2011annual report

Ambre Energy Limited www.ambreenergy.com

DirectorsDavid UsaszEdward (Edek) ChorosMichael MewingMichael van BaarleJayson NewittJohn MasseyRoss Bhappu

Company SecretaryMark Fraser

Principal registered office of AustraliaLevel 27 AMP Place, 10 Eagle StreetBrisbane QLD 4000, AustraliaTel: +61 (0)7 3009 9180Fax: +61 (0)7 3009 9181Email: info@ambreenergy.comWeb: www.ambreenergy.com

Principal registered Office in the United StatesAmbre Energy North America, Inc.170 South Main Street Suite 700 Salt Lake City, UT 84101Tel: +1 801 539 3788Fax: +1 801 539 3789

Share registryComputershare Investor Services Pty Limited GPO Box 2975Melbourne Victoria 3001Telephone:(within Australia) 1300 850 505(outside Australia) +61 3 9415 4000Facsimile: +61 3 9473 2500Website: www.computershare.com.au

AuditorGrant Thornton Audit Pty Ltd

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© Ambre Energy Limited, December 2011. Published by Ambre Energy Limited, December 2011, Level 27 AMP Place, 10 Eagle Street, Brisbane Qld 4000.

Ambre Energy Limited supports and encourages the dissemination and exchange of information. However, copyright protects this document. Ambre Energy Limited has no objection to this material being reproduced or made available online or electronically, but only if it is recognised as the owner of the copyright and this material remains unaltered. Copyright enquiries about this publication should be directed to the company by email to info@ambreenergy.com or in writing to GPO Box 3288, Brisbane Qld 4001.

Copies of this publication can be obtained by contacting +61 (0)7 3009 9180 (Australia) or +1 801 539 3788 (North America), visiting Ambre Energy’s office at Level 27, AMP Place, 10 Eagle Street, Brisbane during business hours or by downloading the report from www.ambreenergy.com/investor_relations/annual_reports

This document has been printed on ENVI Recycled 50/50. ENVI is an Australian made, recycled range of carbon neutral uncoated papers.ENVI is PEFC Certified and is manufactured from 50% post consumer recycled fibre.

Ambre Energy is building a vertically integrated coal marketing, mining and infrastructure company with aspirations to become the largest supplier of US thermal coal to the Asia Pacific market.

Cover Image: The beauty of energy - a coloured fountain illuminates the Admiral Yi Sun-Sin statue in downtown Seoul, South Korea.

About Ambre Energy 1

Vision, strategy, values, measuring success 2

2011 highlights 4

2012 objectives 7

Chairman’s review 8

Managing Director’s report 10

Ambre Energy Locations & Assets 12

Review of Operations & Business Strategy 14

Business Structure 14

US thermal coal strategy 14

US thermal coal mining 15

Decker Coal Mine 15

Black Butte Coal Mine 15

Big Horn and Rosebud coal deposits 16

US Coal Infrastructure 17

MBTL 18

Morrow Pacific project 19

Port of Corpus Christi 20

Alternative Fuel Production 21

Australia - ambreCTL 22

US - Oil Shale and coal-to-liquids project 23

Technology and opportunity 24

Cleaner fuels 24

DME technologies 24

Coal gasification 25

Lignite and lignin technology 25

Biomass utilisation 25

Looking ahead 26

Australian Coal Exploration 27

Contents

Leadership and governance 30

Board operations 31

Board Membership 32

Board Committees 35

Ethical Standards 36

Executive Management 37

Australia 37

North America 39

People 42

Staff profile 43

Training and workforce development 44

Health and safety commitment 44

Directors’ report 48

Auditor’s independence declaration 54

Financial report 55

Consolidatedstatementoffinancialposition 56

Consolidatedstatementofcomprehensiveincome 57

Consolidatedstatementofchangesinequity 58

Consolidatedstatementofcashflows 59

Notestotheconsolidatedfinancialstatements 60

Directors' Declaration 99

IndependantAuditor'sReport 100

Glossary 103

Corporate Directory Back Page

About Ambre EnergyAmbre Energy is building a vertically-integrated thermal coal mining and export business in the United States and domestic coal-related industries in Australia.

Our prime strategy is to acquire and optimise US thermal coal assets and secure and develop the port infrastructure required to create a major new source of competitive thermal coal from the US for the international market. Ambre Energy is also developing projects that apply advanced technologies to low-grade coal and oil shale to feed increasing global demand for liquid fuels.

Formed in 2005 by Managing Director and CEO, Edek Choros, the group is headquartered in Brisbane, Australia with the US operations managed from Salt Lake City, Utah. Ambre Energy now has a number of exploration, mining, infrastructure, marketing and technology projects in development across two continents.

A clear vision…To be a leader in providing efficient and abundant sources of energy from natural resources to meet transportation and electricity needs worldwide

…backed by a clear strategy…Ambre Energy’s strategy is to:

• Acquire and operate world-class coal resources and develop long term mining and coal upgrading operations

• Acquire and develop coal-related infrastructure to expand its markets and facilitate trading activities

• Develop and apply efficient upgrading technologies to produce a cleaner burning, higher grade coal and liquid fuels with enhanced market appeal and value

• Develop and supply domestic and international markets with our products

• Operate our projects in a safe and environmentally-sound manner as a responsible member of the community.

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…with clear measures of success.• Our shareholders are satisfied with their return on investment

• Our operations achieve zero harm

• The environmental impacts of our activities are minimised

• Our customers, suppliers, employees, communities and government stakeholders value our presence

• Our employees are proud team members.

…underpinned by clear values…In achieving our vision, we value:

Environment by promoting sustainable development

Integrity in the accountable and transparent way we conduct our business

Safety in the pursuit of zero incidents and injury

Teamwork to achieve superior business results and challenge our people

Relationships built on open and honest communication

Innovation as we strive for technical excellence and operational performance

Respect for differing views and dignity in the way we treat all people.

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2011 Highlights

Ambre Energy is strategically establishing itself asa vertically integrated coal marketing, mining andinfrastructure company with aspirations to becomethe largest supplier of US thermal coal to the AsiaPacific market.

Since the last annual report, the group hastransformed from a development company toan operating company with the purchase ofport infrastructure on the US west coast andthe acquisition of a 50% interest in each of twosubstantial operating US coal mining assetsincluding operating and marketing responsibilitiesfor both operations.

Our subsidiary, Ambre CTL Limited, proceededwith environmental and technical development forits proposed project, ambreCTL, Australia’s mostadvanced commercial scale coal-to-liquids project,and Ambre Energy maintained its active researchand development program investigating alternativefuel production technologies.

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50%Equity Stake in two large operational Coal Mines - Decker Coal Mine, Montana USA & Black Butte Coal Mine, Wyoming USA.

100%Stake in two non-operational Coal Deposits - Big Horn & Rosebud in Wyoming USA.

62%Stake with US miner Arch Coal taking a 38% stake in a bulk materials terminal on the Columbia River in Washington State USA.

33,000 acres to 38,000 acresExpanded Utah oil shale lease holdings

>98%

US$1.22m Clean Coal Government Grants

Carbon conversion in successful commercial scale gasification tests of 2,800 tonnes of Queensland coal in China.

Awarded by the Wyoming Government Clean Coal Task Force to projects involving Ambre Energy and its partners to investigate and develop liquid fuel conversion. 5

Over the coming year, we will pursue a number of activities tofortify our stake in all the key phases of the company’s US coalsupply chain - from mining to final customers. Our Australianalternative fuels subsidiary, Ambre CTL Limited, will continue toprogress ambreCTL with an ultimate goal to provide Queensland and Australia with a secure supply of unleaded petrol and LPG, and we will research new and innovative ways to convert carbonbased resources into liquid fuels on a commercial scale.

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2011 Annual Report

2012 ObjectivesDuring 2011-12, Ambre Energy’s keyoperational and financial objectives are to:

• Exceed the expectations of US domestic coal customers and attract new domestic customers

• Establish an international coal trading business based on the export of US thermal coal

• Optimise the operation of the newly acquired Decker and Black Butte mines in Montana and Wyoming

• Continue remediation and upgrading works at the Millennium Bulk Terminals - Longview site to restore the site to a high environmental standard

• Apply for permits to build new state-of-the-art coal handling facilities at Millennium Bulk Terminals - Longview (Washington), Port of Morrow (Oregon) and the Port of Corpus Christi (Texas)designed to service the export market

• Strengthen Ambre CTL Limited’s position as an independent subsidiary by securing a cornerstone investor

• Investigate development options for the company’s 38,000 acres of oil shale leases in Utah

• Undertake additional exploration drilling within our Queensland exploration permits and evaluate opportunities for the future use of coal resources

• Continue research and development activities into methanol production and fuels which can be derived from methanol

• Commence scoping studies on coal-to-liquids and coal-to-methanol projects in Montana, Wyoming, Colorado and Texas

• List the company on the Australian Securities Exchange

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With strong growth in world demand for energy sourced from thermal coal and liquid fuels, the company is well positioned to become a significant player in the delivery of these products to domestic and international markets.

Ambre Energy maintains a very positive view of the world economy. Continued growth in coal-based power generation in the Asia-Pacific is driving thermal coal import demand worldwide, providing a strong market for the vertically-integrated mining and export business we are building in the United States.

US thermal coal exportDeveloping the US thermal coal export business has been a major focus for Ambre Energy during the reporting period. We have made strong headway with the acquisition of world-class coal resources in the US, along with necessary transport infrastructure to expand markets and facilitate trade.

Coal demand forecasts continue to increase for the coming decades and Ambre Energy’s primary US target area, the Powder River Basin, is set to be a significant source of supply for Pacific Rim countries that have few primary energy resources of their own, such as South Korea and Japan. Even China, with its own massive reserves and production has in recent years become an importer of coal. In its favour, the low-sulphur, sub-bituminous Powder River Basin coal burns cleaner than much of the coal currently burned in Asia-Pacific markets.

Pacific market demand for thermal coal is set to continue to grow strongly over the next several decades. Seaborne imports are forecast to increase from 534 Mt in 2011 to almost 1,300 Mt in 2025, representing a compound annual growth rate of 6.5% over the forecast period.

With US thermal coal exports into the Pacific market forecast to increase from the modest current levels of <10 million tonnes per year to over 80 million tonnes per year by 2025, Ambre Energy is extremely well positioned to supply into this burgeoning market.

We are proud to announce that in 2011, Ambre Energy transitioned from a development company to an operating company with the acquisition of key assets. In January 2011 the company acquired what is now known as Millennium Bulk Terminals-Longview (MBTL) in Washington State, USA, providing potential access to growing Asia-Pacific markets for US thermal coal. We are very pleased to be working with Arch Coal, Inc. who have taken a 38% ownership stake in MBTL, and look forward to a long and fruitful partnership.

In addition to MBTL, Ambre Energy secured options in May 2011 to lease land at the Port of Corpus Christi, Texas and Port of Morrow, Oregon. The Port of Corpus Christi lease was executed in October 2011, and both ports provide additional gateway options for accessing international markets.

We are also pleased to report that In November 2011, Ambre Energy acquired a 50% ownership stake in the Decker Coal

Chairman’s ReviewOn behalf of the Board and management of Ambre Energy, I take great pleasure in presenting the company’s 2011 Annual Report.

This Annual Report highlights our achievements in a year of significant milestones for Ambre Energy, which continues to strengthen its position as an emerging leader in the supply of US thermal coal to the Asia-Pacific market.

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2011 Annual Report

Company in southern Montana, US, and Black Butte Coal Company in Wyoming, US, by purchasing KCP, Inc. from Level 3 Communications, a telecommunications and internet service provider headquartered in Broomfield, Colorado.

The KCP purchase gives Ambre Energy the operating and marketing responsibilities for these mines. As part of the transaction, Ambre Energy also acquired a 100% interest in the remaining reserves of the Big Horn Coal Company and the Rosebud Coal Sales Company.

The acquisition of KCP, Inc. was partly financed through an equity investment in Ambre Energy by Resource Capital Funds (RCF), a mining focused private equity firm with an excellent reputation and specialist expertise in the mining investment sector. We warmly welcome RCF as Ambre’s second largest shareholder.

Ambre CTL LimitedOn the Australian domestic front, we continue to be conscious of the growing disparity between declining oil production and rising demand for transport fuels, particularly cleaner fuels, in Australia. Our flagship Australian project, ambreCTL, will help address this divide by producing 1.8 million tonnes of methanol and converting this to approximately 1 billion litres of sulphur-free unleaded petrol per year to the local market, greatly enhancing domestic energy security.

This is just one example of Ambre Energy’s commitment to embracing new technologies to utilise low grade or waste coals for conversion into high-quality fuels.

Ambre CTL Limited, currently a 100% owned subsidiary of Ambre Energy, expanded its Board during the reporting period to increase its independence from the parent company. Neill Arthur was appointed as Chairman and Stephen Lonie as Deputy Chairman. I welcome these experienced gentlemen to the Ambre group.

Once necessary approvals are in place, ambreCTL will be in a position to demonstrate the economic and technical viability of producing liquid fuels from coal on a commercial scale for the first time in Australia by using marginal coal resources which are currently sub-economic.

With all our projects, Ambre Energy remains committed to the strictest protocols for safety and the environment. Responsible environmental performance and promoting sustainable development is one of our core values and we will continue

to actively engage with community and government groups to build long-term positive relationships in the regions where we operate.

Ambre Energy’s outlook for the year ahead is promising, with the company embarking on further capital raising to pursue a number of activities which will provide a reliable, profitable business base for stepping up our acquisition, development and research programs.

ListingIn conjunction with our advisors, Ambre Energy has completed much of the work required to prepare the company for listing on a securities exchange. We look forward to updating stakeholders on our listing intentions at an appropriate stage, which will be dependent on favourable market conditions.

Since year end, Ambre Energy has expanded its team with the Board appointments of highly experienced mining industry executives John Massey (appointed July 2011) and RCF partner Ross Bhappu (appointed November 2011). I welcome John and Ross to the company, and sincerely thank all board members, management and staff on their outstanding contributions this year. Ambre Energy would not be where it is today without your loyalty, hard work and commitment and your efforts are greatly appreciated. I also wish to welcome over 400 new staff into the company who have joined us through the MBTL and KCP, Inc. acquisitions.

Finally, I would like to thank the shareholders for the faith you have shown. We look forward to delivering you value in the years ahead by growing Ambre Energy into a strong, profitable, safe and environmentally sound company on your behalf.

David Usasz Chairman

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The company announced major acquisitions since the last annual report including Millennium Bulk Terminals-Longview (MBTL), one of the very few facilities on the west coast of North America that will be capable of exporting coal to the growing Asia-Pacific markets once our development goals have been achieved.

Additionally, Ambre Energy took a 50% stake in operating mines in Montana and Wyoming obtaining full operating and marketing rights along with 100% ownership of non-operating coal deposits in the rich Powder River Basin that produces about 50% of United States coal supply. We have a strong leadership team in place to oversee a smooth transition in ownership and operation.

The company forges ahead with its acquisition and project development agenda in an exciting time for world coal, where continued growth in coal-based power generation in the Asia-Pacific drives robust demand.

We intend to work closely with our existing coal customers in the USA while increasing production to support the growing export markets, targeting the Asia-Pacific through our west coast infrastructure projects and meeting strong European demand via the Gulf of Mexico. All international coal sales will be managed through our coal trading business, which is undergoing expansion to meet the expectations of our current customer base while developing new customers for export coal.

A significant works program is underway maintaining and upgrading existing facilities at MBTL to meet government requirements. Ambre Energy is making solid progress working through engineering plans and permitting on this and other port projects with a goal of building community support and creating economic benefits for local families.

Ambre Energy has been strengthened by a number of key appointments during the year. We greatly appreciate the strong leadership given to our growing US team by Everett King, who is overseeing all aspects of our US operations.

Ambre CTL Limited - the Ambre Energy subsidiary developing Australia’s first commercial scale coal-to-liquids project – is gaining increased independence from its parent company through a stronger governance structure and plans for dedicated fundraising. Aside from new Chairman and Deputy Chairman appointments, we welcome Jannie Grové to the role of CEO of Ambre CTL Limited.

It has been a highly productive year for ambreCTL with a substantial amount of environmental and technical evaluation undertaken including successful gasification testing in China in December, 2010.

Based near Pittsworth in Queensland’s south east, the project will convert local coal to methanol and then to unleaded petrol and LPG, providing fuel security by reducing the state’s reliance on petroleum products imported from overseas or refined from imported crude oil.

Managing Director’s ReportWe are delighted to report that 2011 has been one of delivery for Ambre Energy as we transitioned into an exciting operational company, creating benefits for shareholders, employees, customers and communities.

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2011 Annual Report

At peak construction, ambreCTL will create an estimated 1,880 jobs in Queensland and aims to sustain approximately 530 permanent jobs in the eastern Darling Downs during operation.

Once a decision is made on our application with the Queensland Government for a significant project declaration, we will be able to progress the project with vigour.

We are committed to the highest quality rehabilitation and environmental stewardship in developing ambreCTL, as we are with all our projects, and endorse the Queensland Government’s objectives to protect the best of the best food producing land across the state.

Ambre Energy has an ongoing involvement in research and development activities relating to the alternative production of fuels, particularly from low grade and waste coal. We will continue to pursue further research and development opportunities that may deliver cleaner and more efficient sources of energy from natural resources in a cost-effective manner.

With a diverse business in place covering mining, infrastructure development and fuel production from low grade and waste coal; growing global demand for energy and a world-class team in place, I look ahead to 2012 with great optimism.

As we enter our operation phase, Ambre Energy will remain committed to the highest standards of workplace health and safety in the pursuit of zero incidents and injury.

Finally, I would like to thank my fellow Board members, management, employees and key contractors for their great work ethic and expertise in delivering excellent results for the company throughout the year.

Edek Choros

Managing Director and Chief Executive Officer

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2

3

Brisbane

1

Sydney

Melbourne

Perth

Ambre Energy

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2011 Annual Report

Ref Site Name Location Activity Description

1 Ambre Energy Limited Head Office Queensland (AUS) Company headquarters in Brisbane, Queensland, Australia

2 AmbreCTL Queensland (AUS) Proposed coal-to-liquids project site

3 Mount Molar deposit Queensland (AUS) 840km2 exploration permits including Mount Molar thermal coal deposit

4 Ambre Energy North America Head Office Utah (US) Head office for North American operations in Salt Lake City, Utah

5 Millennium Bulk Terminal Washington State (US) 62% owned operating port and site for proposed coal terminal

6 Port of Morrow Oregon (US) Lease option site for proposed coal barging terminal

7 Port of Corpus Christi Texas (US) Lease site for proposed coal export terminal

8 Oil Shale Leases Utah (US) 38,000 acres of oil shale leases held

9 Decker Coal Mine Montana (US) 50% owned thermal coal mine

10 Black Butte Coal Mine Wyoming (US) 50% owned thermal coal mine

11 Big Horn Deposit Wyoming (US) 100% owned non-operating mine

12 Rosebud Deposit Wyoming (US) 100% owned non-operating mine

Rail Line

HoustonSan Antonio

Ambre Energy

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Portland

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Salt Lake City

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8Denver10

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Review of operations and business strategyAmbre Energy business structure

International coal trading

US thermal coal production

US InfrastructureAlternative fuel

productionAustralian coal

exploration

• Servicing Korean, Japanese and other Asia Pacific and European customers

• US - coal operations including Decker coal mine, Black Butte coal mine, Big Horn deposit and Rosebud deposit

• Supply domestic coal customers

• Supply domestic coal-to-liquids and coal-to-methanol projects

• US – Millennium Bulk Terminals-Longview

• US - Coyote Island Terminal – Port of Morrow

• US Gulf States Bulk Terminal - Port of Corpus Christi

• Australia – ambreCTL – methanol and petrol, including Felton North coal deposit

• Develop coal-to-methanol and coal-to-petrol projects

• US - Oil shale

• Global - Technology and opportunity

• Australia – Exploration permits including Mt Molar exploration

US thermal coal strategyAmbre Energy’s overall strategic business plan in the US is to acquire and operate producing assets, with idle production capacity, in a relatively undervalued domestic market and utilize that idle capacity to service the booming export market, particularly Asia.

The USA has the largest coal reserves in the world and the Powder River Basin (PRB) in Montana and Wyoming produces the cheapest coal in the world on a Free on Rail basis. Mining conditions in this region can only be described as spectacular with massive seams under relatively low levels of cover. The relatively high moisture content of these coals is offset by very low ash and sulphur levels which has underwritten significant growth in the sales of these coals both in the US and the Asian thermal

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2011 Annual Reportcoal market. Powder River Basin coal is shipped across the US and used to generate electricity in 38 US states.

Coals such as those at Ambre Energy’s newly acquired Decker coal mine based in Montana are the best suited coals for the Asian export market. In addition to the state’s geographical advantage to the US west coast, the Montana coals have higher energy levels compared to the southern PRB in Wyoming.

The Powder River Basin currently represents approximately 50% of the US’s total coal production and the reserves are massive. The key to accessing the Asian export market is port capacity. The US west coast currently supplies only 8Mtpa of Asia’s total thermal coal demand of 550Mtpa. Current port capacity restricts any further growth.

In 2009, coal accounted for 28% of global energy use and generated 42% of the world’s electricity. Japan is the world’s largest coal importer (182 million tons in 2009), South Korea imported 110 million tons and Taiwan imported 65 million tons. Asia’s thermal coal demand is forecast (Wood Mackenzie) to increase by 560Mtpa over the next 10 years. The US can only participate in this phenomenal growth if new port capacity comes on stream. Ambre Energy’s Millennium Bulk Terminals port at Longview in Washington State could be the next shore-based coal loading facility to be commissioned.

Ambre is seeking to join the Asian export market earlier through a barge and transshipment operation on the Columbia River. The company’s plan is to load barges at the Port of Morrow in Oregon and transship to panamax sized vessels nearer the mouth of the Columbia River. Ambre plans to ship first coal via transshipment in 2013 followed by coal through the Millennium shore based terminal in 2014-15. Ambre’s first mover status with new export coal port capacity will give the company a significant competitive edge over other US coal exporters to the Asian market.

US thermal coal miningFor five years, Ambre Energy has been evaluating US coal regions and deposits to identify acquisition opportunities that would build a supply base for sale through the company’s coal marketing business to domestic and international customers.

Large coal deposits with low ash content and low to moderate moisture content located close to rail infrastructure have been the target.

In particular, Ambre Energy conducted technical due diligence and market assessments over two operating coal mines - the Decker Coal Mine (Decker) and the Black Butte Coal Mine (Black Butte), and two non-operating coal deposits known as the Big Horn Deposit (Big Horn) and the Rosebud Deposit (Rosebud) in Montana and Wyoming.

Successful negotiations during 2010/11 resulted in Ambre Energy acquiring a stake in these assets previously held by Level 3 Communications, which includes 50% ownership of the Decker and Black Butte mines and 100% ownership of the Big Horn and Rosebud deposits. With these acquisitions complete, Ambre Energy is on track to becoming a major supplier of US thermal coal to the international market.

Decker Coal MineThe Decker coal mine (Decker) is situated in the north-western section of the Powder River Basin. Located within Big Horn County in the state of Montana, the project consists of two distinct areas, East Decker and West Decker.

The West and East Decker mines were started in the 1970s as two separate mining operations which came together under the Decker Coal Company in the late 1980s. Since the commencement of operations at both, the mines have produced approximately 330 million tons of coal. The mines are serviced by BNSF Railway with two rail loops and load out facilities, one for each mine.

Ownership of the mines is now a 50/50 joint venture between Ambre Energy and Cloud Peak Energy, with Ambre Energy responsible for operating the mine and marketing the coal.

The Decker mine produces approximately three million short tons of low ash, low sulphur, sub-bituminous coal each year which is currently sold into the domestic thermal market. An independent JORC-compliant assessment indicates a sizable resource of 415.6 million short tons remained at Decker as at 19 May 2010.

Resource Category Resource Estimate*

Measured 204.6 million short tons

Indicated 126.0 million short tons

Inferred 85.0 million short tons

Total 415.6millionshorttons

*The Resources estimate is based on information compiled by Dr. Ian Stone, who is a Member of the Australasian Institute of Mining and Metallurgy (102087). Dr. Stone is Manager, Geology of Palaris Mining Pty Ltd. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Re-sources and Ore Reserves. Dr. Stone has over 30 years experience in exploration and mining of coal deposits. Dr. Stone consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form in which it appears.

Ambre Energy will be seeking to strengthen relationships with existing customers and explore opportunities for additional domestic sales. The company also intends ultimately to increase coal production to take advantage of demand for coal from North Asian customers via Ambre Energy’s port infrastructure in the US west coast region.

Black Butte Coal MineThe Black Butte mine is located in the Green River Basin in Sweetwater County, south west Wyoming.

The Black Butte and Leucite Hills mines were started in the 1970s as two separate mining operations which came together under the Black Butte Coal Company in 1988. The mines are serviced by Union Pacific railroad.

Black Butte is now operated by a 50/50 joint venture between Ambre Energy and Anadarko Petroleum Corporation (APC). As with Decker Mine, Ambre Energy is responsible for operating the mine and marketing the coal.

The mine is a mixed dragline plus truck and shovel stripping operation targeting production of approximately 3.5 million

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short tons of coal each year. This low ash, sub-bituminous coal is currently sold on the domestic market. An independent JORC-compliant assessment of the modelled and permitted areas shows a resource estimate of 127.68 million short tons as at 28 April 2010.

Resource Category Resource Estimate*

Measured 80.03 million short tons

Indicated 34.32 million short tons

Inferred 13.33 million short tons

Total 127.68millionshorttons

*The Resources estimate is based on information compiled by Dr. Ian Stone, who is a Member of the Australasian Institute of Mining and Metallurgy (102087). Dr. Stone is Manager, Geology of Palaris Mining Pty Ltd. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Re-sources and Ore Reserves. Dr. Stone has over 30 years experience in exploration and mining of coal deposits. Dr. Stone consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form in which it appears.

As with Decker Mine, Ambre Energy will seek to maintain existing domestic contracts and investigate options for new domestic sales. There are also opportunities to increase coal production for the international seaborne market.

Big Horn and Rosebud coal depositsAs part of the mine acquisition transaction completed in November 2011, Ambre Energy assumed 100% ownership of the Big Horn coal deposit and the Rosebud coal deposit in Wyoming, USA.

The Big Horn coal deposit is located in the Northern Powder River Basin in Sheridan County, Wyoming, approximately 15 miles south west of Decker. A mine was operated at the site from 1944 until 2000, producing up to 4.5 million short tons of coal per year at the height of its productivity. Today the mine is fully reclaimed with the exception of some infrastructure and a solid waste disposal site.

The Rosebud coal deposit is located north of Hanna, Wyoming in the Hanna Basin, Carbon County, Wyoming. The Rosebud Mine was opened in 1955 and operated until the early 1990s. The mine produced approximately 3 million tons per year at the height of its productivity in the 1970s. Today, the mine is nearly fully reclaimed and no coal production occurs.

While the deposits are not currently being mined, there are significant potential resources available at Big Horn and Rosebud. Resource estimates indicate a combined total of more than 500 million tons of coal across both deposits in permitted and unpermitted areas that could be readily developed with appropriate approvals. Development of these deposits remains an option for Ambre Energy in coming years as supply sources are considered for its thermal coal export business.

US Coal Infrastructure

2011 Annual Report

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Millennium Bulk Terminals-Longview, LLCDuring 2010, Ambre Energy inspected numerous potential coal terminal sites on the US west coast to progress its objective of becoming a pioneer in the export of thermal coal from the USA. A brownfield bulk materials terminal in Cowlitz County on the Columbia River in Longview, Washington State was ultimately chosen as the preferred option and

Millennium Bulk Terminals-Longview LLC (MBTL) was established as the business entity for the purchase. The transaction was completed successfully on 11 January 2011 and MBTL acquired the assets of Chinook Ventures, Inc. (CVI), simultaneously entering into a long term ground lease over the site owned by Alcoa.

MBTL is a Limited Liability Company (LLC) with two shareholders. Ambre Energy owns 62 percent of the shares and Arch Coal, Inc., the second largest US thermal coal producer, owns the remaining 38 percent.

This underutilised 416 acre site is a multi-product bulk handling facility for commodities such as alumina and cement. It is accessible by rail infrastructure and serviced by both Union Pacific Railroad (UP) and Burlington Northern Santa Fe Railway (BNSF). Deep water access up the Columbia River provides passage for ocean going vessels and the MBTL loading dock on the site’s 1.5 miles of river frontage has the potential to receive Panamax class ships.

For more than 60 years, this site zoned heavy industrial operated as an aluminium smelter, employing more than 1,400 people. The associated dock was used for importing alumina and materials needed in the smelting process. Around 2001, the facility was acquired by Alcoa and the smelter was shut down.

MBTL has begun a significant works program to maintain and upgrade the existing facilities, including multiple clean up projects related to decades of aluminium smelting and unpermitted actions taken by the site’s previous owner, CVI. The works will improve the safety and condition of the site to meet government requirements and community expectations.

MBTL currently employs 33 people plus dozens of local contractors, in addition to an experienced board and executive management team.

Engineering studies are currently underway to determine the scope and scale of a state-of-the-art coal handling facility, before the company enters into a comprehensive Environmental Impact Statement process working towards local, state and federal approvals for an efficient and environmentally sound state-of-the-art coal export facility.

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2011 Annual Report

Coyote Island Terminal, Port of Morrow Following the acquisition of Millennium Bulk Terminals-Longview, Ambre Energy broadened its investigations into potential coal terminal sites across the west and south of the US. Limited opportunities directly on the west coast led the company to sites further inland up the Columbia River.

Drawing inspiration from successful coal barging operations in other parts of the US and worldwide, Ambre Energy began negotiations with the Port of Morrow, a site offering ample river frontage for

barge loading infrastructure, excellent rail and highway access and rail links to Powder River Basin coal.

On 11 May 2011, the Port of Morrow Commission approved a one-year lease option with Ambre Energy subsidiary, Coyote Island Terminal, LLC, over approximately 24 acres of upland and approximately 15 acres of waterfront adjacent to the Port’s rail loop in order to construct, own and operate a marine terminal business known as the Morrow Pacific project.

The Port of Morrow is located near Boardman, Oregon, approximately 272 miles from the mouth of the Columbia River. The Union Pacific transcontinental rail line, also historically used by BNSF, provides the Port with a direct rail link to coal mines in Montana, Wyoming, Colorado and Utah, including Ambre Energy’s mining operations at Decker and Black Butte.

When fully operational, covered barges will transport coal down the Columbia River to a selected transloading site, where the coal will be transferred from barges to ocean going vessels.

Ambre Energy expects to make significant progress on this development over the coming year with a goal to barge and ship first coal to Asia in 2013/14.

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Gulf States Bulk Terminal, Port of Corpus ChristiIn addition to Ambre Energy’s west coast export options through Millennium Bulk Terminals-Longview and the Port of Morrow, it has increased its potential export capacity by securing a lease over land at the Port of Corpus Christi, Texas on the Gulf of Mexico.

The Port of Corpus Christi is the sixth largest port in the United States in total tonnage. Established in 1926, the port is equipped to receive Panamax vessels and handles a broad range of cargo including petroleum, ore, minerals, grain, chemicals and liquid bulk.

Ambre Energy subsidiary, AE Infrastructure, LLC, has a lease over a 14.5 acre tract in an area known as the Bulk Terminal in the Port’s Inner Harbor. The lease gives Ambre Energy the option for a 30 year tenure and the capability to develop a storage site to receive and ship coal through the Port’s joint facilities.

Three Class 1 railroads serve the Bulk Terminal, including BNSF, Kansas City Southern Lines (KCS) and UP. Of these railroads, BNSF and UP serve the coal fields under investigation to potentially supply coal for export.

Ambre is currently engaged in the feasibility engineering process to design a coal storage facility and to determine the throughput capacity. Discussions are underway with current tenants at the port to develop a joint facility. The port’s existing air emissions permits would allow immediate coal shipment up to 1.5 Mtpa and Ambre Energy is investigating options for increasing this tonnage, requiring new infrastructure and appropriate air permits for a larger scale operation.

The Port of Corpus Christi presents an ideal opportunity for Ambre Energy to access South American and European markets for thermal coal through its coal trading business.

Alternative Fuel production

2011 Annual Report

22

Major fuel marketers and distributors have announced there will be no new investment in Australian oil refineries and in some cases closure has already been announced, which will lead to significant increased imports of crude oil and refined petroleum. This, in turn, will increase Australia’s crude oil trade deficit which currently sits at around A$16.5 billion and is predicted to increase to approximately A$92 billion by 2030.

Ambre CTL Limited, a wholly owned subsidiary of Ambre Energy, will address these issues through ambreCTL, its proposed $3.5 billion project 30km south west of Toowoomba in Queensland. The project has the potential to make a noticeable impact on Queensland and Australian fuel security by producing 1.8 million tonnes of methanol per year to be converted to 940 million litres per year of unleaded petrol and 150 million litres per year of LPG (greater than 20% of Queensland’s demand and approximately 5% of Australia’s demand for both fuels).

Ambre CTL Limited increased its independence from the parent company during the past year with new director and officer appointments, a stronger governance structure and plans for project specific fundraising.

An application was submitted to the Queensland Government’s Coordinator-General in 2010 for ambreCTL to be declared a ‘significant project’ under the State Development and Public Works Organisation Act 1971 (SDPWO Act). A decision is pending on a significant project declaration which would result in centralised government co-ordination of the approvals process.

Despite this pending decision, ambreCTL project development has advanced well. Key progress includes:

• Identification of a JORC-compliant coal resource of nearly 500 million tonnes

• Application to the Commonwealth Government for Major Project Facilitation status

• Community engagement strategy developed and being implemented

• Employment figures generated showing 1,880 construction jobs at peak construction, 530 direct jobs and approximately 1,000 indirect jobs during operation.

• ACIL Tasman economic impact study completed, identifying a $26 billion stimulus to the Australian economy and a 0.68% increase to Australia’s Gross Domestic Product

• Long-lead Environmental Impact Statement (EIS) background information collection (fauna and flora studies) completed

• Concept level mine and process plant design completed

• Successful commercial scale gasification trials in China in December 2010 achieving outstanding carbon conversions greater than 98%

• Technology proposals received from all of the other key technology providers

• Discussions held with a number of large EPCM firms in relation to the completion of an engineering feasibility study (to a bankable level)

• Mining lease applications, including ML55003 over 1,634 ha lodged in May 2011

• Sharefarming agreements in place to manage land owned by Ambre CTL and tree screen planting commenced

• Launched the Ambre Foundation, an $80 million fund to support community initiatives once the project is in operation

• Established the Ambre Engineering Scholarship to support locally selected engineering students with their studies at the University of Southern Queensland

• Opened a regional office in Pittsworth, a short distance from the project site.

The project is poised for accelerated development once a government assessment path becomes clear and ambreCTL can continue with its goal to create a value adding industry bringing major downstream processing of a natural resource to Queensland.

AustraliaEconomic and energy market conditions over the last twelve months have emphasised the need for alternative fuel production in Australia. World oil prices have recovered from their 2008 low and forecasts for tapis blend, Australia’s current benchmark oil price, are predicted to remain above US$100 a barrel over the coming years.

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2011 Annual Report

AENA executed a drilling program in September 2011 to assist in developing a geological model of available resources. An independent report commissioned by AENA has estimated an in-place resource of 9.6 billion tons containing 5.5 billion barrels (Bbbls) of shale oil. Approximately 1.0Bbbls of shale oil is contained in shale resources occurring at less than 500ft of cover and the majority of near-surface resources should be amenable to surface mining techniques.

Ambre Energy will be conducting a research program in partnership with the University of Wyoming on the post combustion capture of CO2 using retorted shale. With estimated US oil shale reserves totalling 1.5 trillion barrels of oil, this resource is bound to play an integral role in America’s future energy strategy.

Investigations have continued into potential coal-to-liquids and coal-to-methanol projects in Wyoming, Montana,and Colorado and Texas. Sites targeted for further review were selected for the following reasons:

• Sufficient coal is available for a large-scale coal-to liquids project

• The market for unleaded petrol in the US could easily accommodate the quantities of fuel produced, and distribution options are economical and numerous

• Multinational fuel retailers have expressed interest in distributing the fuel

• A CO2 market and pipeline network exists, providing customers for the offtake of CO2

Ambre Energy will continue to conduct testing on the associated coals to confirm suitability for gasification.

United States Oil shale and coal-to-liquids projects

Ambre Energy North America Inc. (AENA) increased its holding of oil shale leases in Utah during 2011 from 33,000 acres to 38,000 acres across 18 mineral leases, making it the largest private owner of oil shale leases in the state.

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Cleaner fuelsSince its inception, Ambre Energy has had an ongoing involvement in research and development activities relating to the alternative production of fuels, particularly from coal.

It has undertaken research programs and studies with respect to:

• Coal and shale pyrolysis, to produce a clean burning solid char product and synthetic crude oil

• Upgrading of coal liquids (filtering, pre-treatment and hydroprocessing), to make synthetic crude for further processing into liquid fuels

• Coal gasification to produce liquid fuels such as methanol, unleaded petrol, LPG and next generation fuels such as DME

• Converting biomass and municipal waste to alternate fuels

• Co-firing biomass and coal

• Lignin-to-fuels conversion technologies

• Coal liquefaction (dissolving coal) and

• Drying and briquetting of low rank coals.

During 2011-12, Ambre Energy continued to pursue the development and application of the following technologies.

DME technologiesCountries such as the US and Australia rely heavily on imported oil for transportation and industry, while having rich reserves of natural gas and coal.

DME is among the most promising alternative fuels that can be produced from natural gas and coal, and could play a critical role in the smooth transition from petroleum dependence to other forms of energy use.

DME can be considered a diesel substitute. However, unlike diesel, gasoline or even ethanol, it produces no smoke or soot on combustion. DME contains no sulphur and produces very low NOx emissions, is similar to LPG (a gas at room temperature and a liquid at low pressure), and is much easier to transport and store than liquefied natural gas or pure hydrogen.

University of Utah research

In May 2007, Ambre Energy entered into a three year US$2.2 million research and licensing agreement with the University of Utah to develop novel catalysts for the single-stage conversion of syngas to DME.

In May 2010, this agreement was extended for a further 12 months at a cost of around $375,000. Researchers have developed a catalyst which is on-par with the only existing commercial single-stage DME catalyst. The additional funding will assist in further testing to improve the activity and stability of the catalyst.

The associated licensing agreement gives Ambre Energy worldwide exclusive rights to exploit the reactor and catalyst technology.

DME is typically prepared by converting syngas to methanol in a first process, then converting methanol to DME in a second process. Ambre Energy is developing technology to convert syngas directly to DME in a single process, which would reduce capital and operating costs.

The single stage process greatly improves single pass conversion efficiencies and significantly reduces total equipment account (reducing capital costs). The catalyst being developed by Ambre Energy, in conjunction with the University of Utah, is a bi-functional catalyst, meaning that the catalytic activity for converting syngas to methanol and methanol to DME is contained in the one catalyst.

In 2011, Ambre Energy submitted a funding application to the Wyoming Government, in partnership with Western Research Institute (WRI), to progress the development of this technology. This funding application was successfully awarded. Total funding for the project is for $1,460,000 with $720,000 coming from the Wyoming Government.

Under the funding award, Ambre Energy will build a pilot scale helical channel reactor and run trials to test the system. Ambre Energy also intends to test the efficacy of the single stage syngas to DME catalyst in the system.

Technology and opportunity

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2011 Annual Report

University of Queensland research

Research has indicated that DME can be used directly in compression-ignition engines, such as diesel engines, without any modification to the engine itself required. Some minor modifications are required to fuel lines and injectors.

In 2008, Ambre Energy, in conjunction with Dr Bo Feng of the Metallurgical Engineering Department of the University of Queensland, successfully applied for an Australian Research Council (Australian Government) Linkage Grant, to support a three-year research project.

The grant was to fund building and running an engine testing system to investigate emissions from a DME-fuelled diesel engine, run under varying loads.

Under the arrangement, Ambre Energy was to contribute around $455,000 of cash and in-kind support, of which around $240,000 was contributed in 2010-11.

An agreement with the University of Queensland was signed in 2009 and funding has been used for purchasing equipment, building an engine testing room and control room, and recruiting high quality internationally recognised staff. Testing is expected to commence towards the end of 2011.

One of the purposes of the testing program is to develop a fuel specification standard for DME in Australia, as no standard currently exists. Over the long term, it is Ambre Energy’s intent to develop, test and prove the use of DME in mining equipment.

Coal gasification Ambre Energy has undertaken a range of studies investigating the gasification potential of the Lower Walloon coal found at the Felton North Coal Deposit, 30km south west of Toowoomba.

Ambre Energy has also undertaken reactivity and ash behaviour studies at CSIRO in Australia to understand the nature and composition of the coal.

Coal reactivity and pilot scale gasification tests were conducted in Germany under the supervision of international specialists Uhde and RWE, to assess the gasification suitability of the high ash coal found at the ambreCTL site.

In 2009-10, Ambre Energy performed similar studies with western sub-bituminous coals of the US with Siemens to determine their suitability for a coal-to-liquids plant in Montana.

Ambre Energy has also undertaken gasification reactivity studies with the Synthesis Energy Systems (SES) U-Gas technology, culminating in late 2010 with a commercial demonstration of the U-Gas technology with Lower Walloon coal (approximately 3000 tonnes) in China.

Lignite and lignin technologyDuring 2011, Ambre Energy continued investigations into potential alternative fuels generation through a new lignin and lignite liquefaction (depolymerisation) technology. The new technology typically involves liquefaction of the lignin or coal superstructure (liquefaction is a depolymerisation process which breaks down big molecules into smaller molecules), followed by staged hydroprocessing of this depolymerised product.

Staged hydroprocessing is a series of chemical processes that remove oxygen, sulphur and nitrogen, increasing the hydrogen content, lightening the liquefied product and making it suitable for use as a transport fuel.

In 2011, Ambre Energy submitted a funding application to the Wyoming Government, in partnership with Western Research Institute (WRI) and Jantra Fuels and Chemicals LLC, to progress the development of this technology. This funding application was successfully awarded. Total funding for the project is for $1,000,000 with $500,000 coming from the Wyoming Government.

This technology is being developed to convert lignin and low rank coals into liquid fuels. A new company called Thermosolv LLC was formed as a result of this partnership.

Biomass utilisationAmbre Energy is currently investigating the potential to co-fire biomass, such as municipal green waste, agricultural waste and forestry residues, in a gasifier with coal, to produce syngas for the production of future fuels. Critical aspects when utilising biomass as an energy feedstock are the availability of feed to the gasification plant and costs associated with haulage and processing of the feed material.

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Looking ahead With respect to embracing technology, in 2011-12 Ambre Energy will:

• Continue to progress the development of new technologies for the production of fuels and energy from carbonaceous materials

• Pursue further research and development opportunities that may deliver cleaner and more efficient sources of energy from natural resources in a cost-effective manner

• Strengthen partnerships that have been formed with research and development partners to advance projects

• Investigate new areas of opportunity that may be critical to the success of Ambre Energy projects

• Inform and stimulate Australian policy debates on peak oil issues, CO2 and the coexistence of mining and agriculture.

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Australian Coal Exploration

2011 Annual Report

28

Thirteen holes were drilled on EPC 935 during 2011 and data gathered from piezometers and geophysical logging will be used to refine water and geological models. Additional drilling is planned for 2012 for the purpose of mine planning, further resource delineation and to provide data for the project’s feasibility studies.

The second major area of interest under Ambre Energy’s Queensland exploration permits is a resource the company has titled the Mount Molar resource, located at Back Plains - approximately 40 kilometres southwest from the city of Toowoomba and approximately 10 kilometres from Clifton, the nearest town. Three notable events occurred over this area in the last twelve months.

First, a drilling programme consisting of 15 holes was completed in 2011, adding to information gathered from Ambre Energy’s three previous drilling programmes and available historical and water bore hole data.

Second, an application to combine EPCs 1245 and 1810 was submitted to the Queensland Department of Mines and Energy. Ambre Energy is awaiting approval for the new permit,

provisionally coded EPC 2505. Consolidating these permits places the Mount Molar resource under one EPC, making it easier for Ambre Energy to meet its administrative and expenditure commitments to government.

Third, a geological model was finalised by Palaris Mining in August 2011, reporting a JORC-compliant coal resource of 303.90 Million tonnes (see table below) and a non JORC-compliant exploration target of 800 million tonnes using a 65% raw ash cut-off. A drill program has been designed to increase the knowledge of the Mount Molar resource and bring a larger area up to JORC reporting standard. This resource may support a thermal coal export project if future infrastructure developments in the region permit.

In anticipation of the Queensland Government’s proposed Urban Restricted Zones legislation Ambre Energy proactively relinquished all exploration permits covering land within 2 kilometres of centres with a population of greater than 1,000. This relinquishment of 48.5km2 rendered no impact on the ambreCTL resource area and no material impact on the Mount Molar resource area.

*Summary of estimated coal resources using a 50% raw ash cut-off

*The Resources estimate is based on information compiled by Gwen Stefani, who is a Member of the Australasian Institute of Mining and Metallurgy (230564). Gwen Stefani is Principal Geologist of Palaris Mining Pty Ltd. She has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity she is undertaking to qualify as a Competent Person, as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Gwen Stefani has over 10 years’ experience in exploration and mining of coal deposits. Gwen Stefani consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form in which it appears.

Lease

In-situ Tonnes (Mt)

Ash (%, ad)

Relative Density

(g/cc, ad)

Inherent Moisture

(%, ad)

Total Resources

(MT)Measured Indicated Inferred

EPC1245 0.00 0.00 0.00 -

EPC1810 0.00 0.00 278.78 40.6 1.60 6.0 278.78

EPC935 0.00 0.00 25.12 39.8 1.59 5.7 25.12

Total 0.00 0.00 303.90 -

Ambre Energy holds coal exploration permits over approximately 783km2 in Queensland, located roughly between Millmerran, Pittsworth and Warwick. This area includes around 20km2 of mining lease applications on the Felton North coal deposit within EPC 935, which is held by Ambre CTL Limited for the project, ambreCTL.

Australian Coal Exploration

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2011 Annual Report

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Leadership and Governance

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2011 Annual Report

A seven member Board is responsible for Ambre Energy’s corporate governance, including setting its strategic direction, establishing goals for management and monitoring performance against these goals.

The Board is accountable for Ambre Energy’s efficient and effective performance and strives to build shareholder value in a socially and environmentally responsible manner. Each

director is required to act in the company’s best interests and ensure Ambre Energy acts in accordance with its legal requirements and performance plan.

The five directors in office during the last reporting period were reappointed at the annual general meeting of 25 January 2011 and two new directors, John Massey and Ross Bhappu, joined the board after the reporting period.

Board Operations

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David Usasz BCom, FCA Chairman

David Usasz is non-executive Chairman of the Ambre Energy Limited board and chair of the Audit and Risk Management Committee and the Nomination and Remuneration Committee.

Mr Usasz’s expertise in financial and strategic affairs is founded upon 31 years of service at PricewaterhouseCoopers, including 20 years as partner. Throughout his career he has advised businesses in both government and private sectors on management issues surrounding success and growth.

Mr Usasz has been a registered tax agent for more than 25 years, gaining extensive experience in corporate finance with a focus on tax, and mergers and acquisitions. He has an acute understanding of Asian markets and investors following three years working in Hong Kong and considerable travel to Japan, Taiwan, Jakarta and Singapore.

As Ambre prepares for ASX listing, Mr Usasz’s experience as a board member of ASX listed Queensland Mining Corporation Limited and ASX listed Cromwell Corporation Limited is very helpful. His diversified interests and networks are further exemplified by former directorship of the Australian Rugby Union Limited (2005-2007) and significant honorary positions held with the Princess Alexandra Hospital Research Foundation and the Australia Taiwan Business Council.

Appointed: 1 February 2009

Special responsibilities: • Chairman of the Audit and Risk Management Committee

• Chairman of the Nomination and Remuneration Committee

Edek Choros MSc (Geol), BE (Mining) Managing Director and Chief Executive Officer

Edek Choros founded Ambre Energy in June 2005 and has been its Managing Director and Chief Executive Officer since that time. With over 20 years of geological and engineering experience, his strength lies in his ability to identify and develop new project opportunities with the potential to apply resource upgrading technologies.

Mr Choros successfully led the establishment and sale of the Millennium Coal Project in Queensland’s Bowen Basin spanning 1999-2005 prior to forming Ambre Energy. His keen interest in the conversion of coal and oil shale to liquid fuels is driving Ambre Energy’s direction as a credible player in the peak oil debate.

Mr Choros is closely involved with executive recruitment and is building a team capable of adding value to Ambre Energy’s increasingly diverse operations. His track record in developing robust and profitable ventures has ensured that Ambre Energy continues to attract investment and international interest.

Board Membership

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2011 Annual Report

Mr Choros gained his qualifications as a geologist and mining engineer in Krakow, Poland before moving to Australia in 1989. He worked for the Electricity Trust of South Australia and subsequently as a private consultant in the coal mining industry before establishing Millennium Coal.

Appointed: 17 June 2005

Special responsibilities: • Member of the Audit and Risk Management Committee

• Member of the Nomination and Remuneration Committee

Michael Mewing BEc

Executive Director

Michael Mewing joined the board of Ambre Energy in April 2008 as nonexecutive Chairman and subsequently assumed a full time executive role in September 2008. He held the position of President Ambre Energy North America LLC in Salt Lake City from December 2008 to December 2010 and is now an Executive Director based in Brisbane. His primary responsibilities include strategic development as well as coal trading and marketing.

Mr Mewing has been instrumental in progressing Ambre Energy’s North American acquisition and development program. Experienced industry professionals have been recruited to identify and realise business opportunities in mining, logistics and coal trading and marketing in North America.

He joined Ambre Energy with 30 years experience in the international energy field, working in New South Wales, Queensland, Japan, Indonesia and the US. He has held commercial, marketing and business development roles with BP Oil, BP Coal, Rio Tinto, PT Berau Coal and Millennium Coal.

Mr Mewing’s unique experience in the international coal industry is based on the marketing and development of coal assets in New South Wales, Queensland, South Africa, Indonesia and the US.

Appointed: 14 April 2008

Special responsibilities: • Member of the Audit and Risk Management Committee

• Member of the Nomination and Remuneration Committee

Michael van Baarle BCom, LLB Director Corporate Development

Michael van Baarle is a founding Director of Ambre Energy with broad responsibilities including capital raising, contract negotiation and positioning the company with senior government and industry stakeholders.

He retired from a 20-year legal career in September 2006 to accept an executive position as Director Business Development with Ambre Energy, and is a member of the Ambre Energy Limited and Ambre CTL Limited boards.

During his legal career, Mr van Baarle practiced law in Australia and the United Kingdom, gaining wide experience in business services with a narrowed focus on the resource sector. His term with BHP Coal’s in-house legal team and his work on the Millennium Coal Project as a partner at Hillhouse Burrough McKeown provided specific exposure to the issues faced by projects in the energy sector.

Appointed: 3 April 2007

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Jayson Newitt BSc, MBA

Non-Executive Director

Jayson Newitt holds a Bachelor of Science from Brigham Young University, and received a Master of Business Administration degree from the Marriott School of Management (BYU).

Mr Newitt is a co-founder and Managing Director of Ritchie Opportunity Fund I, a private equity and investment fund based in Salt Lake City, Utah, USA with investment allocations in energy, manufacturing and healthcare.

Prior to the formation of the Fund, Jayson was and continues to be a principal of The Ritchie Group, a private equity company with investments and projects in nine US states and two countries across a diversified industry base.

Mr Newitt has substantial experience in project management, real estate, healthcare and private equity projects as a manager, limited partner, investor and board member.

Appointed: 1 December 2010

Special responsibilities: Member of the Audit and Risk Management Committee

Member of the Nomination and Remuneration Committee

John Massey BCom, CPA, FAICD (Life), FAIM

Non-Executive Director

John Massey joined Ambre Energy in August, 2011 as a non-executive Director.

John has extensive senior leadership and strategic development experience and currently serves as Chairman of Sunstate Cement, UQ Holdings and the ASX listed Cardno (ASX: CDD).

In 2006, John was made a Life Fellow of the Australian Institute of Company Directors for his renowned service in the field of directorship. His contribution to corporate life and the community was subsequently recognised with the 2010 Gold Medal for Outstanding Company Director in Queensland. John’s career has seen him serve in a number of executive roles across a diverse range of companies including Brisbane Airport, Grainco, QDL Pharmaceuticals, Dairy Australia and Thomas Cook.

He is a member of the Board of Governors of the Committee for the Economic Development of Australia (CEDA), serves as a national judge for the Global Entrepreneur of the Year Awards and also as Chairman of the Northern Regional Judging Panel.

Appointed: 18 July 2011

Ross Bhappu BSc, MSc, PhD(Mineral Econ.)

Non-Executive Director

Since 2005, Mr. Bhappu has been a partner with Resource Capital Funds, a series of private equity funds investing exclusively in the mining and minerals industry, and from 2001 until 2005, Mr. Bhappu was vice president/principal of Resource Capital Funds.

Mr. Bhappu has served as chairman of the board of Molycorp, Inc. since July 2010 and on the board of directors of EMED Mining Public Ltd., a copper mining company, since October 2008, and he has been a director of Traxys S.A., a metal trading and distribution company, since January 2007. Previously, Mr. Bhappu served on the board of directors of Constellation Copper Corporation, a copper mining company, from July 2002 until November 2007 and Anglo Asian Mining, a gold mining company, from November 2005 until September 2006.

Mr. Bhappu has prior experience constructing and operating complex mining and processing operations, as well as mining related merger and acquisition activities. He was previously employed by Newmont Mining Corporation, GTN Copper Corporation and Cyprus Minerals Company.

Appointed: 16 November 2011

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2011 Annual Report

Board committeesAudit and Risk Management Committee

The Audit and Risk Management Committee was established in March 2009 and comprises the two non-executive directors appointed by the Board, David Usasz and Jayson Newitt, together with Managing Director, Edek Choros, and Executive Director, Michael Mewing.

The committee meets as required to undertake its role effectively, and at any other time as requested by a member of the committee or the external auditors.

The primary function of the committee is to assist the Board in fulfilling its responsibilities for the company’s financial reporting and external reporting and ensuring all accounting reports are prepared in accordance with the appropriate accounting standards and statutory requirements.

Nomination and Remuneration CommitteeThe Nomination and Remuneration Committee was established in March 2009 and comprises the two non-executive directors appointed by the Board, David Usasz and Jayson Newitt, together with Managing Director, Edek Choros, and Executive Director, Michael Mewing.

The aims of the committee are to ensure the company:

• has a Board of an effective composition, size and commitment to adequately discharge its responsibilities and duties

• has coherent remuneration policies and practices to attract and retain executives and directors who will create value for security holders

• fairly and responsibly rewards executives having regard to the performance of the company, the performance of the executives and the general pay environment.

The Board has established an Audit and Risk Management Committee and a Nomination and Remuneration Committee to assist in the execution of its responsibilities.

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Ambre Energy operates with a long term focus and expects high standards of personal integrity from its directors, executive management teams and the Chief Financial Officer, to ensure financial and business performance are underpinned by a values-driven approach to business operations. Ambre Energy will strive continually to operate in an open and accountable manner, building a sound reputation for environmental stewardship and respectful community relations as it pursues business success.

Ambre Energy recognises the importance of avoiding potential conflicts of interest and prioritising the needs of the company and shareholders over personal interests. All employees, consultants and contractors are required to have a clear understanding of the company’s rules, values, expectations and required standards of conduct at the outset of their relationship with Ambre Energy, in order to be appropriate company ambassadors.

Ethical standardsAmbre Energy is building a strong team across two continents and its leaders are committed to modelling ethical behaviour in the conduct of every facet of the company’s expanding business activities and community interactions.

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2011 Annual Report

AustraliaIn addition to three Executive Directors described previously, Edek Choros, Michael van Baarle and Michael Mewing, Ambre Energy’s Australian Executive Management team at the time of reporting includes the following senior officers.

Executive Management

Mark Fraser BCom

Chief Financial Officer and Company Secretary

After joining Ambre Energy in January 2007, Mark Fraser was appointed as Chief Financial Officer in January 2008 and Company Secretary in July 2008. Mr Fraser is responsible for the preparation of the Company’s statutory financial reports, other statutory compliance, cashflow management, and company secretarial services.

Mark is the principal liaison for investor enquiries and as Chief Financial Officer, he is focused on ensuring the company’s finances are properly structured and reported in preparation for Ambre Energy’s ASX listing.

Mr Fraser completed a Bachelor of Commerce at the University of Newcastle.

Johannes (Jannie) Grové BEng(Chem), MEng(Chem), MBA

Chief Executive Officer, Ambre CTL Limited

Jannie Grové joined Ambre Energy in 2008 in the role of General Manager Projects Australia and Asia and is responsible for process development, technology development and project management of the company’s coal-to-liquids and potential oil shale projects.

Jannie commenced his career as a chemical engineer with Sasol Chemical Industries, a company focused on converting coal into fuel and high value products. In the subsequent 18 years he gained experience in process engineering, technical management, operations management and process development working in plants / projects in South Africa, the USA and Australia. Specific industry experience includes the Ethylene, Vinyl Chloride Monomer, Alumina, Cement and Oil Shale Industries.

Prior to joining the company, he held the position of Director of Process Development for QER, a company focusing on emerging oil shale projects in Australia.

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Graeme Booth BCom, CA

General Manager Corporate Finance

Graeme is a chartered accountant whose career has included senior executive roles with ABN Amro Bank NV and RBS in London and Hong Kong in Capital Markets Origination, Trading and Risk Management. He was a member of both the Asian Equities and Global Equities Origination management teams, and was Corporate Managing Director heading the Strategic Equities Solutions team for Asia. Prior to these positions he held the position of Equity Derivatives Product Control for Credit Suisse Financial Products in London.

He is well qualified having studied at prestigious institutions around the globe:

• University of Natal – Bachelor of Commerce (Cum Laude) and Postgrad Dip. Acc.

• London Business School – Corporate Finance Program

• Amsterdam Institute of Finance – Options Trading Strategies and Risk Management

• University of Technology Sydney and University of Sydney – Tax, Company and Takeover Law

Dr Nicholas Drinnan BSc, BA(Hon), PhD(Chem), MIP

Manager Research and Development

Since 2007, Nicholas Drinnan has been responsible for managing Ambre Energy’s test work including retorting, gasification and other coal upgrading techniques, providing design basis data for Ambre Energy’s engineering team. He is the primary liaison point for Ambre Energy’s catalyst and reactor research and development at the University of Utah and DME engine testing program at the University of Queensland.

Nicholas completed his undergraduate education majoring in chemistry and philosophy. He has completed postgraduate studies in organic chemistry, philosophy and intellectual property, and is a qualified patent and trademark attorney.

He spent almost seven years at Alchemia Ltd working as a synthetic organic chemist. In addition to his scientific duties, he was also responsible for intellectual property management.

In 2004, Nicholas joined patent attorney firm Davies Collison Cave, which he subsequently left to join Ambre Energy

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2011 Annual Report

Ambre Energy North America has an Executive Management team which includes the following senior officers.

Everett King BBA (Accounting Major)

President and Chief Executive Officer, Ambre Energy North America, Inc.

Everett King is overseeing the transition of the company’s North American businesses into an operational phase, in addition to the development work that continues. He has 30 years experience with a strong cost and operations background in manufacturing, mining, logistics and technology in the private and public sectors. He has held top general and financial management positions with demonstrated success in business development, finance, operations, strategic planning, mergers, divestitures, investor relations, and treasury.

Prior to joining Ambre Energy North America in May 2010, he held the CFO role for the US Engineered Products Division of the Rio Tinto Alcan Aerospace Transportation Group. He spent 23 years with The Marmon Group and was CFO and Group Vice President of several member companies.

Everett has been instrumental in the success of several start-ups, and he has considerable experience and expertise in merger and acquisition activity, debt restructuring, bond issues, private equity investment and investor management.

Tracy Welch MBA, BS (Accounting)

Chief Financial Officer, Ambre Energy North America, Inc.

Tracy Welch assumed the role of Chief Financial Officer for Ambre Energy North America in October 2011. He has held senior financial management positions with other global energy and manufacturing companies. Tracy has significant experience in treasury, finance, risk management, mergers and acquisitions, investor relations, business development, and strategic planning.

Prior to joining Ambre, Mr. Welch was the Treasurer at Verso Paper, Hawkeye Energy and Iomega. He was also the Chief Financial Officer at Global Ethanol and at Schwan’s Food Service. Tracy has spent over 30 years international experience including over 15 years with companies in the energy industry plus over 15 years with manufacturing companies. During his career, Tracy has been involved with significant financings and debt restructuring, bond issues, private equity investment, M&A transactions, investor relations and risk management.

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Tay Tonozzi BSc Environmental Engineering

Vice President Technical Services

Tay Tonozzi joined Ambre Energy in May 2010, and currently holds the position of Vice President Technical Services. Tay is responsible for the management and coordination of all Strategic Regulatory Affairs and Mine Planning activities associated with Ambre Energy’s North American coal ventures.

Tay has over 14 years of environmental, mine engineering, and operation supervision experience in the coal mining industry. He has extensive knowledge in large multi-dragline and truck/shovel operations, with a broad portfolio of project management experience ranging from project start-ups to optimization of active operations. Recently, Tay has managed the due diligence efforts associated with the acquisition of multiple active mining operations located in the United States.

Prior to joining Ambre Energy, Tay held the position of Technical Service Manager for Rio Tinto’s Colowyo mine, where he managed all engineering, permitting, and project development activities.

Steve Gili B.S. Mining Engineering

General Manager Black Butte Mine

Stephen Gili assumed the role of General Manager Black Butte Mine for Ambre Energy North America in October 2010.

Since October 2010, Stephen has worked with the Technical Services department to develop mine plans for Black Butte and Decker. Steve has 15 years experience in coal mine management, operations, supervision and engineering. Most recently he worked for Rio Tinto as Production Manager at Jacobs Ranch Mine followed by General Manager of the Colowyo Mine. His background in engineering and operations helps to influence Steve’s approach to mine management by basing decisions on technical knowledge and practical applications.

Tim Fagley B.S. Mining Engineering

General Manager Decker Mine

Tim Fagley assumed the role of General Manager Decker Mine in December 2011.

Before joining Ambre Energy, Tim was the General Manager Minerals responsible for the bentonite mining & processing operations for Schlumberger. He has had over 25 years experience in the mining industry including senior management, strategy and planning roles. From 1994 to 2004, he had senior positions at a number of coal mines operated by Rio Tinto’s Kennecott Energy Company, including Spring Creek Mine, Antelope Mine and Cordero-Rojo Mine. He has also worked as a mining engineer for other top tier coal industry players such as Arch Mineral Corporation (now Arch Coal) and North American Coal Corporation.

Tim holds a B.S. Mining Engineering from Pennsylvania State University.

41

2011 Annual Report

Clark Moseley BSc (Mining Engineering)

Chief Operating Officer, AE Infrastructure

Clark Moseley joined Ambre Energy in 2010 with over 35 years of accomplishment in directing a diverse company and organisations. He has held responsibilities for profit and loss, new business development, mine operations, budgeting, mine planning, engineering and engineering supervision.

In addition to an extensive career in the US coal industry over 30 years, Clark has held the position of President with an Australian owned used equipment and sales company where he turned the entity into a profitable enterprise and directed a successful acquisition program.

Clark is responsible for the development of Ambre Energy’s infrastructure program in North America. He directs the development of the company’s port projects, and works with the railroads and barging companies to investigate options for transporting coal to the various ports for loading into ocean going vessels.

Ken Miller Chief Executive Officer, MBTL

Ken has 36 years experience in the mining industry (31 in coal); having been a Department Manager in Engineering, Maintenance, Operations, & Capital Projects & director of Process Improvement at Arch Coal’s Thunder Basin Coal Co. In 2010, TBCC’s Black Thunder Mine shipped over 100 million tons. Previously Ken was Arco Coal Manager of Planning (Business Department). He holds a Bachelor of Science in Civil Engineering and is registered as a Professional Engineer in Wyoming and Colorado. He is a past President of the Rocky Mountain Coal Mining Institute.

Trevor SimmonsVice-President Operations and Project Management, MBTL

Trevor Simmons joined Ambre Energy in January 2011 with over 25 years involvement in the operation and expansion of Newcastle’s coal export terminals. He has qualifications in Mechanical Engineering with experience in managing the planning approvals for and construction of the expansion of the terminals.

Trevor is the VP of Operations and Project Management at the Millennium Bulk Terminals’ site in Longview Washington USA. His responsibilities include the operational aspects of the current site activities and the development of the Coal Export Terminal Project at Longview. His knowledge, skills and experience in the design and operation of coal handling facilities will be instrumental in the successful development of the Millennium Bulk Terminal in Longview.

Kristin GainesManager Environment and Health, MBTL

Kristin Gaines commenced working for Millennium Bulk Terminals in January 2011 bringing over 20 years of experience in industrial operations, remediation, and brownfield redevelopment. Ms. Gaines is responsible for facility compliance, operations permitting, expansions permitting, and site remediation.

Prior to joining Millennium Bulk Terminals, Ms. Gaines worked for a variety of large international industrial operations managing compliance and permitting for the operating facilities. Her knowledge, skills and experience are pivotal to her being a valued member of the Millennium Bulk Terminals management team in taking the project through its various stages to effective operation.

People

43

2011 Annual Report

At the date of reporting, Ambre Energy employed over 400 people spread across Australia and the US. Ambre Energy employees have varied responsibilities including management, mine engineering, mine operators, port operators, civil engineers, design engineers, maintenance staff, mechanical engineers, chemical engineering, geology, legal, accounting, and government and community relations.

A number of key specialist appointments were made in 2010-11, to increase the technical competence in mining and geology available in-house in Australia. In the US, there was also a strong focus on expanding the team to secure a skills base to finalise port and mine acquisitions, and prepare for operation.

Reflecting the stage of Ambre Energy’s growth, a significant investment was made in 2010-11 to buy-in the specialist skills required in the short term, to supplement existing resources and to take proposed projects to the next development stage. This expertise included financial, engineering, environmental and social impact, and community engagement practitioners.

Staff Profile Attracting and retaining appropriately skilled and committed professionals across Ambre Energy’s global operations to support the company’s business strategy was a priority in 2010-11. It will remain a priority in 2011-12 to reflect the company’s expected growth and increased requirements for specific technical and operations skills.

44

Ambre Energy believes a strong company results from an appropriately skilled and motivated workforce and strives to provide an environment where individual talent and contributions to the company’s growth are valued and recognised.

During 2010-11, Ambre Energy actively supported professional development and training, investing in a range

of courses for employees including management, leadership, health and safety, information technology, legal, community engagement, media and public relations.

The company will continue to invest in training activities that improve the safety and productivity of its workforce. All training and development activities are provided on an equitable basis.

Training and workforce developmentDuring the year, Ambre Energy continued to invest in workforce planning and skills development, while identifying the integration strategies required following successful US acquisitions to manage a significantly increased workforce.

Ambre Energy recognises that safe and healthy workplaces, free from injury and incident, underpin all of its activities. Ambre Energy values its employees and the community and strives to ensure that risks to personal injury are minimised

through the appropriate and ongoing investment in equipment, safety monitoring, reporting and communication systems, training and safety exercises, and through building a corporate safety culture.

Health and safety commitmentProviding a healthy and safe workplace for all employees, contractors, consultants and visitors to various site operations is not just a legal requirement, but a core corporate goal.

45

2011 Annual ReportA wide-ranging risk assessment was completed for various aspects of Australian operations, appropriate team members completed Site Senior Executive training and a Workplace Health and Safety Officer was appointed.

An independent audit confirmed no loss-of-time injuries of workplace safety incidents were incurred in either Australian or US operations.

Ambre Energy’s activities involve dealing with a range of potentially dangerous chemicals and materials, and as mining and liquid fuel production projects and planned acquisitions advance, the range of hazards and risks associated with business operations will increase.

Along with increased operational activities in 2010-11, expanded activity on analysing risks, and assessing the potential hazards and mitigation strategies will result to help Ambre Energy fulfill its commitment to sending people home safely.

2011 Annual Report

Directors’ ReportDirectors’ report

Auditor’s independence declaration

Financial report

Consolidated statement of financial position

Consolidated statement of comprehensive income

Consolidated statement of cash flows

Notes to the consolidated financial statements

Directors’ declaration

Independent auditor’s report

48

Directors’ Report

DirectorsThe following persons were directors of the parent during the whole of the financial year and up to the date of this report, unless otherwise noted:

D Usasz Non-Executive Chairman Chairman of Audit & Risk Committee Chairman of Nomination and Remuneration Committee

E Choros Chief Executive Officer and Managing Director Member of Audit & Risk Committee Member of Nomination and Remuneration Committee

M Mewing Executive Director Member of Audit & Risk Committee Member of Nomination and Remuneration Committee

SMJ van Baarle Executive Director

J Newitt Non-Executive Director - Appointed 1 December 2010 Member of Audit & Risk Committee Member of Nomination and Remuneration Committee

J Massey Non-Executive Director - Appointed 18 July 2011 Member of Audit & Risk Committee Member of Nomination and Remuneration Committee

R Bhappu Non-Executive Director - Appointed 16 November 2011

The qualifications, experience and special responsibilities of the Directors are set out on pages 32 to 34 of the Annual Report.

Company SecretaryM Fraser – see page 37 for the biography of the company secretary.

The Directors of Ambre Energy Limited present their report, together with the financial statements of the consolidated group, being Ambre Energy Limited (“the parent”) and its controlled entities (‘the group”), for the financial year ended 30 June 2011.

49

2011 Annual Report

Principal activitiesDuring the year, the principal activities of the group were –

• completing the acquisition of a port terminal business near Longview, Washington State, USA (now known as Millennium Bulk Terminals-Longview or MBTL), and finalizing a co-investment in MBTL by US coal producer, Arch Coal, Inc.;

• conducting feasibility studies into the potential construction of new state-of-the-art coal handling facilities at MBTL for the purpose of exporting US coal;

• negotiating and entering into an option agreement with the Port of Morrow near Boardman, Oregon, USA in connection with the potential construction of coal handling facilities and a barge terminal at the port for the purpose of exporting US coal;

• seeking further capital to enable the acquisition of producing coal mine assets in Montana and Wyoming;

• development of a coal deposit and proposed coal gasification and chemical processing facility for the production of liquid fuels, known as the ambreCTL project, near Toowoomba, Australia;

• development of technology for the cleaner, more efficient production of new fuels such as dimethyl ether (DME) from coal.

Review of operationsInformation on the operations of the group and its business strategies and prospects is set out on pages 14 to 29 of the Annual Report.

Operating resultsThe net accounting loss for the group was $23,129,390 (2010: $15,955,372).

Significant changes in state of affairs During the financial year, the group –

• advanced negotiations and associated funding arrangements to acquire operating coal mines in the US states of Wyoming and Montana;

• acquired property, plant and equipment and entered into a ground lease on the site commonly known as the Former Reynolds Aluminum Smelter Facility in Longview, Washington, USA, on 11 January 2011 for an initial term of sixty years. The acquisition was in line with the groups’ strategy to progress its objective of becoming a leading exporter of thermal coal from the USA.

• raised approximately $29.99 million in share capital and redeemable convertible notes and issued a membership

interest equating to a non-controlling 38% of the total issued capital Millennium Bulk Terminals Longview LLC (MBTL), a controlled entity of the group, to Arch Coal West, LLC, for an initial capital contribution of $USD 25 million.

Events after balance sheet dateSince the end of the financial year, the group has concluded several significant transactions. Further details are set out on pages 95 to 96 of the Annual Report.

Otherwise, there has not been any other matter or circumstance that has significantly affected, or may significantly affect, the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

Likely developmentsLikely developments in the operations of the group in future financial years and the expected results of those operations are set out in pages 14 to 29 of the Annual Report.

Environmental legislationAmbre Energy (Felton) Pty Ltd and Ambre Energy Exploration Pty Ltd are subject to environmental regulations applicable in the State of Queensland, Australia where it holds coal exploration tenements and during the financial year their activities recorded no environmental non-compliance issues.

Ambre Energy Technology, LLC is subject to environmental regulations applicable in the State of Utah, USA where it holds oil shale leases and permits for operation of the pilot retort near Vernal, and during the financial year its activities recorded no environmental non-compliance issues.

Millennium Bulk Terminals-Longview, LLC, a partly-owned (62%) US subsidiary, has certain obligations to remediate the newly acquired former Reynolds Metals aluminum smelter near Longview, Washington State, USA.

The group is not subject to the conditions imposed by the registration and reporting requirements of the National Greenhouse and Energy Reporting Act 2007.

DividendsThe Directors declare that no amount has been paid or declared by way of a dividend since the start of the financial year. The Directors do not recommend the payment of a dividend in respect of the financial year.

50

Share Options

Share options granted to directors and executives

During and since the end of the financial year, an aggregate of 18,500,000 share options were granted to the following directors and executives of the parent as part of their remuneration. Included in the total of 18,500,000 are 16,000,000 options granted since the end of the financial year to executives. These options were approved by the Board following the Managing Director, Mr E Choros electing to forfeit 20,000,000 options to reward and further align the interest of other senior executive employees within the group. The vesting of options at the minimum exercise price granted is in certain cases conditional on future events:

Directors and executivesNumber of options

grantedNumber of ordinary

shares under option

M Mewing 4,000,000 4,000,000

SMJ van Baarle 4,000,000 4,000,000

E King 4,500,000 4,500,000

G Booth 1,500,000 1,500,000

M Fraser 2,000,000 2,000,000

C Moseley 2,000,000 2,000,000

J Grové 500,000 500,000

Total 18,500,000 18,500,000

Shares under option or issued Details of unissued shares or interests under option as issued by Ambre Energy Limited as at the date of this report are:

Issue Date Number of shares under option Class of Shares

Exercise Price of

option Expiry date of options

8 November 2006 30,000,000 Ordinary $0.20 31 December 2011

19 March 2007 3,000,000 Ordinary $0.20 31 December 2011

19 April 2007 1,000,000 Ordinary $0.20 31 December 2011

18 March 2008 1,000,000 Ordinary $0.48 31 December 2011

30 June 2008 3,000,000 Ordinary $0.48 31 December 2012

1 September 2008 4,100,000 Ordinary $0.48 31 December 2012

4 September 2008 320,000 Ordinary $0.48 31 December 2012

29 September 2008 200,000 Ordinary $0.48 31 December 2012

30 September 2008 800,000 Ordinary $0.48 31 December 2012

1 October 2008 750,000 Ordinary $0.48 31 December 2012

6 November 2008 200,000 Ordinary $0.48 31 December 2013

28 January 2009 500,000 Ordinary $0.48 31 December 2012

1 February 2009 2,050,000 Ordinary $0.48 31 December 2013

7 May 2009 1,600,000 Ordinary $0.48 31 May 2014

27 January 2010 400,000 Ordinary $0.48 31 December 2015

51

2011 Annual Report

1 March 2010 1,500,000 Ordinary $0.48 31 December 2015

15 March 2010 200,000 Ordinary $0.48 31 December 2014

20 April 2010 1,000,000 Ordinary $0.60 31 December 2014

20 April 2010 600,000 Ordinary $0.60 31 December 2015

20 April 2010 2,000,000 Ordinary $0.60 31 December 2015

30 April 2010 300,000 Ordinary $0.48 31 December 2014

30 April 2010 2,000,000 Ordinary $0.60 31 December 2015

3 May 2010 1,000,000 Ordinary $0.48 31 December 2015

10 May 2010 500,000 Ordinary $0.48 31 December 2015

1 July 2010 1,200,000 Ordinary $0.48 31 December 2015

1 October 2010 1,000,000 Ordinary $0.48 31 December 2015

21 October 2010 100,000 Ordinary $0.60 31 December 2015

22 October 2010 100,000 Ordinary $0.60 31 December 2015

1 November 2010 200,000 Ordinary $0.60 31 December 2015

22 November 2010 600,000 Ordinary $0.60 31 December 2015

1 December 2010 300,000 Ordinary $0.60 31 December 2015

1 May 2011 250,000 Ordinary $1.00 31 December 2015

11 May 2011 500,000 Ordinary $1.25 31 December 2015

16 June 2011 500,000 Ordinary $1.00 31 December 2015

16 June 2011 250,000 Ordinary $1.25 31 December 2015

18 July 2011 300,000 Ordinary $1.25 31 December 2015

8 August 2011 400,000 Ordinary $1.10 31 December 2015

16 August 2011 100,000 Ordinary $1.10 31 December 2015

1 October 2011 600,000 Ordinary $1.10 31 December 2015

24 October 2011 500,000 Ordinary $1.10 31 December 2015

14 November 2011 6,250,000 Ordinary $1.00 14 November 2014

16 November 2011 5,400,000 Ordinary $1.10 31 December 2015

16 November 2011 11,000,000 Ordinary $1.25 31 December 2015

5 December 2011 500,000 Ordinary $1.10 31 December 2015

Total 88,070,000

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body.

Indemnifications of officers and auditorsDuring the financial year the company paid a premium in respect of a contract insuring the directors of the company (as named above), the company secretary, and all executive officers of the company and of any related body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred as such an officer or auditor.

52

Directors’ meetingsThe number of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2011, and the number of meetings attended by each director was as follows:

Full meetings of directors

Meetings of Committees

Audit and Risk Committee

Remuneration and Nomination Committee

Attended Held* Attended Held* Attended Held*

E. Choros 6 6 1 1 1 1

M. Mewing 6 6 1 1 1 1

SMJ. van Baarle 6 6 n/a n/a n/a n/a

P. Ritchie 3 3 n/a n/a n/a n/a

D. Usasz 6 6 1 1 1 1

J. Newitt 3 3 1 1 1 1

* Number of meetings held during the time the director held office.

Proceedings involving the CompanyThe company is not a party to any court proceedings in respect of section 237 of the Corporations Act.

Non-audit servicesThe following non-audit services were provided by the group’s auditor, Grant Thornton. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for audits imposed by the Corporation Act 2001. The nature and scope of each type of non-audit service provided was such that auditor independence was not compromised.

Grant Thornton received, or are due to receive, the following amounts for the provision of non-audit services:

Non-audit service$ $

Tax compliance 16,051

Corporate advice services 10,000

Totalnon-auditservices 26,051

Auditor’s independence declarationThe auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page 54 of the annual report.

The report is made in accordance with a resolution of the directors.

Edward (Edek) Choros Director

19 December 2011

53

Auditor’s Independence Declaration

2011 Annual Report

54

55

Financial Report

2011 Annual Report

56

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Consolidated Statement of Financial Positionas at 30 June 2011

Note 2011 2010

$ $

ASSETS

CURRENT ASSETS

Cash and cash equivalents 6 10,980,040 2,909,037

Trade and other receivables 7 487,901 141,163

Current tax assets 3 572,439 447,551

Other current assets 13 1,038,554 171,896

TOTAL CURRENT ASSETS 13,078,934 3,669,647

NON-CURRENT ASSETS

Other financial assets 8 154,015 131,088

Property, plant and equipment 10 15,862,499 3,571,086

Intangible assets 11 12,994,949 2,796,600

Exploration and evaluation assets 12 25,246,016 29,451,258

Other non-current assets 13 229,507 243,569

TOTAL NON-CURRENT ASSETS 54,486,986 36,193,601

TOTAL ASSETS 67,565,920 39,863,248

CURRENT LIABILITIES

Trade and other payables 14 1,631,871 665,481

Other financial liabilities 8 9,843,101 4,871,741

Employee entitlements 15 267,284 143,311

Provisions 16 759,601 -

TOTAL CURRENT LIABILITIES 12,501,857 5,680,533

NON-CURRENT LIABILITIES

Other financial liabilities 8 - 83,444

Employee entitlements 15 65,812 17,366

TOTAL NON-CURRENT LIABILITIES 65,812 100,810

TOTAL LIABILITIES 12,567,669 5,781,343

NET ASSETS 54,998,251 34,081,905

EQUITY

Issued capital 17 89,496,566 64,497,625

Convertible notes 17 670,814 362,792

Reserves 18 11,631,615 15,710,079

Retained earnings (69,617,981) (46,488,591)

Parent interest 32,181,014 34,081,905

Non-controlling interest 22,817,237 -

TOTAL EQUITY 54,998,251 34,081,905

57

2011 Annual Report

The accompanying notes form part of these financial statements

Ambre Energy Limited ACN 114 812 074

Consolidated Statement of Comprehensive Incomefor the year ended 30 June 2011

Note 2011 2010

$ $

Revenue 2 1,090,462 117,681

Depreciation and amortisation expense (1,554,874) (1,527,784)

Employee benefits expense 19 (6,685,350) (4,275,486)

Foreign exchange gains (losses) (121,524) (57,351)

Finance costs (1,459,433) (224,413)

Consultants and professional expense (6,940,935) (2,341,423)

Insurance expenses (343,114) (89,662)

Loss on disposal of financial assets - (69,583)

Office lease expense (591,651) (552,083)

Research and development expense (2,063,036) (2,127,099)

Recruitment and relocation expense (279,602) (177,287)

Repairs and maintenance expense (366,313) (7,869)

Share based payments expense 19 (1,920,380) (3,362,504)

Travel expenses (1,018,740) (618,707)

Other expenses (2,465,793) (1,129,353)

Profit/(loss) before income tax (24,720,283) (16,442,923)

Income tax expense/(benefit) 3 (572,439) (447,551)

Profit/(loss) for the year 2 (24,147,844) (15,995,372)

Attributable to members of the parententity (23,129,390) (15,995,372)

Loss attributable to non-controlling interest (1,018,454) -

Other comprehensive income:

Exchange differences on translation of foreign controlled entities (4,865,705) (1,452,816)

Other comprehensive income for the year, net of income tax (4,865,705) (1,452,816)

Total comprehensive income for the year (27,995,095) (17,448,188)

Attributable to members of the parent entity (27,001,548) (17,448,188)

Attributable to non-controlling interest (993,547) -

Earning per share $ $

Basic and diluted earnings per share attributable to members of the parent entity: 29 (0.09) (0.06)

58

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Consolidated Statement of Changes in Equityfor the year ended 30 June 2011

Share capital Retained earnings

Foreign currency

translation reserve Option reserve

Convertible notes

Non-controlling

interest Total

$ $ $ $ $ $ $

Balance at 1 July 2009 58,747,769 (30,493,219) 2,585,955 11,214,436 - - 42,054,941

Profit/ (Loss) attributable to members of parent entity

- (15,995,372) - - - - (15,995,372)

Total other comprehensive income for the year

- - (1,452,816) - - - (1,452,816)

Shares issued during the year

5,761,376 - - - - - 5,761,376

Transaction costs (11,520) - - - - - (11,520)

Options issued during the year

- - - 3,362,504 - - 3,362,504

Value of conversion rights on convertible notes issued

- - - - 362,792 - 362,792

Balance at 30 June 2010 64,497,625 (46,488,591) 1,133,139 14,576,940 362,792 - 34,081,905

Balance at 1 July 2010 64,497,625 (46,488,591) 1,133,139 14,576,940 362,792 - 34,081,905

Profit/ (Loss) attributable to members of parent entity

- (23,129,390) - - - - (23,129,390)

Profit/ (Loss) attributable to non-controlling interests

- - - - - (1,018,454) (1,018,454)

Total other comprehensive income for the year

- - (5,998,844) - - 24,907 (5,973,937)

Shares issued during the year

25,889,340 - - - - - 25,889,340

Transaction costs (890,399) - - - - - (890,399)

Transactions with non-controlling interests

- - - - - 23,810,784 23,810,784

Options issued during the year

- - - 1,920,380 - - 1,920,380

Conversion of convertible notes to ordinary shares

- - - - (349,926) - (349,926)

Value of conversion rights on convertible notes issued

- - - - 657,948 - 657,948

Balance at 30 June 2011 89,496,566 (69,617,981) (4,865,705) 16,497,320 670,814 22,817,237 54,998,251

59

2011 Annual Report

The accompanying notes form part of these financial statements

Ambre Energy Limited ACN 114 812 074

Consolidated Statement of Cashflowsfor the year ended 30 June 2011

Note

2011 2010

$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 656,613 -

Payments to suppliers and employees (20,134,271) (11,060,094)

Income tax offset received 447,551 -

Interest received 200,064 110,758

Interest paid (418,555) (5,836)

Net cash provided by (used in) operating activities 24a (19,248,598) (10,955,172)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of non-current assets 92,158 -

Purchase of property, plant and equipment 10a (14,094,554) (273,980)

Purchase of other intangible assets 11a (10,982,013) -

Purchase of exploration and evaluation assets 12a (457,805) (612,773)

Purchase of financial assets (154,015) (200,671)

Net cash provided by (used in) investing activities (25,596,229) (1,087,424)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 19,494,000 5,556,167

Share issue transaction costs (890,399) -

Proceeds from issue of redeemable convertible notes 8 10,500,000 5,099,400

Transactions with non-controlling interests 24d 23,810,784 -

Net cash provided by (used in) financing activities 52,914,385 10,655,567

Net movement in cash held 8,069,558 (1,387,029)

Cash at beginning of financial year 6 2,909,037 4,297,221

Effect of exchange rates on cash holdings in foreign currencies 1,445 (1,155)

Cash at end of financial year 6 10,980,040 2,909,037

60

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies

The consolidated financial statements of Ambre Energy Limited and its controlled entities for the financial year ended 30 June 2011 comprises Ambre Energy Limited and its controlled entities (together referred to as the “group”). Ambre Energy Limited (the parent) is an unlisted public company incorporated in and domiciled in Australia.

The separate financial statements of the parent, Ambre Energy Limited have not been presented in the financial report as permitted by amendments to the Corporations Act 2001 effective 28 June 2010.

Basis of preparation

The consolidated financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

The consolidated financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. All amounts are presented in Australian dollars.

The following is a summary of the material accounting policies adopted by the group in preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

Accounting policies

(a) Principles of consolidation

A controlled entity is any entity Ambre Energy Limited has the ability and right to govern the financial and operating policies so as to obtain benefits from its activities. Control will generally exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are also considered.

A list of controlled entities is contained in Note 9 to the financial statements. All controlled entities have a June financial year end.

As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the group during the year, their operating results have been included (excluded) from the date control was obtained (ceased).

Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the Equity section of the Statement of Financial Position and Statement of Comprehensive Income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date.

All inter-company balances and transactions between entities in the group, including any unrealised profits and losses are eliminated in preparing the financial statements.

61

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 1: Statement of significant accounting policies (cont’d)

(a) Principles of consolidation (cont’d)

Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

(b) Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer. The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the accounts and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed.

In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. All transaction costs incurred in relation to the business combination are expensed to the Statement of Comprehensive Income.

(c) Income tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

62

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies (cont’d)

(c) Income tax (cont’d)

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Tax consolidation

Ambre Energy Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax liability of each group entity is then subsequently assumed by the parent entity. The group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 20 October 2006.

There are no tax sharing arrangements in place between members of the income tax consolidated group at the date of this report.

(d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost less, where applicable, accumulated depreciation and impairment losses.

Property

Freehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings.

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the Statement of Comprehensive Income. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the Statement of Comprehensive Income and depreciation based on the asset’s original cost is transferred from the revaluation reserve to Retained Earnings.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

63

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 1: Statement of significant accounting policies (cont’d)

(d) Property, plant and equipment (cont’d)

Plant and equipment

Plant and equipment are measured on the cost basis less accumulated depreciation and any accumulated impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. A formal assessment of recoverable amounts are made when impairment indicators are present (refer to Note 1(h) for details on impairment).

The cost of fixed assets constructed within the group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets, including buildings and capitalised lease assets, but excluding freehold land is depreciated on a straight-line basis over their useful lives to the group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are:

Class of fixed asset Depreciation rate

Buildings 2-100%

Plant and equipment 2-100%

Leasehold improvements 5-20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Comprehensive Income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to Retained Earnings.

(e) Exploration and development expenditure

Exploration, evaluation and development expenditure incurred is capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

64

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies (cont’d)

(e) Exploration and development expenditure (cont’d)

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits.

Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

(f) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the group classified as finance leases.

Finance leases are capitalised by recording an asset and liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the year.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

(g) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately.

65

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 1: Statement of significant accounting policies (cont’d)

(g) Financial instruments (cont’d)

Classification and subsequent measurement

Financial instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as:

a) the amount at which the financial asset or financial liability is measured at initial recognition; b) less principal repayments; c) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and d) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

The group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

Financial assets at fair value through profit or loss

Financial assets are classified at ‘fair value through profit or loss’ when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period.

66

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies (cont’d)

(g) Financial instruments (cont’d)

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently

measured at amortised cost.

Derivative instruments

The group designates certain derivatives as either:

i) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or ii) hedges of highly probable forecast transactions (cash flow hedges).

At the inception of the transaction the relationship between hedging instruments and hedged items, as well as the group’s risk management objective and strategy for undertaking various hedge transactions is documented.

Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items, are also documented.

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Statement of Comprehensive Income, together with any changes in the fair value of hedged assets or liabilities that are attributable to the hedged risk.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred to a hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Comprehensive Income.

Amounts accumulated in the hedge reserve in equity are transferred to the Statement of Comprehensive Income in the periods when the hedged item will affect profit or loss.

Impairment

At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the Statement of Comprehensive Income.

67

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 1: Statement of significant accounting policies (cont’d)

(g) Financial instruments (cont’d)

Financial guarantees

Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition.

The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118.

The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

— the likelihood of the guaranteed party defaulting in a year period;

— the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and

— the maximum loss exposed if the guaranteed party were to default.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

(h) Impairment of assets

At the end of each reporting period, the group assesses whether there is an indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less cost to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Comprehensive Income.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

(i) Intangible assets other than goodwill

Patents

Patents are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes being recognised as a change in accounting estimate.

68

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies (cont’d)

(i) Intangible assets other than goodwill (cont’d)

Research and development costs

Expenditure on the research phase of projects is recognised as an expense in the period in which it is incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.

Acquisition costs of operating lease

On 11 January 2011 the group acquired a ground lease on the site commonly known as the Former Reynolds Aluminium Smelter Facility in Longview, Washington, USA. Significant costs were incurred to obtain this lease. These costs have been capitalised as an intangible asset and will be amortised over the remaining term of the lease.

(j) Foreign currency transactions and balances

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of Ambre Energy Limited and the presentation currency for the consolidated financial statements.

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the Statement of Comprehensive Income, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the Statement of Comprehensive Income.

The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:

i. assets and liabilities are translated at year-end exchange rates prevailing at that

reporting date;

ii. income and expenses are translated at average exchange rates for the period where this approximates the rate at the date of the transaction; and

iii. retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the Statement of Financial Position. These differences are recognised in the Statement of Comprehensive Income in the period in which the operation is disposed.

69

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 1: Statement of significant accounting policies (cont’d)

(k) Employee benefits

Provision is made for the group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

Equity settled compensation

The group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of options is ascertained using a Black– Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

(l) Provisions

Provisions are recognised in the Statement of Financial Position when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and that outflow can be reliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the year.

(m) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(n) Revenue and other income

Revenue is measured at the fair value of consideration received or receivable, net of the amount of goods and services tax. Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

Revenues have been received for the unloading, handling, storage and trucking of bulk materials. Revenue is recognised when the unloading of alumina is complete at the site. Other revenue from the rendering of services is recognised upon the delivery of the service to the customers. The exception to this is income relating to storage and trucking of coal and rental of land which is invoiced monthly. The source of these revenues is the port facility at Longview, WA, USA.

All revenue is stated net of the amount of goods and services tax (GST) or appropriate USA taxes.

70

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies (cont’d)

(o) Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the group that remain unpaid at the end of the financial year. The balance is recognised as current liability with the amounts normally paid within 30 days of recognition of the liability.

(p) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and service tax (GST), except where an amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of an asset or as part of an item of expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO, is included as a current asset or liability in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(q) Operating segments

The group has adopted the disclosure requirements of AASB 8 – Operating Segments for the first time this year. Note that the comparative year information has been disclosed.

In identifying its operating segments, management follows the group’s service lines, which represent the main products and services provided by the group.

The three segments identified by management are the three divisions of operation being the Coal, Alternative Fuels and Infrastructure.

The activities of each are as follows:

• Coal – coal exploration and development of coal resource, development of coal mines and acquisition of coal mines.

• Alternative fuels – the development and use of alternative fuel technologies including the coal to liquids project and research and development on a single DME single stage manufacturing process.

• Infrastructure - development and eventual operation of port facilities for the shipping of coal in the USA.

Note that not all inter-segment transfers are carried out at arm’s length prices. However, the inter-segment transfers are infrequent and insignificant.

Unless otherwise stated, all amounts reported to the Board being the chief decision makers with respect to operating segments are determined in accordance with accounting policies which are consistent with those reported in the annual financial statements of the group.

71

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 1: Statement of significant accounting policies (cont’d)

(r) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the group has retrospectively applied an accounting policy, made retrospective statement of items in the financial statements or reclassified items in the financial statements an additional statement of financial performance as at the beginning of the earliest comparative period will be disclosed.

(s) New accounting standards for application in future periods

The following standards, amendments to standards and interpretations have been identified as those which may impact the group in the period of initial application. They are available for early adoption at 30 June 2011, but have not been applied in preparing these financial statements:

AASB 9: Financial Instruments and AASB 2009–11: (applicable for annual reporting periods commencing on or after 1 January 2013) These standards are applicable retrospectively and amend the classification and measurement of financial assets. The group has not yet determined the potential impact on the financial statements.

AASB 124: Related Party Disclosures: (applicable for annual reporting periods commencing on or after 1 January 2011): This standard removes the requirement for government related entities to disclose details of all transactions with the government and other government related entities and clarifies the definition of a related party to remove inconsistencies and simplify the structure of the standard. No changes are expected to materially affect the group.

(t) Critical accounting estimates and judgments

The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trend and economic data, obtained both externally and within the group.

Key judgements

Included in the financial statements are intangible assets (refer to Note 11), mineral leases and capitalised exploration costs (refer to Note 12) and a retort pilot plant (refer to Note 10). The initial value of these assets has been determined by the directors after assessing the value of similar assets and the expected value of the assets (discounted) upon successful commercialisation of these assets. The directors believe that the amounts shown are recoverable and no provision for impairment needs to be made at 30 June 2011.

(u) Change in accounting policy

The group has adopted the following standards, amendment to standards and interpretations. Please note that none of these have made a significant impact on the group.

- AASB 2009-4, 5 Amendments to Australian Accounting Standards – Arising from the Annual Improvements Project affecting various AASBs.

- AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions AASB 2.

- AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues AASB 132.

- AASB Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments

72

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 1: Statement of significant accounting policies (cont’d)

(v) Going concern

The financial statements have been prepared on a going concern basis. The Board acknowledges that without further funding the group will deplete its cash reserves within 12 months of the date of this report.

The group has successfully secured funding in the 2011 financial year totalling $53.8million (2010: $10.7million) and acquired interests in revenue and cash producing assets (refer to Note 25).

The group is planning to source funding in the 2012 financial year. The parent is currently in advanced negotiations to secure further funding for acquisitions and working capital including by way of an initial public offering (IPO) of its securities.

Given these factors, the Board has assessed the resources available to the group and consequently believe that the company will be able to pay its debts as and when they fall due.

73

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 2: Operating segments

Management has chosen to organise the group by division around three different activities and are the operating segments used for the purposes of this note.

The operating segments and their respective type of products and services are as follows:

Coal exploration, development and acquisition (Coal) - Coal exploration and development of coal resources. - Development and operation of coal mines. - Acquisition of coal mines.

Infrastructure

Infrastructure entails the acquisition, development and eventual operation of port facilities primarily for the exporting of coal from the United States of America.

Alternative fuels

The development and use of alternative fuel technologies including: - The development of a coal to liquids fuel projects. - The development of oil shale resources. - Research and development activities.

Segment earnings are described as earnings before interest, tax, depreciation and amortisation (EBITDA).

Coal Infrastructure Alternative fuels Total

2011 2011 2011 2011

Segment result $ $ $ $

EBITDA (3,869,442) (9,213,053) (5,611,103) (18,693,598)

Depreciation and amortisation - (354,437) (1,090,136) (1,444,573)

Unallocated items:

Head office expense (3,122,679)

Interest expense (1,459,433)

Taxation expense/ (benefit) 572,439

Profit/(loss) after income taxation (24,147,844)

Assets and liabilities

Segment assets 2,809,139 25,414,607 31,692,377 59,916,123

Unsegmented assets 7,649,797

Total assets of the consolidated group 67,565,920

Segment liabilities 202,481 1,823,300 134,040 2,159,821

Unsegmented liabilities 10,407,848

Total liabilities of consolidated group 12,567,669

74

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Coal Infrastructure Alternative fuels Total

2011 2011 2011 2011

Revenue $ $ $ $

Revenues from external customers - 886,969 3,129 890,098

Interest revenue 88 361 4,469 4,918

Unsegmented interest revenue 195,446

Total interest revenue 200,364

Consolidated revenue 1,090,462

Coal Infrastructure Alternative Fuels Total

2010 2010 2010 2010

Segment result $ $ $ $

EBITDA (loss) (1,773,724) (2,569,090) (5,351,096) (9,693,910)

Depreciation and amortisation - - (1,450,108) (1,450,108)

Unallocated items:

Head office expense (5,074,154)

Interest expense (224,413)

Taxation (expense)/benefit 447,213

Profit/(loss) after income taxation (15,995,372)

Assets and liabilities

Segment assets 1,076,079 - 35,546,425 36,622,504

Unsegmented assets 3,240,744

Total assets of the consolidated group 39,863,248

Segment liabilities - - 342,792 342,792

Unsegmented liabilities 5,438,551

Total liabilities of consolidated group 5,781,343

Revenue

Revenues from external customers - - 6,866 6,868

Interest revenue 1,124 - 1,774 2,898

Unsegmented interest revenue 107,915

Total interest revenue 110,813

Consolidated revenue 117,681

Note 2: Operating segments (cont’d)

75

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

2011 2010

$ $

Revenue Non-current assets Revenue Non-current assets

United States of America 887,163 42,543,798 - 27,554,479

Australia 2,935 11,789,173 6,866 8,508,034

Total 890,098 54,332,971 6,866 36,062,513

The group has provided port facilities in the infrastruture segment to two customers who accounted for 43% and 37% (2010:nil) of external revenue for this segment.

Note 2: Operating segments (cont’d)

The group’s revenues from external customers and its non-current assets (other than financial instruments, investments accounted for using the equity method, deferred tax assets and post-employment benefits assets) are divided into the following geographical areas:

76

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

2011 2010

$ $

a. The components of tax expense/(benefit) comprise:

Current tax (572,439) (447,551)

Deferred tax - -

(572,439) (447,551)

b. The prima facie tax on profit from ordinary activities before income tax is recon-ciled to the income tax as follows:

Profit from continuing operations before income tax expense (24,720,283) (16,442,923)

Tax at the Australian tax rate of 30% (2010: 30%) (7,416,085) (4,932,877)

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

— Entertainment 7,639 5,458

— Fines and penalties 81 15

— Gifts and donations 3,064 2,326

— Share option expense 576,114 1,008,751

(6,829,187) (3,916,327)

Effect of different tax rates of subsidiaries operating in other taxation jurisdictions. (520,691) -

(Under)/over provision in prior year (277,874) -

— Deferred tax assets not brought to account 7,627,752 3,916,327

Less:

Tax effect of:

— Tax concessions (research and development) (572,439) (447,551)

Income tax expense/ (benefit) attributable to entity (572,439) (447,551)

Weighted average effective tax rates (2.3%) (2.7%)

Where applicable, grants and tax concessions are accrued in the year in which they are receiv-able.

Potential deferred tax assets attributable to unused tax losses and unrecognized temporary differences carried forward:

17,378,245 9,750,493

Unused tax losses and unrecognised temporary differences relate to the Australian tax consolidated group and two USA tax groups.

Of the two USA tax groups, the tax group headed by AE Oil Shale, Inc. has restrictions on the utilisation of losses within the group.

The total unused losses of this USA tax group are as follows:

— group headed by AE Oil Shale, Inc. 3,775,307 4,611,839

The unused losses of each subsidiary within this USA tax group may only be utilised against taxable profits of the same subsidiary. The potential tax benefit of restricted unused tax losses of the USA tax group are as follows:

— group headed by AE Oil Shale, Inc. 1,600,697 2,016,882

Note 3: Income tax expense

77

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 4: Auditors’ remuneration

2011 2010

$ $Remuneration of the auditor of the parent for:

— audit and review of the financial report 74,201 52,635

74,201 52,635

— Taxation compliance 16,051 24,890

— Corporate advice services 10,000 -

26,051 24,890

Note 5: DividendsNo dividends were paid or declared during the current or prior year.

Franking Credits

The amount of the franking credits available for subsequent reporting periods are:

— Balance at the end of the reporting period (Parent) 3,036 3,036

Note 6: Cash and cash equivalentsCash at bank and in hand:

— AUD 6,973,741 2,778,270

— USD 4,006,299 130,767

Cash and cash equivalents 10,980,040 2,909,037

Note 7: Trade and other receivablesCURRENT

Trade receivables 250,633 -

Interest receivable 300 -

GST receivable 236,968 124,015

FBT receivable - 7,148

Security deposits refundable - 10,000

487,901 141,163

All amounts are short-term. The net carrying value of trade receivables is considered a reasonableapproximation of fair value.

The group’s trade and other receivables have been reviewed for indicators of impairment. No trade

receivables were found to be impaired and no allowance for credit losses has been recorded.

Trade recievables are non-interest bearing and generally paid within 14 days.

78

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 8: Financial assets and liabilities

The carrying amounts presented in the Statement of Financial Position relate to the following categories of assets and liabilities:

Note 2011 2010

$ $

Financial assets Current:

Held to maturity investments 8a 154,015 131,088

Current:

Loans and receivables

— Cash and cash equivalents 6 10,980,040 2,909,037

— Trade and other receivables 7 487,901 141,163

11,467,941 3,050,200

Financial liabilities

Measured at amortised cost:

Current:

— Borrowings 8b 9,843,101 4,871,741

— Trade and other payables 14 1,631,871 665,481

Non-current:

— Borrowings 8b - 83,444

11,474,972 5,620,666

8a. Held to maturity investments

Unlisted investments, at cost:

— option fees paid for freehold land 285,103 200,671

less options expired - (69,583)

less options exercised (131,088) -

154,015 131,088

8b. Borrowings

Financial liabilities measured at amortised cost:

Current

— Unsecured redeemable convertible notes issued during the previous financial year (i) - 4,871,741

issued during the year (ii) 9,743,060 -

Transfers from non-current (iii) 100,041 -

9,843,101 4,871,741

Non-current:

— Unsecured redeemable convertible notes (iii) - 83,444

9,843,101 4,955,185

Redeemable convertible notes have been issued as a source of short-term finance for operational cashflow and to assist with acquisitions. The notes are redeemable or convertible to ordinary shares in the parent entity at the election of the noteholder.

79

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 8: Financial assets and liabilities (cont’d)

i. On 28 March 2010 the parent entity issued 6,250,000 convertible notes with a face value of $0.80 per note, for a total consideration of $5,000,000 to a sophisticated investor. The notes were convertible into ordinary shares in the parent entity at a conversion rate of 1 share for each note. The notes had a redemption date of 28 March 2011 and interest rate of 10% per annum. As part of the note issue the investor was granted a first right of refusal to participate in a project subsidiary. In order to facilitate an investment into the project subsidiary by another party the note holder and the parent entity entered into a deed of variation and termination under which the note holder surrendered its first right of refusal in exchange for a variation to the conversion rate for the notes. The deed provided that the conversion rate be 15 ordinary shares for every 10 notes held by the note holder, with interest also to be converted at the rate of 1 ordinary share for each $0.5333 of interest owing. On 17 February 2011 the note holder elected to convert all notes held and interest accrued under the deed into 10,214,950 fully paid ordinary shares.

ii. On 7 January 2011 the parent entity issued 12,500,000 notes with a face value of $0.80 per note for total consideration of $10,000,000 to an investor. This followed a previous agreement with the investor to acquire shares in a wholly owned subsidiary. The notes were convertible into ordinary shares in the parent entity at a conversion of one share for each note, at the note holder’s election. On 30 November 2011, the noteholder requested the parent entity to redeem the notes no later than 16 December 2011 including accrued interest of $126,027 (refer to Note 25a). The convertible notes are compound financial instruments. The present value of the liability component at initial recognition was $9,342,052. The balance of $657,948 was recognised in equity (refer to Note 17b).The amortised cost as at reporting date was $9,660,868. Also included under current liability is $82,192 of interest payable as at reporting date.

The liability component is based on a reasonable interest rate that the company would need to offer to pure debt investors had they not the opportunity to convert to equity 17.68% is the effective interest rate which has been determined, should a company such as the parent entity require debt funding.

iii. On 18 September 2009 the parent entity issued 142,000 notes with a face value of $0.70 per note, for total consideration of $99,400. The redemption date of the notes is 30 September 2011 and fixed interest of 10% per annum is payable quarterly in arrears. 72,000 notes were issued to a director controlled entity on the same terms as other noteholders (refer to Note 23c).

The convertible notes are compound financial instruments. The present value of the liability component at initial recognition was $86,534. The balance of $12,866 was recognised in equity (refer to Note 17b). The present value of the liability at reporting date totals $100,006. Also included under current liability is $35 of interest payable as at reporting date.

The debt component is based on a reasonable interest rate that the company would need to offer to pure debt investors had they not the opportunity to convert to equity 17.68% is the effective interest rate which has been determined, should a company such as the parent entity require debt funding. On 30 September 2011, the noteholders elected to convert 142,000 notes into ordinary shares (refer to Note 25c).

iv. On 7 July 2010 the parent entity issued 625,000 unsecured convertible notes to a sophisticated investor for a total considerations of $500,000. Issue price per note was $0.80 and entitled the holder to an interest rate of 10% per annum on the issue price. On 30 June 2011 the noteholder elected to convert all outstanding notes and interest accrued to 675,000 ordinary shares in the parent entity.

$10,500,000 has been included in cash flows from financing activities in the Statement of Cashflows. Interest paid during the year in respect of convertible notes was $406,850 and is included in cash flows from operatingactivities in the Statement of Cashflows. A further $369,366 of interest payable on convertible notes was converted toequity at time of conversion (8b(i,iv)).

80

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 9: Controlled entitiesa. Controlled entities consolidated

NoteCountry of

incorporationPercentage owned (%)*

Subsidiaries of Ambre Energy Limited: 2011 2010

Ambre Energy (Felton) Pty Ltd Aust 100 100

Ambre Energy Exploration Pty Ltd Aust 100 100

Ambre CTL Limited Aust 100 100

Ambre EOR Pty Ltd Aust 100 100

Ambre Pipelines Pty Ltd Aust 100 100

AE Minerals Pty Ltd (fomerly AE Minerals Limited) Aust 100 -

AE Oil Shale, Inc. (formerly Ambre Energy North America, Inc.) 9b USA 100 100

Ambre Energy Partners, Inc. USA 100 100

Ambre Energy Technology, LLC USA 100 100

AE Alternative Fuels, LLC USA 100 -

Ambre Energy North America, Inc. (formerly AE Group Holdings, Inc.)

USA 100 -

AE Coal, LLC (formerly AE Coal, Inc.) 9c USA 100 -

AE Infrastructure, LLC (formerly Millennium Bulk Logisitics, Inc.) USA 100 -

Millennium Bulk Terminals-Longview, LLC USA 62 -

AE Coal Marketing, LLC USA 100 -

Coyote Island Terminal, LLC USA 100 -

AE Mining, LLC 9c USA - 100

Ambre Energy Coal Marketing, LLC 9b USA - 100

Ambre Energy Exploration, LLC 9b USA - 100

Ambre Energy Montana, LLC 9b USA - 100

b. Ambre Energy Coal Marketing, LLC, Ambre Energy Exploration, LLC and Ambre Energy Montana, LLC were merged into AE Oil Shale, Inc (fomerly Ambre Energy North America, Inc) on 29 June 2011.

c. AE Mining, LLC was merged into AE Coal, LLC on 29 June 2011.

* percentage of voting power is in proportion to ownership

81

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 10: Property, plant and equipment2011 2010

$ $

Land and buildings

Freehold land

At cost 3,141,442 966,604

Total land 3,141,442 966,604

Buildings

At cost 689,447 259,188

Accumulated depreciation (284,302) (106,863)

Total buildings 405,145 152,325

Total land and buildings 3,546,587 1,118,929

Plant and equipment

At cost 16,638,430 6,505,918

Accumulated depreciation (4,369,106) (4,123,374)

12,269,324 2,382,544

Leasehold improvements

At cost 72,795 89,031

Accumulated amortisation (26,207) (19,418)

Total leasehold improvements 46,588 69,613

Total plant and equipment 12,315,912 2,452,157

Total property, plant and equipment 15,862,499 3,571,086

82

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 10: Property, plant and equipment (cont’d)a. Movements in carrying amounts

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current finan-cial year.

Freehold land BuildingsLeasehold

improvementsPlant and

equipmentTotal

$ $ $ $ $

Balance at 1 July 2009 966,604 125,598 88,206 3,524,773 4,705,181

Additions - 89,188 - 184,792 273,980

Disposals - - - (10,365) (10,365)

Net exchange difference arising on translation of a for-eign subsidiary into the presentation currency

- - (1,377) (143,532) (144,909)

Depreciation and amortisation expense - (62,461) (17,216) (1,173,124) (1,252,801)

Balance at 30 June 2010 966,604 152,325 69,613 2,382,544 3,571,086

Additions (refer to Note 11b) 2,174,838 430,259 - 11,489,457 14,094,554

Disposals - - - (109,243) (109,243)

Net exchange difference arising on translation of a for-eign subsidiary into the presentation currency

- - (7,336) (359,094) (366,430)

Depreciation and amortisation expense - (177,439) (15,689) (1,134,340) (1,327,468)

Balance at 30 June 2011 3,141,442 405,145 46,588 12,269,324 15,862,499

Note 11: Intangible assets2011 2010

$ $

Patents

At cost 2,804,466 3,511,603

Accumulated amortisation (728,338) (715,003)

Net carrying value 2,076,128 2,796,600

Capitalised development costs - Coal Terminal (refer to Note 11c)

At cost 2,841,336 -

Accumulated amortisation - -

Net carrying value 2,841,336 -

Acquisition costs for long-term operating lease (refer to Note 11c)

At cost 8,140,677 -

Accumulated amortisation (63,192) -

Net carrying value 8,077,485 -

Total intangible assets 12,994,949 2,796,600

83

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 11: Intangible assets (cont’d)a. Movements in carrying amounts

Movement in the carrying amounts for each class of intangible between the beginning and the end of the current financial year.

PatentsCapitalised

development costs

Acquisition cost for

operating leaseTotal

Note $ $ $ $

Balance at 1 July 2009 3,258,232 - - 3,258,232

Patents allowed to lapse (34,934) - - (34,934)

Amortisation charge (274,983) - - (274,983)

Net exchange difference arising on translation of a foreign subsidiary into the presentation currency

(151,715) - - (151,715)

Balance at 30 June 2010 2,796,600 - - 2,796,600

Development costs capitalised 11c - 2,841,336 - 2,841,336

Additions 11b 8,140,677 8,140,677

Amortisation charge (164,214) - (63,192) (227,406)

Net exchange difference arising on translation of a for-eign subsidiary into the presentation currency

(556,258) - - (556,258)

Balance at 30 June 2011 2,076,128 2,841,336 8,077,485 12,994,949

Patents owned by the group have finite useful lives between 17 and 25 years . The current amortisation charges for intangible assets are in-cluded under depreciation and amortisation expense per the Statement of Comprehensive Income.

Patents and provisional patents owned by the group are set out below:

Title Country

Retort heating apparatus & methods USA

b. On 11 January 2011, Millennium Bulk Terminals-Longview, LLC (MBTL), a controlled entity entered into an asset purchase agreement with Chinook Ventures, Inc. (Chinook). MBTL acquired improvements (buildings, equipment, unloading and storage facilities) and the leasing rights from Chinook to operate a private bulk terminals business on the site commonly known as the Former Reynolds Aluminium Smelter Facility in Longview, Washington, USA. Included under Note 10 Property plant & equipment, are the fair value amounts $10,907,707 ($USD11,713,603 on acquisition) assigned to the tangible assets acquired from Chinook under this agreement. Included under Note 11, the fair value amount of $8,140,677 ($USD 8,742,136) represents the cost of entering into a new operating lease for the site with the Lessor (Northwest Alloys, Inc.).

c. Subsequent to the asset acquisition, $2,841,336 ($USD 3,051,310) has been spent on the development of a coal terminal facility in the 2011 financial year. This has been been disclosed as development costs capitalised in Note 11a.

84

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 12: Exploration and evaluation assets

Note 2011 2010

$ $

Mineral leases & exploration expenditure capitalised

— Exploration and evaluation phases - Felton, Queensland, Australia 12a 7,310,021 6,852,216

— Exploration and evaluation phases - Utah, United States of America 12b 17,935,995 22,599,042

Total exploration expenditure 25,246,016 29,451,258

a. Movements in carrying amounts

2011 2010

$ $

Opening balance 6,852,216 6,373,642

Exploration expenditure capitalised 457,805 612,773

Exploration costs written off - (134,199)

Closing balance 7,310,021 6,852,216

Capitalised costs amounting to $457,805 (2010:$612,773) have been included in cash flows from investing activities in the Statement of Cash Flows.

b. Movements in carrying amounts

2011 2010

$ $

Opening balance 22,599,042 23,738,184

Net exchange difference arising on translation of a foreign subsidiary into the presentation currency

(4,663,047) (1,139,142)

Closing balance 17,935,995 22,599,042

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and commercial exploitation, or alterna-tively, sale of the respective areas of interest.

Note 13: Other assets2011 2010

$ $

CURRENT

Deposits paid 116,373 25,060

Restricted cash 13b 598,145 -

Prepayments 324,036 146,836

1,038,554 171,896

NON-CURRENT

Deposits paid 49,190 61,329

Note receivable 7,397 9,320

Cash backed bank guarantees 13a 172,920 172,920

229,507 243,569

a. Restricted cash deposited with a bank as security under an office lease.

b. Restricted cash is in relation to holdback and closing adjustments under an asset purchase agreement (refer to Note 11b).

85

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 14: Trade and other payables 2011 2010

$ $

CURRENT

Unsecured liabilities

Trade payables 560,907 203,612

Amounts payable to related parties 25,894 -

Sundry payables and accrued expenses 1,045,070 461,869

1,631,871 665,481

Note 15: Employee entitlements Short-term employee benefits

Long-term employee benefits

$ $

Opening balance at 1 July 2010 143,311 17,366

Additional provisions 319,869 48,446

Amounts used 195,896 -

Balance at 30 June 2011 267,284 65,812

Analysis of total employee entitlements

2011 2010

$ $

Current 267,284 143,311

Non-current 65,812 17,366

333,096 160,677

Provision for long-term employee benefits

A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report.

Provision for short-term employee benefits

A provision has been recognised for employee entitlements relating to annual leave. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report.

Note 16: ProvisionsAll provisions are considered current. The carrying amounts may be analysed as follows:

Asset purchase adjustments Repairs & unknown

claimsTotal

$ $ $

Carrying amount at 1 July 2010 - - -

Additional provisions 1,595,114 825,461 2,420,575

Amounts used 1,405,266 255,708 1,660,974

Carrying amount at 30 June 2011 189,848 569,753 759,601

The provisions for closing adjustments, repair and unknown claims arises from the asset purchase agreement with Chinook Ventures, Inc (refer to Note 11b).The group’s management expects to settle the remaining adjustments and claims in the 2012 financial year.

86

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 17: Issued capitalEffective 1 July 1998 the Corporations Law abolished the concepts of authorised share capital and par value. Accordingly the parent entity has no authorised capital and its shares have no par value.

Note 2011 2010

No. No.

Ordinary shares - issued 17a 318,216,983 287,382,633

$ $

Ordinary shares - fully paid 90,595,025 64,305,685

Ordinary shares - deferred settlement - 400,000

Issue costs (1,098,459) (208,060)

Issued capital 89,496,566 64,497,625

a. Ordinary shares No. No.

At the beginning of the reporting period 287,382,633 276,213,100

Shares issued on equity settled transactions 19,944,400 11,169,533

Shares issued on conversion of convertible notes and interest 8 10,889,950 -

At the end of the reporting period 318,216,983 287,382,633

During the year 30,834,350 shares were issued for a total net consideration of $24,998,941.

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At the shareholders meetings, each ordinary share is entitled to one vote if a poll is called, otherwise each shareholder has one vote on a show of hands.

2011 2010

b. Redeemable convertible notes No. No.

At the beginning of the reporting period 6,392,000 -

Notes issued 13,125,000 -

Conversion into ordinary shares (6,875,000) -

At the end of the reporting period 12,642,000 6,392,000

$ $

The convertible notes are compound financial instruments (refer to Note 8b). 670,814 362,792

c. Options

For information relating to share options issued during the financial year, refer to Note 19.

Capital Management

Management controls the capital of the group in order to ensure that the group can fund its operations and continue as a going concern. The group’s capital includes ordinary share capital and redeemable convertible notes and there are no externally imposed capital requirements. Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of share issues to ensure adequate equity is raised as required.

There have been no changes in the strategy adopted by management to control the capital of the group since the prior year.

87

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 18: Reservesa. Foreign currency translation reserve

The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary.

b. Option reserve

The option reserve records items recognised as expenses on valuation of share options.

Note 19: Employee remuneration2011 2010

a. Employee benefits expense $ $

Wages & salaries 5,796,785 3,564,188

Annual leave 306,855 34,471

Long service leave 9,703 4,731

Personal leave 21,080 10,667

Superannuation contribution 194,057 200,656

Other employee expenses 356,870 460,773

6,685,350 4,275,486

b. Share based payments

Share based employee remuneration of $1,842,149 has been included in share based payments of $1,920,380 (2010:$3,362,504). The group employee share option plans (Australian & USA) are the basis for the share based employee remuneration.All share-based employee remuneration will be settled in equity. The group has no legal or constructive obligation to repurchase or settle the op-tions. Share options and weighted average exercise prices are as follows for the reporting periods presented:

2011 2010

Number of options

Weighted average

exercise priceNumber of

options

Weighted average exercise price

$ $

Outstanding at the beginning of the year 78,020,000 0.29 70,500,000 0.27

Granted 5,400,000 0.70 10,200,000 0.55

Expired - - (2,680,000) 0.48

Outstanding at year-end 83,420,000 0.32 78,020,000 0.29

Exercisable at year-end 75,540,000 0.30 71,250,000 0.28

The options outstanding at 30 June 2011 had a weighted average exercise price of $0.32 and a weighted average remaining contractual life of 1.4 years. Exercise prices range from $0.20 to $1.25 in respect of options outstanding at 30 June 2011.The fair values of options granted were determined using a variation of the binomial option pricing model that takes into account factors specific to the share option incentive plans, such as the vesting period.The following principal assumptions were used in the valuation:Exercise price 0.48-1.25Life of the option 4-6 years

Underlying share price $0.48 - $1.00

Expected share price volatility 60.0%

Risk free interest rate 4.7%

Due to the company’s low trading volumes over recent times, it is the view of the company’s management that the future ex-pected volatility is better represented by an average volatility of similar companies listed on the Australian Securities Exchange. An analysis of similar listed companies provides a volatility of 60.0%.

88

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 20: Leasing commitments

2011 2010

$ $

a. Operating lease commitments

Non-cancellable operating leases contracted for but not recognised in the financial statements:

Minimum lease payments due

— Not later than 12 months 568,515 569,953

— One year or later and not later than five years 1,547,094 2,152,531

— Later than five years - 68,886

2,115,609 2,791,370

The operating lease commitments relate to non-cancellable office property leases in Australia and the United States of America. Two of the leases have options for further terms, of 5 years and 1 year. All leases allow for subletting. Minimum lease payments are increased by pre-determined amounts or percentages as per the agreements. check lease

b. Ground lease

Millennium Bulk Terminals-Longview, LLC (MBTL), a controlled entity entered into a ground lease on the site commonly known as the Former Reynolds Aluminium Smelter Facility in Longview, Washington, USA, on 11 January 2011 for an initial term of sixty years with Northwest Alloys, Inc (Lessor). Annual rental commitments do not commence until 1 January 2014 and will equate to the provision of alumina and other bulk material handling and/or offloading services provided to the lessor not exceeding set limits. Due to the contingent nature of the rent, there are no minimum lease payments relating to the ground lease included in the minimum lease payments due shown above. The rent free period ending on 31 December 2013 recognises the expenditure requirements of MBTL relating to specified work obligations include the demolition, removal and disposal of substantial existing structures on the leased site to be completed by 31 December 2013 and initial maintenance dredging to be completed by 28 February 2012 subject to receiving the required permits.

The ground lease agreement provides an option for the group to purchase the leased site within 12 months of specified environmental remedia-tion and other specified work being completed. As consideration for this option the group has agreed to perform certain work obligations under the lease. The most notable obligation is the performance of environmental remediation work up to a maximum expenditure of $20 million over a 4 year period commencing no later than 31 December 2013.

89

2011 Annual Report

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 21: Capital commitmentsa. Financial guarantees

Related party guarantees provided by the parent entity:The parent entity has provided a guarantee to a third party in relation to the performance and obligations of the controlled entity, Ambre Energy North America, Inc., in respect to a property lease rental. The guarantee is for the term of the lease and represents a financial commitment of $487,387 as at 30 June 2011. In addition a cash backed guarantee of $172,290 (refer to Note 13a) is held as security for performance and obligations of the parent entity in respect to a property lease rental.

Ambre Energy North America, Inc., a controlled entity, has agreed to guarantee the performance of each and every term, condition and covenant of the ground lease and the other agreements that another subsidiary of the group, has entered into with the lessor (refer to Note 20b).

b. Exploration expenditure commitments

The group has certain statutory obligations to undertake a minimum level of exploration activity in order to maintain rights of tenure to its exploration licenses. These obligations may vary from time to time in accordance with the type of tenements held and are expected to be fulfilled in the normal course of operations of the group to avoid forfeiture of any tenement.

2011 2010

Exploration commitments payable:

— Not later than 12 months 220,000 220,000

— One year or later and not later than five years 340,000 730,000

Tenement & mineral lease rental payable:

— Not later than 12 months 58,515 75,933

— One year or later and not later than five years 152,885 238,786

— Later than five years 195,711 280,099

967,111 1,544,818

c. Pilot plant site commitments

Fees payable on pilot plant site, Utah, United States:

— Not later than 12 months 3,073 3,872

— One year or later and not later than five years 12,292 15,488

— Later than five years 51,471 64,854

66,836 84,214

d. Research and development commitment with the University of Utah

The parent entity has a research agreement with the University of Utah, a body politic and corporate of the State of Utah. At year end the outstanding commitment on the agreement was $69,409 ($USD 74,538).

The net commitment is shown below:

2011 2010

$ $

— Not later than 12 months 69,409 427,636

90

Ambre Energy Limited ACN 114 812 074

The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 21: Capital commitments (cont’d)e. Millennium Bulk Terminals-Longview, LLC (MBTL) capital calls

To meet the future capital and operational needs of MBTL, a controlled entity, its board of directors may from time to time require by writ-ten notice that the members make additional capital contributions.

Capital calls shall be made to the members in proportion to their respective percentage membership interests at the date of notification. At year end the group had a 62% membership interest in MBTL and had made $USD 930,000 of capital contributions (2010:Nil).

Note 22: Contingent liabilities and contingent assetsThe group has no contingent assets.

Various legal claims were brought against the parent and controlled entities, Ambre Energy North America, Inc. and Millennium Bulk Logistics, Inc. by M.M. Dillon & Co. Group, LLC (M.M. Dillon) during the year. These claims arise out of M.M. Dillon’s non-exclusive agency relationship with Millennium Bulk Logistics, Inc. pursuant to a letter agreement dated 28 September 2010. M.M. Dillon’s complaint was filed in the Supreme Court of New York, Kings County, alleging damages in the amount of USD $1.2 million plus costs in breach of the agreement. Management do not believe that the parent and controlled entities have any liability and are vigorously defending the claims. Further detailed information on these contingencies is omitted so as not to seriously prejudice the group’s position in the related disputes.

Note 23: Related party transactionsTransactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Details of transactions between the reporting entity and its related parties are as follows:

a. Loans with wholly owned subsidiaries

Loans made between the parent entity and wholly owned subsidiaries are non interest bearing with no set repayment terms and condi-tions.

b. Interests of key management personnel (KMP)

The totals of remuneration paid to KMP of the company and the group during the year are as follows:

2011 2010

$ $

- Short-term employee benefits 2,305,191 1,683,926

- Share-based payment 552,459 1,671,600

2,857,650 3,355,526

c. Convertible notes held by a director related entity

One director related entity holds convertible notes (refer to Note 8biii). The interest paid on these notes was $5,040 for the year (2010:$2,693) being the same terms as other noteholders from the same issue.

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 24: Cash flow informationNote 2011 2010

$ $

a. Reconciliation of cash flow from operations with profit after income tax

Profit/(loss) after income tax (24,147,844) (15,995,372)

Cash flows excluded from profit attributable to operating activities

Non-cash flows in profit

Amortisation 243,096 292,199

Depreciation 1,311,778 1,235,585

Share based payments 1,920,380 3,362,504

Net loss on disposal of property, plant & equipment 15,449 10,365

Net loss/(gain) on disposal of other assets - 104,517

Exchange differences not related to operating activities (93,545) 60,010

Other equity settled transactions 419,766 193,689

Write-off of capitalised expenditure - 134,199

Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries

(Increase)/decrease in trade and other receivables (346,738) (16,369)

(Increase)/decrease in other assets (256,374) (112,736)

Increase/(decrease) in trade and other payables 966,047 (27,288)

Increase/(decrease) in current tax assets (124,888) (447,551)

Increase/(decrease) in financial liabilities 671,512 218,576

Increase/(decrease) in provisions 172,763 32,500

Cashflow from operations (19,248,598) (10,955,172)

b. Credit facilities

The group has no unused credit facilities with banks or other financial institutions.

c. Non-cash financing and investing activities

i) Share issues:

Non cash equity movement represented by:

- During the year 50,400 shares (2010:403,519 shares) were issued at $1.00 per share (2010:$0.48 per share), for total consideration of $50,400 (2010:$193,689) in lieu of employee bonuses payable for the 2010 (2009) calendar year.

- During the year 839,364 shares were issued at $0.5333 per share for total consideration of $447,632 in payment for interest expense that had become payable on particular issued convertible notes. Note that only $319,366 of this interest relates to interest accrued in 2011.

- During the year 50,000 shares were issued at $1.00 per share for total consideration of $50,000 in payment for interest expense that had become payable on particular issued convertible notes.

- During the year 9,375,586 shares were issued at $0.5333 per share for total consideration of $5 million being the conversion of issued convertible notes to issued ordinary shares.

- During the year 625,000 shares were issued at $0.80 per share for total consideration of $500,000 being the conversion of issued convert-ible notes to issued ordinary shares.

d. Transactions with non-controlling interests

During the year Millennium Bulk Terminals Longview LLC (MBTL), a controlled entity of the group issued a membership interest equating to a non-controlling 38% of the total issued capital of MBTL to Arch Coal West, LLC, for an inital capital contribution of $USD 25 million. The ma-jority of these funds were applied to procure the assets and improvements on the site commonly known as the Former Reynolds Aluminium Smelter Facility in Longview, Washington, USA (refer to Note11b).

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 25: Events after the reporting perioda) Acquisition of USA coal mines

On 10 November 2011, the Parent through a newly created controlled entity, AE Wind River, LLC entered into an agreement with Level 3 Holdings, Inc. (“Level 3”) to purchase all of the common stock of Level 3’s coal mining operations holding company, Eldorado Coal Inc., a Delaware corporation (“Eldorado Coal”). Eldorado Coal owns, directly, 100% of the issued and outstand-ing shares of KCP Properties, Inc. a Delaware corporation (“KCP Properties”) and 100% of the issued and outstanding shares of KCP Inc., a Delaware corporation (“KCP”). The transaction closed on 14 November 2011 and post-closing conditions were satisfied on 28 November 2011.

KCP has a 50% ownership stake in both the Decker Coal Company (“Decker”) in southern Montana and the Black Butte Coal Company (“Black Butte”) in Wyoming and certain operating and management responsibilities for both operations. The current production at these mines is approximately 6.0 million tonnes per annum. Ongoing sales contracts with domestic customers are in place for current production at these mines. Both Decker and Black Butte own substantial property plant and equipment. Decker equipment and facilities include 2 x 16 Mt/yr. train loading facilities and 2 draglines. Black Butte equipment and facilities include a 20 Mt/yr. train loading facility (3,000 t/hr.) and 2 draglines.

Additionally the interest in KCP includes 100% ownership of the remaining resources of the Big Horn Coal Company and Rosebud Coal Sales Company both in Wyoming. The purchase is in line with the group’s USA strategy to become a vertically integrated domestic coal producer and exporter of US thermal coal into the buoyant Asia Pacific market.

The consideration for the acquisition was the replacement and release of Level 3’s commitments and liabilities of KCP, in relation to certain asset retirement obligations in accordance with the applicable state reclamation laws and as defined by the mining permits. Zurich of North America (“Zurich”) has provided the surety bonds required by both the State of Montana and State of Wyoming (“the States”) for the reclamation liabilities. At the date of acquisition this represented a total bond liability of approxi-mately USD $152 million with the States.

The group has provided collateral of USD $70.5m to Zurich via restricted cash holding with the Bank of New York Mellon. Ad-ditionally the parent and certain controlled entities have unconditionally indemnified Zurich against all losses in connection with the issued bonds, excluding any amount paid or payable to a reinsurer or co-surety provider.

In order to ensure an efficient integration of the operations of KCP the group has entered into a transitional service agreement with Kiewit Mining Group, Inc. (“Kiewit”). Kiewit have previously provided management services to KCP. The agreement expires no later than 31 December 2012 and the group is obligated to pay USD$ 2,145,000 plus certain transitional employee costs to Kiewit for services provided. All employees are currently employed by Decker and Black Butte and there is likely to be minimal disruption of the workforce at the mines subsequent to the Kiewit agreement ending.

The initial accounting for the business combination is incomplete at the time the financial statements are authorised for issue and it is impracticable to comply with the disclosure requirements under AASB 3, specifically AASB 3 B64 (e)-(q). Due to the timing of the acquisition and additionally being of a complex nature a thorough review of accounting policies and acquisition date fair value calculations is required.

Funding of the acquisition

The acquisition of Eldorado Coal was partly financed through the subscription by Resource Capital Fund V L.P. (RCF) of 60 mil-lion convertible notes in the parent on 14 November 2011 for a price of $60 million. The notes converted to ordinary shares on a 1:1 basis following certain post-closing conditions being satisfied on 28 November 2011. RCF has further subscribed for 10 mil-lion shares in Ambre Energy Limited for $10 million to provide further funding following the request of a noteholder for repayment of $10 million of convertible notes by 16 December 2011 (Refer to Note 8bii). The parent agreed to give RCF certain anti-dilution rights, in which the parent must issue shares for no consideration when shares are issued by the parent less than a certain share price. These rights cease upon an initial public offering or a change in control event occurring.

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 25: Events after the reporting period (cont’d)

On 14 November 2011, RCF also agreed to lend USD $25 million to a controlled entity, Ambre Energy North America, Inc. (AENA) which was used to partly finance the acquisition and provide working capital for the group. Interest is payable at a rate of 5% per annum. In addition the parent issued 6.25 million options to RCF to acquire ordinary shares at $1 per share on financial close. Further options may be issued at 31 December 2011 and 1 April 2012, if the loan is outstanding at these times. The number of options to be issued is dependent on a number of factors including the value of the loan outstanding and market equivalent price of the parent’s shares.

The parent and controlled entity AE Minerals Pty Ltd (AE Minerals),and subsidiaries have agreed to guarantee the repayment of the bridge loan facility by AENA and pledge the shares in AENA as security for repayment of the bridge facility. Additionally certain negative covenants and a broad indemnity for any loss have been provided to RCF.

b) Port land lease

On 1 November 2011 a newly created controlled entity, Gulf States Bulk Terminal, LLC entered into a operating lease agreement with the Port of Corpus Christi Authority Of Nueces County, Texas. The leased area of land may be used for the transport, storage, handling, loading and unloading of bulk materials cargo to vessels and related activities and is for a term of 5 years beginning 1 November 2011 with the option to extend for 5 additional option periods of 5 years each. Rental payable for the lease area is USD $1,087,500, in total, over the initial 5 year term.

c) Other share issues

During July & August 2011, 730,000 shares were issued in the parent at $1.00 per share. Additionally on 31 August 2011 the parent issued 90,910 shares at $1.10 per share as deferred settlement costs under an agreement to purchase land and buildings in Felton, Queensland, Australia. On 30 September 2011, the parent issued 142,000 shares on conversion of 142,000 convertible notes with a face value of $0.70 per note (refer to Note 8biii.)

d) Newly created controlled entities

Post reporting date the following controlled entities were incorporated:

e) Cancellation and granting of options over unissued shares

After the reporting period the managing director, Mr E Choros agreed to cancel 20.0 million options over un-issued shares. The options had an exercise price of $0.20 and an expiry date of 31 December 2011. Following the cancellation the Board agreed to grant 16.0 million options in total to other executives of the company with exercise prices ranging from $1.10-$1.25 and with expiry dates no later than 31 December 2015.

The financial report was authorised for issue on 19 December 2011 by the board of directors.

Country of incorporation

Percentage owned (%)

AE Wind River, LLC USA 100

Gulf States Bulk Terminal, LLC USA 100

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 26: Financial risk managementThe group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable and redeemable convertible notes.

Floating interest rate Non- interest bearing

Financial assets: 2011 2010 2011 2010

$ $ $ $

- Cash and cash equivalents 10,980,040 2,909,037 - -

- Receivables - - 487,901 141,163

- Other assets 172,920 172,920 - -

- Options held to maturity - - 154,015 -

Total financial assets 11,152,960 3,081,957 641,916 141,163

Fixed interest rate Non- interest bearing

Financial liabilities: 2011 2010 2011 2010

$ $ $ $

Financial liabilities at amortised cost

- Trade and other payables - - 1,605,634 665,481

- Redeemable convertible notes 9,843,101 4,955,185 - -

- Amounts payable to related parties - - 25,894 -

Total financial liabilities 9,843,101 4,955,185 1,631,528 665,481

2011 2010

Financial liabilities are expected to be paid as follows: $ $

Less than six monthsLess than a year

11,474,629 6t65,481

- 4,955,185

Financial risk management policies

The Audit and Risk Committee (ARC) has been delegated responsibility by the Board of Directors for, amongst other issues, monitoring and managing financial risk exposures of the group. The ARC reviews the effectiveness of internal controls relating to currency risk, financing risk and interest rate risk. Minutes of the ARC are reviewed by the Board.

The ARC’s overall risk management strategy seeks to assist the group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of the use of hedging derivative instruments, and future cash flow requirements.

Specific financial risk exposures and management

The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk.

a. Interest rate risk

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The group is also exposed to earnings volatility on floating rate instruments.

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 26: Financial risk management (cont’d)b. Liquidity risk

Liquidity risk arises from the possibility that the group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The group manages this risk through the following mechanisms:

— preparing forward looking cash flow analysis in relation to its operational, investing and financing activities

— obtaining funding from a variety of sources

— maintaining a reputable credit profile

— managing credit risk related to financial assets

—investing only in surplus cash with major financial institutions

Financial assets pledged as collateral:

An amount of $172,290 has been pledged as security for contract guarantees and their realisation into cash may be restricted subject to the terms and conditions of the contract. Refer to Note 21 (a) for further details.

c. Foreign exchange risk

Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the group holds financial instruments which are other than the AUD functional currency of the group.

With instruments being held by overseas operations, fluctuations in US Dollar may impact on the group’s financial results unless those exposures are appropriately hedged.

The following table shows the foreign currency risk on financial assets and liabilities of the group’s operations denominated in currencies other than the functional currency of the operations.

Net financial assets/(liabilities) in AUD

2011 2010

Functional currency of the group $ $

AUD (2,829,546) (2,292,094)

USD 3,149,793 (105,452)

Total 320,247 (2,397,546)

d. Credit risk

The maximum exposure to credit risk, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements.

There are no material amounts of collateral held as security at balance date.

The group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the group. Credit risk related to balances with banks and other financial institutions is managed by the ARC. The following table provides information regarding credit risk relating to cash and money market securities based on Standard & Poor’s counter party credit ratings.

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

2011 2010

$ $

Cash and cash equivalents excluding cash on hand

— AA rated 6,973,741 2,786,816

— A-1+ rated 4,006,299 120,738

10,980,040 2,907,554

Cash backed bank guarantees

— AA rated (refer to Note 13) 172,290 172,290

e. Net fair values

The net fair values of assets and liabilities are carried at their approximate carrying value. No financial

assets and financial liabilities are readily traded on organised markets in standardised form

f. Sensitivity analysis

The following table illustrates sensitivities to the group’s exposures to changes in exchange rates. The table indicates the impact on how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables.

Profit Equity

$ $

Year ended 30 June 2011— +/- 10% in $AUD/$USD +/-1,265,000 +/-1,265,000Year ended 30 June 2010— +/- 10% in $AUD/$USD +/- 506,000 +/- 506,000

Note 27: Company detailsAmbre Energy Limited’s registered office and its principal place of business is as follows:

Level 27

AMP Place10 Eagle StreetBRISBANE QLD 4000 AUSTRALIA

Note 26: Financial risk management (cont’d)

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Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Ambre Energy Limited ACN 114 812 074

Note 28: Parent entity disclosuresThe following information has been extracted from the books and records of the parent and has been prepared in accordance with accounting standards.

2011 2010

$ $

Financial position of parent entity at reporting date

Current assets 34,188,914 22,043,945

Total assets 79,593,504 55,610,309

Current liabilities 10,196,419 5,377,891

Total liabilities 10,262,231 5,478,700

Total equity of the parent entity comprising of:

Share capital 90,182,379 64,860,417

Share-based payment reserve 16,497,320 14,576,940

Retained earnings (37,348,426) (29,305,748)

Total equity 69,331,273 50,131,609

Result of the parent entity

Profit/(loss) for the year (8,042,678) (7,931,806)

Total comprehensive income (8,042,678) (7,931,806)

Parent entity commitments for operating leases 2011 2010

Non-cancellable operating leases contracted for but not capitalised in the financial state-ments

$ $

Payable — minimum lease payments

— Not later than 12 months 361,263 343,984

— One year or later and not later than five years 1,243,959 1,537,854

— Later than five years - 68,886

1,605,222 1,950,724

Guarantees

The company has provided bank guarantees totalling $172,920 (2010: $172,920) in respect of the company’s Brisbane head office. These amounts are secured by bank deposits to the value of $172,920 (2010: $172,920).

Refer to Note 21(a) for details of other guarantees provided by the company, for and on behalf of other controlled entities.

Contingent liabilities and contingent assets

The company does not believe it has any material contingent liabilities or contingent assets other than as disclosed in Note 22.

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The accompanying notes form part of these financial statements

Notes to the Consolidated Financial Statementsfor the year ended 30 June 2011

Note 29: Earnings per share

Both basic and diluted earnings per share have been calculated using the total comprehensive income attributable to members of the parent entity (after tax) as the numerator. No adjustments to profits were necessary in 2011 and 2010.

The weighted average number of shares used in the calculation of basic earnings per share and diluted earnings per share is as follows:

2011 2010

Amounts in shares: No. No.

Weighted average number of ordinary shares used in basic earnings per share 297,668,275 282,734,906

Effect of share options and convertible notes on issue - -

Weighted average number of ordinary shares used in diluted earnings per share 297,668,275 282,734,906

Note that issued convertible notes and issued company share options are considered to be antidilutive and therefore were excluded from the diluted weighted average number of ordinary shares calculation.

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Ambre Energy Limited ACN 114 812 074

Directors’ Declarationfor the year ended 30 June 2011

The directors of Ambre Energy Limited declare that:

a. the consolidated financial statements and notes of Ambre Energy Limited are in accordance with the Corporations Act 2001 and,

i. comply with Australian Accounting Standards which as stated in note 1 to the financial statements, constitutes ex-plicit and unreserved compliance with the international financial reporting standards (IFRS); and

ii. give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the company and consolidated group; and

b. In the directors’ opinion there are reasonable grounds to believe that Ambre Energy Limited will be able to pay its debts as and when they become due and payable, having regard to the disclosure made in Note 1(v).

This declaration is made in accordance with a resolution of the Board of Directors.

Brisbane, 19 December 2011

Signature

Edward (Edek) Choros

Director

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Glossary

AGM Annual General Meeting

ASX Australian Securities Exchange

catalyst a substance, usually used in small amounts relative to the reactants, that modifies and increases the rate of a reaction

CEO Chief Executive Officer

CFO Chief Financial Officer

char The solid material that remains after light gases (e.g. coal gas) and tar have been driven-out or released from a carbonaceous material during the initial stage of combustion

CTL coal-to-liquids

depolymerisation see liquefaction

DME dimethyl ether, a synthetic fuel and potential diesel substitute. It can act as a clean fuel when burned in engines properly optimised for DME

EIS Environmental Impact Statement, the document produced for the Queensland Government from environmental impact assessment process

EPC engineering, procurement and construction

EPC Exploration Permit for Coal, granted by the Queensland Government

IAS Initial Advice Statement, a document providing sufficient information about the nature and scope of a project to the Queensland Government

hydroprocessing the catalytic upgrading of oil products, resulting in greater purity and stability

IPO Initial Public Offering of shares on the Australian Securities Exchange

JORC (Australasian) Joint Ore Reserves Committee

lignin an abundant organic polymer, it is commonly derived from wood, it is an integral part of the secondary cell wall of plants and can be found in some algae

lignite a yellow to dark brown coal, formed from peat at shallow depths and temperatures lower than 1000C

liquefaction a process to liquefy, or change from a gaseous to liquid stateLPG liquid petroleum gas, purer than petrol, reducing CO2 emissions by around 10%

ML megalitres

ML/yr million litres per year

Mtpa million tonnes per year

NOx nitrogen oxide, a binary compound of oxygen and nitrogen, typically produced during combustion at high temperatures

pyrolysis decomposition of organic material at elevated temperatures in the absence of oxygen Pyrolysis typically occurs under pressure and at operating temperatures above 430 °C

thermochemical the absorption or evolution of heat that accompanies chemical reactions

syngas from synthesis gas is the name given to a gas mixture that contains varying amounts of carbon monoxide and hydrogen. A fuel artificially made as opposed to natural gas, which is found in nature.

ULP unleaded petrol, a petroleum-derived liquid mixture which is primarily used as a fuel in internal combustion engines

2011annual report

Ambre Energy Limited www.ambreenergy.com

DirectorsDavid UsaszEdward (Edek) ChorosMichael MewingMichael van BaarleJayson NewittJohn MasseyRoss Bhappu

Company SecretaryMark Fraser

Principal registered office of AustraliaLevel 27 AMP Place, 10 Eagle StreetBrisbane QLD 4000, AustraliaTel: +61 (0)7 3009 9180Fax: +61 (0)7 3009 9181Email: info@ambreenergy.comWeb: www.ambreenergy.com

Principal registered Office in the United StatesAmbre Energy North America, Inc.170 South Main Street Suite 700 Salt Lake City, UT 84101Tel: +1 801 539 3788Fax: +1 801 539 3789

Share registryComputershare Investor Services Pty Limited GPO Box 2975Melbourne Victoria 3001Telephone:(within Australia) 1300 850 505(outside Australia) +61 3 9415 4000Facsimile: +61 3 9473 2500Website: www.computershare.com.au

AuditorGrant Thornton Audit Pty Ltd

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