RICHFIELD PROJECT - EPC930

The Company owns a direct interest (60%) in EPC 930, an exploration permit also located in the Bowen Basin close to the township of Middlemount, and 150 kilometres north of Blackwater. This project is considered a “grassroots” exploration project aimed at exploring for shallow coal primarily situated on the western margin of the EPC.

The company intends to undertake an initial drilling program targeting the western area of the EPC for seam delineation, geological structures and coal quality sufficient for the development of high confidence resource estimates. In the east of the EPC seismic work is also planned to locate the presence of potentially economically mineable coal seams. This prerequisite work will be required to be undertaken before progressing to a pre-feasibility study to be undertaken based on resource estimates and geology.

The near term focus, subject to the outcome of further drilling and feasibility studies, will be the development of the Hillalong project as a modest scale open cut operation to generate early cash flow and essentially self fund the exploration effort in the larger scale Rocklands and Richfield tenements.

Using the self funded explorer model concept, the Company is expected to be well positioned in the medium term to have a detailed resource assessment and knowledge base with which to plan for the development of large scale operations to exploit the potential underground resources. The Company believes that, should the prevailing demand for coal continue, the returns that could be generated from large scale underground operations would underpin the capital investment required, provide a growth profile for the Company and attract considerable investor interest.

LOCATION AND TENEMENT PLAN


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In the east of the EPC, Cenozoic cover rocks obscure both outcrop and structure of the eastern margin of the Bowen Basin, but coal bearing formations do occur beneath this cover. Indications (from seismic surveys and extrapolations from data points outside the EPC) in this area are that coal seams in the Fort Cooper Coal Measures are likely to be thin and of poor quality with high ash content but those in the underlying German Creek Formation may be of higher quality and a more suitable exploration target.

The main geological target within EPC 930 is the Rangal Coal Measures which are believed to contain equivalents of two potentially commercial coal seams - the 3-6 metres thick Leichardt Seam and the 2-3 metres thick Vermont Upper Seam. The coal seams of the Rangal Coal Measures have sustained mining operations for several decades in many locations northwest and southwest of EPC 930 where they occur at shallower depths and have quite modest dips, which has been ideal for the development of large scale open-cut mines. The high quality of the coal typically allows for the production of an export quality hard coking coal as well as a thermal coal by-product in many instances.


Coal Resources

Seismic investigations within the western portion of the EPC area have indicated the presence of coal at depths of 200 metres or more.

In the eastern areas of the EPC where the structure is more complex due to folding and faulting and where large areas of the Permian sequence are obscured by younger cover, there could be the possibility of accessing up-faulted blocks that might allow access to coal seams at a shallower depth. Very little exploration has been carried out in these areas in the past but seismic exploration in this sector of the EPC could help to locate any shallower coal areas. It is, however, likely that any mining in either the western or eastern sectors of the EPC would be via underground methods.

Proposed Exploration

In the western area of the EPC where earlier exploration has provided useful data an initial drilling program of some 20 holes (including some cored holes) is proposed. This work will test the depths to seams and coal quality and thickness as well as local geological structure and generate data which could be used for the development of resource estimates.

In the east of the EPC seismic work is planned in order to discover any strong reflections which may indicate the presence of coal seams, especially those in any possible upfaulted blocks. Any suitable targets from this work will be followed up with drilling and downhole geophysical logging.

The proposed expenditure on these activities during the first two years is outlined below for the case where the minimum subscription is raised by the company ($9.0M). This proposed budget and program is considered adequate to achieve the objectives of the company in defining coal resources.

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