THE HIGHLIGHTS OF THE SHAREHOLDERS REVIEW

Transcription

1 ASX Release - 30 September 2011 ENDOCOAL LIMITED 2011 SHAREHOLDERS REVIEW 30 JUNE 2011 THE HIGHLIGHTS OF THE SHAREHOLDERS REVIEW }Australian coal exploration and development company focused on the Bowen Basin QLD }Endocoal has one of the largest tenure holdings in the Bowen Basin Region (12 tenements across ~5,000km 2 ) } Targeting three coal types, Coking, PCI and Thermal }227% increase in JORC from 26.8Mt at 30 June 2010 to 87.6Mt at 1 August 2011 }Remains one of the lowest administration to exploration cost performers in the sector } Moving from the Explorer to the Developer stage with; }Submission of a Mining Lease Application (MLA) for the first open cut project Meteor Downs South (MDS) }Commencement of a Bankable Feasibility Study (BFS) for MDS }Participating in the port expansion process at all three of the Northern ports }Improvement in the likelihood of gaining port access at Gladstone }Entering into a Joint Venture agreement with Carabella Resources Limited (ASX:CLR) on the prospective Pretoria Hill project ENDOCOAL IS PLEASED TO PRESENT THE 2011 SHAREHOLDERS REVIEW Chairman s Report P2 Chief Executive Officer s Report P4 Strong Board and Management P7 Review of Operations P10 Orion Downs P12 Rockwood P14 Other Tenements P /12 Objectives P21 Financials for year ended 30 June 2011 P22 Industry Comparisons P25 20 Largest Shareholders P26 Corporate Directory P27

2 CHAIRMAN S REPORT Dear Shareholder, On behalf of the Board of Directors of Endocoal Limited (the Company), I am pleased to provide you with a copy of this Shareholder Review. As with the 2010 reporting, we have produced this short form report for distribution to our wide shareholder base in conjunction with the detailed Annual Financial Report which can be located on our website, Alan Broome, AM Chairman Our strong focus on both exploration and development has placed the company well to move into the production stage within the next 2 years Exploration As shown in the graphs on page 25 of this Review, the Company has maintained a strong focus on the application of its funds to the continued exploration activities on our granted tenement areas. This has resulted in a 227% increase from our 2010 JORC base of 26.8Mt to a current JORC of 87.6Mt, of which more than half is in the Measured and Indicated categories. The Company has also set out a defined Three Product Strategy with a specific focus in the exploration program to create a potential development program for Coking, PCI and Thermal coals, all in the highly prized Bowen Basin area. This has already resulted in identification of Thermal coal production areas on the Orion Downs tenement, and over 50Mt of potential PCI coal at the Rockwood tenement. Drilling activities are also underway at a number of our tenement areas which hold the potential for Coking Coals. DEVELOPMENT Supporting this Three Product Strategy, the Company has now lodged an application with the Queensland Government for a MLA on the MDS open cut project. The MDS Project sits on the southern border of the Orion Downs tenement, adjacent to the rail line to the ports at Gladstone. Advice has been received from the relevant authorities that the Environment Management Plan process has been approved for Endocoal. This process usually takes around 12 months less than the traditional Environmental Impact Statement assessment process. With an average stripping ratio of 5.5:1 and coal seams commencing at less than 15 metres depth, this project will move quickly to development. The coal quality is suitable for direct shipment, without the need for a washing plant, thus creating the opportunity for commencement of production in The Company s strong focus on both exploration and development has it well placed to move into the production stage within the next 2 years. In order to improve the likelihood of obtaining access to the Gladstone Ports, the Company has entered into agreements to obtain Feasibility Funding Facility Agreement (FFFA) status for Stage Two of the proposed Wiggins Island Coal Export Terminal (WICET). This FFFA status upgrades priority for obtaining access for export of coal from the WICET Stage Two development. TENEMENTS Over this past year, the Company has now received grants for all of the tenement areas (EPC s) that were applied for at the time of our listing on the Australian Securities Exchange (ASX). Our exploration team continues to identify opportunities for further exploration areas and we have made applications for an additional 14 EPC s of which two have already been granted. As part of this process we are entering into a Joint Venture agreement with Carabella Resources for an exploration area known as Pretoria Hill, which sits in close proximity to our Sullivans Creek and Talwood tenements and DIRECTORS AND SENIOR MANAGEMENT With the advancement of both the MDS MLA and the Talwood/ Pretoria Hill opportunity, the Company has bolstered its senior staff levels with the appointment of Tim Hedley as its Brisbane based CEO. Rod Austin, the founding Managing Director will remain in the executive team as Finance Director. The Board passes on its thanks to Rod and his team for the hard work in getting the Company to this strong position and we remain committed to unlocking value for shareholders. We are also pleased to welcome Frederick Yu to the Board as a representative of our largest shareholder Hidili Asset Management Limited who brings both investment banking and Asian marketing experience. Yours faithfully Alan Broome, AM Chairman adjoins Carabella s Mabbin Creek EPC P 2 Chairman s Report P 3

3 CHIEF EXECUTIVE OFFICER S REPORT I am pleased to take up the role of CEO of the Company, taking over from Rod Austin who built a strong asset base and management team capability. My principal tasks will be to now expand the resource base and to move the company into the mine development phase. I am confident this can be achieved with the ongoing support of the Board and Shareholders. Despite the recent world-wide economic turmoil, Endocoal shareholders have remained supportive of our strategy. In this regard we have raised a further $14.9m in funds since mid Our current cash position will enable us to both extend our exploration program and to conduct the necessary bankable feasibility study and environmental approval activities to move the Meteor Downs South (MDS) open cut project to becoming a potential operational mine in H The Company has a positive culture with the highest regard placed on Safety, Health and Environment. CORPORATE REVIEW Endocoal has developed a strong set of policies and procedures covering Safety, Health and Environment, as well as Financial Controls. All staff and exploration contractors have successfully undertaken a rigorous set of site-based induction and training programs. We are seeking to build a sustainable Company with practices that are mindful of the impact on our people, the communities we work with and the environment we work in. I encourage our staff to work and live in a manner that contributes to both the Company s and our community s sustainability. This past year has seen Endocoal make significant progress in the definition of its resource base at both the Orion Downs and Rockwood tenements, as shown on the following table: TENEMENT JORC - MEASURED (Mt) ORION DOWNS EPC 1517 Rockwood epc 1514 JORC - INDICATED (Mt) JORC - INFERRED (Mt) TOTAL (Mt) TOTAL Tim Hedley Chief Executive Officer The company is now in a good position with strong cash reserves, a growing resource base and a defined timeline to production to position itself as one of the next Australian Coal exporters CORPORATE REVIEW CONTINUED The upgrade to JORC Measured status at MDS has enabled the preparation and lodgement of our first Mining Lease Application (MLA), seeking approval under the shorter timeline Environmental Management Plan (EMP) process. The Department of Environment and Resource Management (DERM) has accepted this approach. This has potential to shorten the timeline for granting of a mining lease by up to 12 months, compared to the traditional Environmental Impact Statement (EIS) assessment process. In support of our MLA, a conceptual mine plan was developed which anticipates a low strip ratio open cut coming into production within 12 months from date of granting. There are no major strategic cropping lands overlaying the production area and the Rolleston to Gladstone rail line is within 6k of our proposed stockpile and crushing area. Negotiations are commencing with QR National for access to this rail line. As announced earlier this year, the company has taken proactive steps to strengthen the prospectivity of obtaining access to Stage 2 of the WICET port development at Gladstone. It is currently projected the additional capacity at the export facility will come on line from The Company is A project team has been formed to deliver a Bankable Feasibility Study for the MDS open cut mine, this will cover mine operations, haulage roads, coal crushing and handling, as well as train loading infrastructure. The BFS is due for completion in late The Inderi Project is also moving forward and we anticipate finalisation of our JORC resource later this year, followed by lodgement of an MLA for this small scale underground development. Both of these proposed mines will be extracting a coal which is suitable for direct shipping, without the need for coal beneficiation, hence reducing both the cost and timeline to production. It also reduces the concerns regarding access to other key infrastructure such as water and electricity supplies, which are traditionally in short supply in regional areas. Our projected mining plan could see exports of between 2-3Mtpa from these adjoining mines sharing common stockpiling and rail loading facilities. Exploration progress has been enhanced by the Company obtaining access to 6 drill rigs. Three of these are track mounted, hence improving the Company s reliability during wet ground conditions as experienced in both Queensland and NSW during the 2010/2011 wet season. We have an excellent relationship Progress at the Rockwood tenement has also been encouraging. An initial JORC Resource of 51.6Mt was announced in August The coal type is of a high rank, high carbon, low volatile nature which is expected to be suitable for a PCI-style application.this JORC Resource has been delivered from our first drilling target area. Two of the drill rigs on site are now moving to other prospective locations elsewhere on this tenement. The recent Joint Venture with Carabella Resources on the Pretoria Hill tenement has focused our attention on this northern area of the Bowen Basin. We now have a drill rig ready to commence work on the nearby Talwood tenement, which is prospective for the Rugby style coking coal measures. Drill targets have also been identified at several of our other Bowen Basin tenements. Drill rigs will be moving progressively to commence scout exploration over these areas during the next six months. in discussions with a number of other with our contractors, all of whom have coal producers and explorers with a fulfilled our rigorous Safety, Health and view to obtaining port access for the Environment training requirements 2013 and 2014 years when the MDS and continue to comply with project could be in early production. Company standards. P 4 Chief Executive Officer s Report P 5

4 CHIEF EXECUTIVE OFFICER S REPORT continued LEGISLATION The Company is constantly reviewing proposed changes to both Federal and State laws and will be factoring into financial feasibilities, possible impacts of both a Carbon tax and the MRRT. Changes to the Queensland land access laws for mining companies were introduced in August of In light of the significant changes involved, we have been working hard to develop a protocol for use in landowner negotiations. FUTURE OUTLOOK The Company is now in a good position with strong cash reserves, a growing resource base and with a defined timeline to production is able to position itself as one of the next Australian coal exporters. The Company will continue to devote effort to efficient exploration of its key tenements during Successful progression of the MLA process underway for MDS will bring a new dimension to the Company. The Company has sufficient capital and shareholder support to respond to opportunities that may emerge as a result of our exploration and development program. This was evidenced by the recent steps to acquire FFFA status for WICET Stage 2 port capacity at Gladstone and the Pretoria Hill joint venture. At Endocoal we pride ourselves on our contribution and ability to create shareholder value. Ongoing information on the Company can be found at our website. Here you also have the opportunity to register to receive electronic updates on the Company s progress and to receive Quarterly and Annual Reports. Your Board and Management Team are excited about the coming year. We are well capitalised and have a program that we believe best positions us to satisfy our intention of optimising shareholder value. Tim Hedley Chief Executive Officer STRONG BOARD AND MANAGEMENT Alan John Broome AM Chairman. Age 61. Experience and expertise Independent non executive director and Chairman since 17 July Alan is a qualified metallurgist with over 20 years experience in the secondary metals industry, and 20 years of direct experience in the mining industry. Alan also has an extensive background in metal casting and steel production, and was previously Managing Director of the Australian Coal Industry Research Laboratory (ACIRL) and AMP Control Pty Ltd. Other current directorships Alan is currently a director of mining and mine related technology companies including Micromine Pty Ltd, Austmine Ltd, Buccaneer Energy Ltd, Carbonxt Ltd, CRL Energy Ltd (NZ), WorkPac Group Ltd, Solid Energy New Zealand Ltd, JAT Energy Limited and Nepean Mining Limited. Former directorships in last 3 years Non executive director and Chairman of JKL Jupiter Mines Limited from 2003 to 2009; Non-executive Director and Chairman of Nimrodel Resources Limited from 2007 to Special responsibilities Member of the Remuneration Committee. Member of the Health, Safety and Environment Committee. Interests in shares and options } 189,129 ordinary shares in Endocoal Limited. } 1,000,000 converting preference shares in Endocoal Limited. } 1,500,000 options over ordinary shares in Endocoal Limited. Timothy Hedley Chief Executive Office. Age 61. Recently appointed Chief Executive Officer Mr Tim Hedley is leading strategic initiatives to prepare a Bankable Feasibility Study for mining at Orion Downs, access port capacity at Gladstone and in the Northern Bowen Basin, as well as supporting the Exploration team. Tim has 35 years experience in coal mining operations and mine development, as a Mine Manager and Regional General Manager for various BHP mines in NSW and QLD. More recently, consulting to Tarong Energy Limited, he co-ordinated exploration, coal quality and structure modelling, assessment of coal properties, pit design, infrastructure, mine scheduling, and capital and operating cost modelling activities. With the prediction of production from Meteor Downs South in H the Endocoal Board is confident Tim is capable of making this possible. Interests in shares and options }125,000 ordinary shares in Endocoal Limited. }1,500,000 options over ordinary shares in Endocoal Limited. P 6 Chief Executive Officer s Report P 7

5 STRONG BOARD AND MANAGEMENT CONTINUED Rodney Austin BA, MAICD Finance Director. Age 62. William Alexander (Lex) Hansen BSC, MBA, FAUSIMM, FAICD Non-Executive Director. Age 71. Phillip James McCarthy FAUSIMM, FAICD Non-Executive Director. Age 64. Gavin Solomon BCom, LLB, MAICD Non-Executive Director. Age 56. Frederick Yu, Business Degree, Chinese University Hong Kong Non-Executive Director. Age 54. Justin Clyne, LLM (UNSW) GRADDIP ACG Company Secretary. Age 38. Experience and expertise Experience and expertise Experience and expertise Experience and expertise Experience and expertise Experience and expertise Managing director from 16 July 2008 Independent non executive director Independent non executive director Independent non executive director Mr Yu graduated with a business Justin was appointed to the position to 30 April 2011, and Finance Director since 4 February Lex has more for since 4 February Phillip has since 16 July Gavin is the degree from the Chinese University of company secretary in July, from 1 May Rod has over than 48 years experience in the 40 years experience working in the Managing Director and founder of of Hong Kong and has worked for a He was admitted as a Solicitor of the 20 years experience in the finance mining industry. He was previously Australian coal industry in both senior Helmsec Global Capital Limited, number of investment banks in Hong Supreme Court of New South Wales and resources industries. He was an Executive Director of Corporate management and industry strategic and has over 30 years experience in Kong over a 15 year period. Prior to and the High Court of Australia in 1996 previously Chief Executive of Oceanic Finance (Mining) at HSBC Bank roles. For 10 years he was CEO and Australian capital markets. Gavin has establishing Hidili Asset Management before gaining admission as a Barrister Coal Australia Limited, an operator of Australia Limited, where he had regional Managing Director of Powercoal Pty been a director of a number of ASX Limited in 2009, Mr Yu was Investment in He has 15 years experience in 5 coal mines in the Hunter Valley and responsibility for debt and equity Ltd, an 11mtpa underground coal listed companies as well as many Director for Microsoft in the Greater the legal profession acting for a number Queensland, with production in excess investment appraisals and underwriting producer (before the company was unlisted public and private companies China region. of Australia s largest corporations. of 5mtpa. Rod served on the NSW Minerals Council and also chaired the NSW Coal Association Planning and Environment Committee. Other current directorships Endocoal Finance Services Pty Limited Orion Downs Pty Limited (from 8 March 2011) Former directorships in last 3 years None Special responsibilities Finance Director (from 1 May 2011) Interests in shares and options }2,050,000 ordinary shares in Endocoal Limited. }6,000,000 converting preference shares in Endocoal Limited. }1,200,000 options over ordinary shares in Endocoal Limited. transactions in the resources sector. Lex has broad experience in all aspects of the coal industry. Other current directorships Director of Platinum Australia Limited, Heemskirk Consolidated Limited and Nessgrove Pty Limited. Former directorships in last 3 years None Special responsibilities Chair of the Health, Safety, Environment and Community Committee. Member of the Audit and Risk Committee Member of the Remuneration Committee. Interests in shares and options } 338,462 ordinary shares in Endocoal Limited. } 1,000,000 options over ordinary shares in Endocoal Limited. acquired by Centennial Coal Company Limited). He has also served as a director of Jellinbah Resources Pty Ltd, a 4mtpa open cut PCI coal mine in the Bowen Basin, Queensland, and has been a member of the Australian Coal Association Executive Committee and the NSW Mineral Council. Other current directorships Mine Site Technologies Pty Ltd (Chairman), Former directorships in last 3 years Non Executive Director of WDS Limited Special responsibilities Chair of the Audit and Risk Management Committee. Member of the Health, Safety and Environment Committee. Interests in shares and options } 138,462 ordinary shares in Endocoal Limited. } 1,000,000 options over ordinary in a number of areas including mining and resources exploration. Other current directorships Helmsec Global Capital Limited. Former directorships in last 3 years None Special responsibilities Chair of the Remuneration Committee. Member of the Audit and Risk Management Committee. Interests in shares and options } 1,375,962 ordinary shares in Endocoal Limited } 2,980,000 options over ordinary shares in Endocoal Limited Other current directorships Hidili Asset Management Co., Ltd., Hong Kong, Sichuan Leshan Fuhua Tongda Agro-Chemical Technology Co., Ltd., China, Hong Kong Kaiyuan Mining Group Co., Ltd., Hong Kong, Glory Faith Capital Ltd., BVI, Pacific Crown Capital Ltd., BVI, China Champion Worldwide Ltd., BVI, Citi Man Investment Ltd., BVI Former directorships in last 3 years None Special responsibilities None Interests in shares and options None He has significant experience and knowledge of the Corporations Act, the ASX listing rules and general corporate regulatory requirements. Justin holds a Masters Degree in International Law and is a qualified Chartered Company Secretary. shares in Endocoal Limited. P 8 Strong Board and Management P 9

6 REVIEW OF OPERATIONS Despite one of the most destructive wet seasons to strike Queensland in recent history, restricting Endocoal s operational season to only 6 months, the Company significantly increased the confidence levels of its Orion Downs Projects. The Company also announced a maiden JORC resource for its Rockwood Project, which is not only a first for the Project but also a first for the far east of the Bowen Basin and potentially opening a new coal province. Total JORC Resource for Endocoal now stands at 87.6Mt for the Orion Downs and Rockwood tenement areas. Endocoal achieved the drilling of 23,560 m of coal exploration holes during the year, successfully mobilising 6 drill rigs in Q from a tight drilling contractor market, as well as ancillary services and contractors. Drilling comprised 88 of open holes and 53 of core holes across all projects. The Company also completed, across a number of projects, various geophysical surveys, geological surveys as well as advancing mining concept studies, feasibility studies and mining lease applications for the Orion Downs Projects. Endocoal has also applied for a number of new tenement areas during the year, ensuring a flow of potential new projects into the Company. Endocoal Ltd Coal Tenure Portfolio EPC Name Status Sub-Status Basin Interest 1511 SPRINGTON DUARINGA Granted Bowen Basin, QLD EXPEDITION PEAK Granted Bowen Basin, QLD NEBO Granted Bowen Basin, QLD ROCKWOOD Granted Bowen Basin, QLD ESSEX Granted Bowen Basin, QLD CEDARS Granted Bowen Basin, QLD ORION DOWNS Granted Bowen Basin, QLD SULLIVAN CREEK Granted Bowen Basin, QLD TALWOOD Granted Bowen Basin, QLD BARFIELD Granted Bowen Basin, QLD ROCKWOOD 2 Granted Bowen Basin, QLD STOCKYARD CREEK Granted Bowen Basin, QLD PRETORIA HILL Application Joint Venture with Carabella Resources Ltd Bowen Basin, QLD SPRINGTON DUARINGA Application 2025 OVERLANDER Application Proposal to amalgamate EPC1511 with neighboring tenement applications Exploration Permit Proposal to add vacant sub blocks to EPC1517 Bowen Basin, QLD 100 Bowen Basin, QLD BUNDARRA Application Priority Applicant Bowen Basin, QLD NORTH CREEK Application Competing Application Bowen Basin, QLD MT INGLIS Application Priority Applicant - Competing Application Bowen Basin, QLD MILRAY Application Competing Application Galilee Basin, QLD KOLAR BAR Application Priority Applicant - Competing Application Bowen Basin, QLD COOPER CREEK Application Competing Application Bowen Basin, QLD SANDILANDS Application Priority Applicant - Competing Application Galilee Basin, QLD RANKIN Application Competing Application Bowen Basin, QLD MILE CREEK Application Competing Application Bowen Basin, QLD TURRAWULLA Application Competing Application Bowen Basin, QLD DEVLIN CREEK Application Sole Applicant Bowen Basin, QLD 100 MLA Name Status Basin Interest Meteor Downs South Application Bowen Basin, QLD 100 INGHAM Orion Downs Overview E E E INGHAM E TOWNSVILLE E EPC1518 SULLIVAN CREEK EPC2596 AYR TURRAWULLA EPC2348 SANDILANDS EASTERN ABBOT CREEK POINT S NEWLANDS MACKAY EPC2180 BOWEN SUTTOR CREEK NORTH CREEK DALRYMPLE BAY EPC S HAIL CREEK WARDS WELL DEVLIN CREEK BURTON EPC1590 NORTH GOONYELLA TALWOOD EPC1513 NEBO RIVERSIDE SOUTH WALKER CREEK NEBO GOONYELLA RIVERSIDE BROADMEADOW EPC2262 BROADLEA NORTH COLLINSVILLE MILRAY COPPABELLA MORANBAH NORTH EPC2135 SONOMA COLLINSVILLE ISAAC EPC1518 PLAINS EPC2306 MORANBAH MOORVALE PRETORIA HILL MILLENNIUM COOPER CREEK SULLIVAN CREEK EPC S EPC2173 TURRAWULLA PEAK DOWNS BUNDARRA EPC2348 EPC2350 SARAJI EPC2022 SANDILANDS EASTERN CREEK RANKIN EPC1514 ROCKWOOD S NEWLANDS MACKAY ROCKWOOD EPC2180 NORWICH PARK BLAIR ATHOL NORTH CREEK SUTTOR CREEK DALRYMPLE BAY CLERMONT EPC1515 EPC2709 HAIL CREEK WARDS WELL DEVLIN EPC1590 GERMAN CREEK GERMAN CREEK EAST ESSEX FOXLEIGH BURTON LAKE LINDSAY NORTH GOONYELLA CURRAGH NORTH (FORMERLY PISCES) TALWOOD EPC1513 RIVERSIDE NEBO EPC1512 GREGORY CRINUM OAKY CREEK SOUTH WALKER CREEK NEBO GOONYELLA RIVERSIDE BROADMEADOW EPC S EXPEDITION PEAK BROADLEA NORTH COPPABELLA KOLA BAR EPC2461 KESTREL MORANBAH NORTH EPC MILE CREEK YARRABEE MORANBAH ISAAC EPC2306 MOORVALE PRETORIA HILL MILLENNIUM PLAINS ROCKHAMPTON COOPER JELLINBAH EAST CURRAGH ENSHAM CREEK EMERALD S EPC2173 EPC1511 / EPC1803 PEAK DOWNS BUNDARRA SRINGTON DUARINGA WIGGINS ISLAND BLACKWATER COOK EPC2350 SARAJI EPC2022 RANKIN EPC1514 ROCKWOOD SOUTH BLACKWATER 2 GLADSTONE MINERVA ROCKWOOD EPC1517 NORWICH PARK BLAIR ATHOL ORION DOWNS S BARALABA BOUNDARY HILL CLERMONT MLA70452 EPC1515 CALLIDE GERMAN CREEK GERMAN METEOR CREEK EAST DAWSON NORTH DOWNS ESSEX SOUTH BLACKALL FOXLEIGH BILOELA LAKE LINDSAY CURRAGH NORTH (FORMERLY PISCES) ROLLESTON EPC1512 EPC2025 GREGORY CRINUM OAKY CREEK EXPEDITION PEAK EPC2283 EPC1620 DAWSON CENTRAL S OVERLANDER KOLA BAR BARFIELD EPC2461 EPC2253 KESTREL 12 MILE CREEK MT INGLIS YARRABEE DAWSON ROCKHAMPTON SOUTH JELLINBAH EAST CURRAGH ENSHAM EMERALD EPC1516 Granted EPC's CEDARS EPC1511 / EPC1803 EPC S BLACKWATER SRINGTON DUARINGA STOCKYARD CREEK WIGGINS ISLAND COOK EPC Applications SOUTH BLACKWATER GLADSTONE MINERVA Meteor Downs South MLA EPC1517 ORION DOWNS S BARALABA Towns BOUNDARY HILL MLA70452 CALLIDE Major Roads DAWSON NORTH METEOR DOWNS SOUTH BLACKALL BILOELA Railway ROLLESTON S EPC2025 EPC1620 DAWSON CENTRAL Major Coal Terminals OVERLANDER BARFIELD EPC2253 MT INGLIS DAWSON SOUTH McCollum Environmental Management Services EPC1516 Granted EPC's CEDARS EPC S STOCKYARD CREEK EPC Applications Meteor Downs South MLA Towns Major Roads Railway Based on or contains data provided by the State of Queensland (Department of Employment, Economic Development & Innovation, ). In consideration of the State permitting use of this data you acknowledge and agree State gives no warranty in relation to the data (including accuracy, r completeness, currency or suitability) and accepts no liability (includi limitation, liability in negligence) for any loss, damage or costs (in consequential damage) relating to any use of the data. Data must no for direct marketing or be used in breach of the privacy laws Major Coal Terminals E TOWNSVILLE REVIEW OF OPERATIONS AYR continued EPC2262 MILRAY E 0 SONOMA kilometres CURRENT MINING TENURES & SURROUNDING MINES E COLLINSVILLE COLLINSVILLE ABBOT POINT BOWEN E E E E Author: McCollum Environmental - MEMS18 Scale: 1:2,500,000 (A3P) E E Date: 22 September S Endocoal Limited Current Mining Tenure & Surrounding Mines S S Checked: NT Projection: Latitude / Longitude (GDA94) Plan: M:\GIS\Plans\2011\Endocoal\General Tenure Mapping\110922MP_Endocoal Mining Tenement & Surrounding Mines S Author: McCollum Environment - MEMS18 22 September 2011 P 10 Orion Review Downs of Operations Overview P kilometres

7 Orion Downs Overview Orion Downs EPC 1517 Orion Downs EPC 1517 continued The reporting period proved to be very productive for the Orion Downs tenement with 13,240 m of coal exploration holes, As a result JORC resources were upgraded at the MDS Project from 14.2 Mt inferred (2010 estimate) to 13.4 Mt Measured and ORION DOWNS DRILLING LOCATIONS discovery and delineation of the Meteor Downs South resource, 2.0 Mt Inferred for a revised total of 15.4 Mt. JORC resources submission of an application for a mining lease over the Meteor at the Inderi Project were upgraded from 15.5 Mt Indicated and Downs South Project area, confirmation of approval to progress 11.3 Mt Inferred (2010 estimate) to 3.4 Mt Measured, 10.8 Mt the Mining Lease Application (MLA) along the Environmental Indicated and 6.4 Mt Inferred. Total current JORC resources Management Plan pathway and commencement of a between both projects now stands at 36.0 Mt. Bankable Feasibility Study for the Meteor Downs South Project. Geologically, the MDS resource represents a shallow coal It is worth noting that while the initial JORC resource for the Meteor Downs South project (MDS) was only announced in late November 2010, the progression within the reporting period to now having completed a Conceptual mining study, with a MLA submitted in April 2011 and commencement of a Bankable Feasibility Study, is a remarkable achievement by the Company. resource containing the D Seam which is over 9m thick in places and an average thickness of 7.63m over the resource area at a maximum depth of 80m to top of coal. The seam dips gently to the south east and crops out in the west of the resource area with less than 15m of overburden cover. The Inderi resource represents a deeper coal resource consisting of the C and D Seams with a basalt cover. The seams have an average thicknesses of 5m for the C Seam and 4.89m for the D Seam across the resource area. Both seams dip gently to the east. Geological structure is minimal with no significant faulting or folding observed in either deposit. The C and D Seams are mined at the adjacent Rolleston open cut mine and the coal is well accepted in the marketplace as a INDERI PROJECT The Orion Downs tenement is home to both the MDS and Inderi direct-ship thermal coal product. Resource areas, the first discoveries by Endocoal following listing in Adjacent to XStrata s Rolleston Coal Mine both JORC RESULTS August 2011 projects are located in the south eastern corner of the EPC Orion Downs tenement. The tenement and therefore the two resource areas are wholly owned by Endocoal Ltd. Operationally, the MDS and Inderi Projects have been one of the two main focus areas for exploration during the reporting period. Despite a prolonged wet season delaying field work a total of 5,790mm of coal exploration holes were drilled on the MDS Project and 7,450m were drilled on the Inderi Project Meteor Downs South open cut project Measured Resource Indicated Resource Indicated Resource Inderi underground project Measured Resource Indicated Resource 13.4Mt 0Mt 2.0Mt 3.4Mt 10.8Mt METEOR DOWNS SOUTH PROJECT Holes Intersecting Coal Drill Hole All Other Holes Drill Hole comprising a total of 37 core holes and 61 open holes across both project areas, plus other target areas within the tenement. Indicated Resource TOTAL 6.4Mt 36.0Mt P 12 Orion Downs Overview EPC 1517 P 13

8 Orion Downs Overview Rockwood EPC 1514 The Rockwood Project comprises EPC1514 and EPC 2022 with both being 100% owned and operated by Endocoal. As well as the Orion Downs tenement these were the main focus area for Endocoal s exploration activities during the reporting period. Rockwood is located north east of the township of Dysart adjacent to the Fitzroy Development Road. The Oaky Creek Rail Line of the Goonyella Rail System is approximately 55km north west of the tenement, with a total distance of approximately 200km by rail to the Dalrymple Bay Coal Terminal. Macarthur Coal s resource area Wilunga and planned mining project at Codrilla are located west and north of the tenement area respectively. The Rockwood Project has been the focus of intense exploration activity during the reporting period with 10,273m of drilling achieved. This includes 16 core and 27 open holes, for a total of 43 drill holes. Additionally over 30km of 2D (two dimensional) seismic survey has been completed in conjunction with two ground gravity surveys (open and close spaced) and an aerial magnetics survey. A JORC resource of 51.6 Mt was announced on 1 August 2011, comprising 18.6 Mt Indicated and 33.0 Mt Inferred. Apart from being the maiden JORC resource for the area this represents the first JORC resource discovery in the Moranbah coal measures located in this eastern area of the Bowen Basin, potentially opening up a new coal province. Geologically the eastern part of the Bowen Basin is structurally complex with the Rockwood tenement no exception. Tight folding, interspersed with minor to significant faulting, has impacted the ability to correlate and delineate coal seams over significant distances using bore hole data alone. The Rockwood tenement lies east of the known extent of the Rangal Coal Measures and so the Moranbah Coal Measures have formed the target for exploration. In the Rockwood area the Moranbah Coal Measures consist of up to 26 individual seams ranging in thickness from 0.20 m to over 4.0 m and are markedly different geologically to the same Moranbah Coal Measures mined along the western margin of the Bowen Basin. The coal seams are also very high in rank, having been subjected to extremes of pressure and heat during their formation. Ground gravity surveys coupled with a detailed aero-magnetic survey, photo geology structure mapping and 2D seismic acquisition using mini SOSIE and Envrovibe sources have given increased confidence in the regional geology interpretations that lead to the discovery of the maiden JORC resource area in the current drilling area. The same structure hosting the resource in the current drilling area has been confirmed to extend much farther south and numerous similar structures have also been confirmed to occur to the west and east of the current drilling area. Exploration drilling during the reporting period to the north east of the current drilling area has also confirmed the presence and continuity of shallow seams across structures with seam correlation possible between these areas. Together with the geophysical surveys and exploration drilling to date, this has increased confidence in the likelihood of areas of shallow coal being present on other similar geological structures. The Rockwood Project will be the main focus of exploration activities for the remainder of the 2011 field season with the intent to increase the definition of the current drilling area resource as well as confirm the presence of shallow coal in similar geological structures to the west and east. During 2011 the Company has maintained a watching brief on new port development projects underway, or under consideration for the Northern Bowen Basin region. As a result an Expression of interest has been lodged for consideration as a Preferred Capacity Seeker within the T4-T7 terminal development planned for Abbot Point, near Bowen, with Rockwood nominated as the proposed coal source at the level of 4Mtpa. Rockwood EPC 1514 continued Separately, the Company has engaged with two potential port development projects to be located at Dudgeon Point, near Mackay. The Company has lodged the necessary documentation required to support an application for 4Mtpa at each of the Brookfield and Adarni port development projects now under consideration. Rockwood and the nearby Nebo tenement have been nominated as the proposed coal sources respectively. ROCKWOOD CROSS SECTION 2 (NORTHERN) The Company intends to commence a conceptual mine planning exercise for the Rockwood deposit once adequate geological data has been assembled and coal quality and geology structure modelling has been completed. JORC RESULTS August 2011 Measured Resource Indicated Resource Indicated Resource TOTAL Cross section through the Northern part of the current JORC resource area as shown in following plan. Note anticline folding structure with numerous coal seams intersected thus far in the resource drilling denoted by the different colours with each colour representing a coal seam. Drill holes along the section are also shown. Coal seams continue to the East (right of section) but were not included in the current JORC model due to insufficient drilling at this stage. This is part of the focus of current drilling. ROCKWOOD CROSS SECTION 5 (SOUTHERN) Cross section through the Southern part of the current JORC resource area as shown in following plan. Note anticline folding structure with numerous coal seams intersected thus far in the resource drilling denoted by the different colours with each colour representing a coal seam. Drill holes along the section are also shown. Coal seams continue to the East (right of section) but were not included in the current JORC model due to insufficient drilling at this stage. This is part of the focus of current drilling. See page 16. 0Mt 18.6Mt 33.0Mt 51.6Mt P 14 Orion Rockwood Downs EPC Overview 1514 P 15

9 Rockwood EPC 1514 Orion Downs Overview TENEMENTS continued Talwood EPC 1590/ Sullivans Creek EPC 1518 The Talwood/Sullivans Creek Project is made up of EPCs 1590 and 1518 which are 100% owned and operated by Endocoal Ltd, covering a combined area of 1,197 km 2 and located approximately 140 km west of Mackay and 50 km north west of Moranbah, Queensland. The Project area has potential for Lower Permian coal measures in small sub-basins on or near the western edge of the Bowen Basin. Comparable Early Permian resource deposits in the region include the Rugby, Blair Athol and Collinsville Coal Measures. Review of open file geological and geophysical data (including high quality geophysical surveys) has increased confidence for the presence of a large freshwater derived sub basin within the EPC 1590 (Talwood) area. Multiple thin coal seams have been observed in two historical Queensland Mines Department stratigraphic drill holes located within and adjacent to EPC 1590 and confirm the presence of coal seams within the tenement area. Due to its location on the western edge of the Bowen Basin and proximity to existing coking coal mines the Company believes that there is excellent potential for coal seams within the Project area to be of coking coal quality. Exploration activities during the reporting period have focussed on identifying drilling targets, planning for a 20 line km 2D seismic survey and land access activities. Field work involving site pegging and cultural heritage surveys has been completed and an initial scout drilling program is anticipated for the Q to confirm the presence of coal seams and any coking coal potential. The Project area is strategically well placed to benefit from having close access to both the Northern Missing Link rail project now under construction, as well as to rail lines planned from the Galilee Basin coal mining projects. The Talwood/Sullivans Creek Project areas represent the third high priority exploration area for the Company. Pretoria Hill Joint Venture - EPC 2135 (EOC 50%) During the reporting period Endocoal entered into a 50:50 joint venture arrangement with Carabella Resources to acquire a 100% interest in the EPC 2135 from a third party. Pretoria Hill comprises an area approximately 410 km 2 located immediately adjacent to Carabella s Mabin Creek (EPC1069) tenement and south of Endocoal s Talwood/ Sullivans Creek project areas. The Pretoria Hill tenement is prospective for similar freshwater derived sub basins as the Talwood/Sullivans Creek Project and the Company believes that the Pretoria Hill project also has potential to host coal seams with coking coal style quality. While the Company awaits the granting of Pretoria Hill tenement, desk top studies have begun in conjunction with Endocoal s joint venture partner with the intention of completing a initial scout drilling program shortly after granting. Endocoal and Carabella Resources are currently negotiating a Joint Venture Agreement with the intention of commencing an exploration program on the Pretoria Hill tenement following completion of the 2011/12 wet season. P 16 Orion Rockwood Downs EPC Overview 1514 P 17

10 Orion Downs Overview TENEMENTS continued TENEMENTS continued Essex Project EPC 1515 The Essex Project is 100% owned and operated by Endocoal and is located south east of the Rockwood project adjacent to the Fitzroy Development Road. The project area has been the focus of geophysical surveys and drilling preparation activities during the reporting period. Similar in geological setting to the Rockwood project the Essex area is prospective for coal seams of the Moranbah Coal Measures in a complex geological structured setting. A ground gravity geophysical survey, along with photo geology mapping, has confirmed the presence of similar geological structures as those observed at the Rockwood project. Analysis of historical drilling and seismic information has also confirmed the presence of coal to the east and north of the area. Field activities during the reporting period included the pegging and cultural heritage surveys of planned scout drill sites and securing land access in preparation for drilling activities during Q Springton Project EPC 1511 (Springton - Duaringa EPCA 1803) Springton is 100% owned and operated by Endocoal and is located directly north of the central Queensland township of Dingo, also adjacent to the Fitzroy Development Road. The project area has also been the focus of geological structural mapping and geophysical surveys during the reporting period. The Springton area is east north east of Bandanna Resources Dingo West resource area and is located in a structurally complex zone of folding and faulting. The project area is also well situated close to the Blackwater railway line which runs through the Dingo township. Detailed photo geology structurally mapping was completed during the period along with a ground gravity survey and 30 line km of 2D seismic using Envirovibe sources. Data received from the ground gravity survey and the final seismic data is expected to be received in November This information along with analysis of historical high quality aero magnetic data has enabled a detailed geological structure interpretation of the Springton Project to be completed which has allowed much greater targeting of potential areas of shallow coal. The detailed structural interpretation has identified potential areas that are prospective for shallow coal seam repeats of the Rangal Coal Measures. An initial drilling program has been formulated with the intention of completing scout drilling in late 2011 or early During the reporting period the Company applied for new tenures by way of several sub blocks that came out of moratorium after relinquishment by another party. The Cedars EPC1516/Barfield EPC 1620/ Stockyard Creek EPC 2339 The Cedars/ Barfield/ Stockyard Creek Project Area consists of EPC 1516, EPC 1620 and EPC 2339 respectively and is 100% owned and operated by Endocoal Ltd. The project area is located directly to the east of the Moura/Dawson mining operations owned by Anglo Coal Australia in the early Permian geology of the South Eastern Bowen Basin. The tenements run North South along the edge of the Bowen Basin. Exploration activity during the reporting period consisted of desk top studies and review of historical information, reports, drilling and geophysical surveys across the Project area and region. Field work was completed for geological mapping and investigation of potential target areas. During the reporting period the area covered by the EPC 2339 Stockyard Creek was identified as a target area and subsequently an application was submitted and then formally granted. The Stockyard Creek tenement area is prospective for shallow coal resources located within freshwater sub basins along the margin of the Bowen Basin and basement geology. Historical reports from water bores drilled in the area have reported the presence of shallow coal within the tenement area and the Company believes that these are within the project area. Several other target areas have been identified within the greater project area and the identification of initial scout drilling sites has been completed. The Company is planning to continue exploration with an initial scout drilling program in late 2011/early A ground gravity survey was completed during the reporting period with the results now received. In addition, a detailed review of historical data, geology, drilling and geophysical information has been undertaken. Field work completed involved mainly geological mapping and land owner liaison. The Nebo Project is prospective for Moranbah Coal Measures in a similar structural setting to the Rockwood Project. Basalt cover in the area may impact the development of shallow coal resources but several gravity low areas identified from the ground gravity survey have potential for less basalt cover. These gravity low areas also have potential to be associated with coal presence. Further field work involving geological mapping and confirmation of structures identified in the gravity survey are planned for late An initial scout drilling program will then be developed and implemented in the field with a target date of early to mid Company negotiated with the responsible Government Department to conditionally relinquish EPC 1511 on Nebo EPC1513 condition of granting of a new tenement, EPC 1803, which includes all of the tenure from existing EPC 1511 plus the new sub blocks applied for. This new tenement EPC 1803 is expected to be granted in late Nebo EPC 1513 is 100% owned and operated by Endocoal Ltd, located directly west of the central Queensland township of Nebo and North of the Rockwood Project. P 18 Orion Tenements Downs Continued Overview P 19

11 TENEMENTS continued Expedition Peak EPC1512 The Expedition Peak EPC 1512 project is 100% owned and operated by Endocoal Ltd and is located directly east of the German Creek mining operations, located in the area between the central Queensland townships of Capella and Tieri. Expedition Peak has the potential to host early Permian coal measures that are known from nearby mining operations to sit below the German Creek Coal Measures in the area. Geological mapping during the reporting period confirmed the presence of relatively flat lying sedimentary units within the tenement area which is beneficial in the event shallow coal seams are intersected. Extensive review of historical data, geology, regional drilling and geophysical surveys was completed during the reporting period which along with geological mapping in the field resulted in the identification of potential scout drilling sites. Site investigation and cultural heritage surveys of the planned scout drilling sites were completed during the reporting period. The Company s intention is to complete initial scout drilling of target areas in /12 Objectives ORION DOWNS METEOR DOWNS SOUTH PROJECT Complete EMP process leading to grant of mining lease in 2012 Deliver a Bankable Feasibility Study Consider alternatives for Port access in 2103 and 2104 prior to WICET Stage 2 INDERI PROJECT Complete drilling to upgrade resource to JORC Measured status Deliver a Bankable Feasibility Study Prepare and submit a Mining Lease Application Undertake required Environmental studies ROCKWOOD Expand and upgrade JORC Resource for 51.6Mt in Northern Project area Scout drilling in other target areas of Rockwood tenement Confirm coal quality and properties to identify the best value in use INFRASTRUCTURE Continue participation in Wiggins Island Coal Terminal expansion Negotiate access to under-utilised allocations at Gladstone Port Negotiate with Qld Rail for access to the Bauhinia spur line from Orion Downs to the Blackwater system and Gladstone port Commence discussions with Northern Bowen Basin port operations regarding access and allocation OTHER TENEMENTS Undertake initial drilling program targeting Rugby coking coal measures at Talwood tenement Negotiate land access and commence scout drilling at target areas identified in other Bowen Basin tenements P 20 Tenements Continued P 21

12 BALANCE SHEET As at 30 June 2011 INCOME STATEMENT For the year ended 30 June $ 2010 $ ASSETS Current assets Cash and cash equivalents 11,601,508 15,584,699 Trade and other receivables 536, ,605 Total current assets 12,137,627 16,096,304 Non-current assets Receivables 270,851 76,290 Intangibles 400,000 - Investments accounted for using the equity method 52,200 - Property, plant and equipment 195, ,046 Exploration and evaluation expenditure 13,977,979 3,773,167 Total non-current assets 14,896,714 4,004,503 Total assets 27,034,341 20,100,807 LIABILITIES Current liabilities Trade creditors and other payables 2,898, ,727 Provisions 60,288 35,634 Total current liabilities 2,958, ,361 Total liabilities 2,958, ,361 Net assets 24,075,374 19,362,446 EQUITY Contributed equity 28,816,261 22,263,339 Reserves 2,878,859 2,816,603 Accumulated losses (7,619,746) (5,717,496) Total equity 24,075,374 19,362, $ 2010 $ Revenue from continuing operations 615, ,299 Accountancy and audit expenses (108,868) (212,395) Corporate consultants and secretarial expenses (561,171) (245,073) Corporate office (521,755) (234,001) Depreciation (42,432) (7,607) Employee benefits expenses (720,166) (473,245) Finance Costs (87,230) (1,327) Legal fees (85,398) (43,341) Share based payments options (62,256) (2,041,838) Share of net profit / (loss) of associate (28,082) - Exploration and evaluation expense written off (125,253) (19,785) Travel and accommodation expenses (90,930) (121,914) Other expenses (84,091) (38,680) Loss before income tax (1,902,250) (3,220,907) Income tax (expense)/benefit - - Loss for the year (1,902,250) (3,220,907) Other comprehensive income for the year, net of tax - - Total comprehensive loss for the year attributable to owners of Endocoal Limited (1,902,250) (3,220,907) Earnings per share for profit attributable to the ordinary equity holders of the company: Cents Cents Basic loss per share (1.5) (3.6) Diluted loss per share (1.5) (3.6) Full company financial information, including explanatory notes are contained in the Endocoal Limited 2011 Annual Report available on the website; Full company financial information, including explanatory notes are contained in the Endocoal Limited 2011 Annual Report available on the website; P 22 Financial Report P 23

13 CASH FLOW STATEMENT For the year ended 30 June 2011 INDUSTRY COMPARISONS Cash flows from operating activities 2011 $ 2010 $ Comparison of Endocoal with other ASX listed coal exploration companies Exploration Expenditure as a percentage of total costs (Y/E 30 June 2011) Interest received 582,402 87,335 Payments to suppliers and employees (inclusive of GST) (2,523,128) (1,262,285) Net cash inflow/(outflow) from operating activities (1,940,726) (1,174,950) Cash flows from investing activities Purchase of property, plant and equipment (137,727) (155,757) Payments for Wiggins Island Coal Export Terminal (WICET) (150,000) - Payments for tenement development costs (8,307,660) (3,105,164) Net cash inflow/(outflow) from investing activities (8,595,387) (3,260,921) Cash flows from financing activities Proceeds from borrowings 4,000,000 - Repayments of borrowings (4,000,000) - Proceeds from issue of shares net of share issue costs 6,552,922 17,221,308 Net cash inflow/(outflow) from financing activities 6,552,922 17,221,308 Net increase/(decrease) in cash and cash equivalents (3,983,191) 12,785,437 Cash and cash equivalents at the beginning of the year 15,584,699 2,799,262 $m Administration Costs (Y/E 30 June 2011) 82% Cash and cash equivalents at the end of the year 11,601,508 15,584,699 Full company financial information, including explanatory notes are contained in the Endocoal Limited 2011 Annual Report available on the website; Average $2.6m 0.0 Endocoal $1.8M ENDOCOAL REMAINS ONE OF THE LOWEST COST PERFORMERS IN THE SECTOR Source: ASX 5B Reports P 24 Financial Report P 25

14 Source: ASX 5B Quarterly Reports 20 LARGEST SHAREHOLDERS-ORDINARY SHARES AS AT 23 SEPTEMBER 2011 corporate directory Ordinary shares Number of quoted shares held Percentage HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 27,946, CITI MAN INVESTMENTS LIMITED 23,539, COOKSHILL INVESTMENTS PTY LTD <COOKSHILL INVESTMENTS A/C> 16,060, STEMCOR AUSTRALIA PTY LTD 7,166, CITICORP NOMINEES PTY LIMITED 5,290, FULCRUM RESOURCES LIMITED 2,156, MR RODNEY JOHN AUSTIN <APT SUPERANNUATION FUND A/C> 2,050, KFT CAPITAL PTY LIMITED <GUINDIMAINE A/C> 1,847, MR STUART TURNER 1,764, THORPE ROAD NOMINEES PTY LTD <IAN TREGONING FAMILY 2 A/C> 1,684, ALLIED STRATEGIC RESOURCES LIMITED 1,538, HELMSEC GLOBAL MARKETS LIMITED 1,517, FESH PTY LTD 1,500, N M B INVESTMENTS PTY LIMITED <NMB A/C> 1,500, MR JINESH KIRAN PATEL 1,497, HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3 1,495, FLANNERY FOUNDATION PTY LTD <THE FLANNERY FOUNDATION A/C> 1,456, CONRAD CORPORATION PTY LIMITED 1,375, MR ROBERT JAMES HUGH BUCKLEY 1,327, ALLIED STRATEGIC RESOURCES LTD 1,233, Total 103,947, Issued Capital 156,929,401 Endocoal Limited ACN ASX: EOC Corporate Directory Mr Alan Broome AM, Chairman Mr Tim Hedley, Chief Executive Officer Mr Rod Austin, Finance Director Mr Gavin Solomon, Non Executive Director Mr William (Lex) Hansen, Non Executive Director Mr Phillip McCarthy, Non Executive Director Mr Fred Yu, Non Executive Director Karina Scott, Chief Financial Officer Darren Walker, Exploration Manager COMPANY SECRETARY Mr Justin Clyne Registered Office Level 9, 25 Bligh Street Sydney NSW 2000 Telephone Facsimile PRINCIPAL PLACE OF BUSINESS Suite 2, 1 Swann Road Taringa QLD 4068 Telephone Facsimile Share Registry Boardroom Pty Limited Level 7, 207 Kent Street Sydney NSW 2000 Phone: Auditors PricewaterhouseCoopers Australia Lv 6, 26 Honeysuckle Drive Newcastle NSW 2300 phone Solicitors Norton Rose Grosvenor Place, 225 George Street Sydney NSW 2000 Phone +61 (0) Hopgood Ganim Level 8 Waterfront Place 1 Eagle Street Brisbane QLD 4000 Phone P 26 Appendix 5B

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