ADAVALE RESOURCES LIMITED - Capital/Financing Update 2010

ADAVALE RESOURCES LIMITED ABN 91 008 719 015

ENTITLEMENT ISSUE PROSPECTUS

For a pro rata non-renounceable entitlement issue of two (2) Shares for every three (3) Shares held by Shareholders at an issue price of 2 cents per Share to raise approximately $2,447,920 together with one (1) free Option for every two (2) Shares issued exercisable at 4 cents on or before 31 July 2014 ( Entitlement Issue ).

The Entitlement Issue is partially underwritten by Arthur Phillip Pty Ltd (AFSL 258 057). Refer to Section 8.2 for details regarding the terms of the Underwriting Agreement.

IMPORTANT NOTICE

This document is important and should be read in its entirety. If after reading this Prospectus you have any questions about the Securities being offered under this Prospectus or any other matter, then you should consult your stockbroker, accountant or other professional adviser.

The Securities offered by this Prospectus should be considered as speculative.

1.	SUMMARY OF IMPORTANT DATES AND IMPORTANT NOTES .......................................... 2
2.	CORPORATE DIRECTORY .................................................................................................. 6
3.	CHAIRMAN’S LETTER .......................................................................................................... 7
4.	DETAILS OF THE OFFER ....................................................................................................... 8
5.	PURPOSE AND EFFECT OF THE OFFER .............................................................................12
6.	RIGHTS AND LIABILITIES ATTACHING TO THE SECURITIES .............................................16
7.	RISK FACTORS ..................................................................................................................19
8.	ADDITIONAL INFORMATION ...........................................................................................24
9.	DEFINITIONS .....................................................................................................................36
10.	AUTHORITY OF DIRECTORS .............................................................................................35

1. SUMMARY OF IMPORTANT DATES AND IMPORTANT NOTES

TIMETABLE AND IMPORTANT DATES*

Lodgement of Prospectus with ASIC	Monday 18 October 2010
Notice sent to Shareholders	Wednesday 20 October 2010
Ex Date	Thursday 21 October 2010
Record Date for determining Shareholder entitlements	Wednesday 27 October 2010
Prospectus despatched to Shareholders	Wednesday 3 November 2010
Closing Date of Offer	Wednesday 17 November 2010
Securities quoted on a deferred settlement basis	Thursday 18 November 2010
Notify ASX of under-subscriptions	Monday 22 November 2010
Despatch date/Shares entered into Shareholders’ security holdings	Thursday 25 November 2010

These dates are indicative only and subject to change. The Company reserves the right, subject to the Corporations Act, the ASX Listing Rules and other applicable laws, to vary the dates of the Offer, including extending the Closing Date or accepting late applications, either generally or in particular cases, without notifying you. You are encouraged to submit your application as soon as possible. Any extension of the Closing Date will have a consequential effect on the date of the issue of the Securities. The Offer does not require the approval of Shareholders.

IMPORTANT NOTES

Shareholders should read this document in its entirety and, if in doubt, should consult their professional advisors.

This Prospectus is dated 18 October 2010 and a copy of this Prospectus was lodged with the ASIC on that date. The ASIC and ASX take no responsibility for the content of this Prospectus.

The expiry date of this Prospectus is that date 13 months after the date this Prospectus was lodged with ASIC ( Expiry Date ). No Securities will be allotted or issued on the basis of this Prospectus after the Expiry Date.

Applications for Securities offered pursuant to this Prospectus can only be submitted on an original Entitlement and Acceptance Form which accompanies this Prospectus.

No person is authorised to give information or to make any representation in connection with this Prospectus which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with this Prospectus.

In making representations in this Prospectus regard has been given to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and certain matters may reasonably be expected to be known to investors and professional advisers whom potential investors may consult.

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any of these restrictions. Failure to comply with these restrictions may violate securities laws. Applicants who are resident in countries other than Australia should

consult their professional advisers as to whether any governmental or other consents are required or whether any other formalities need to be considered and followed.

This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer.

The Offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act and the Corporations Regulations 2001. In New Zealand, this is Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings – Australia) Regulations 2008.

The Offer and the content of the Prospectus are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act sets out how the Offer must be made.

There are differences in how securities are regulated under Australian law.

The rights, remedies, and compensation arrangements available to New Zealand investors in Australian securities may differ from the rights, remedies, and compensation arrangements for New Zealand securities.

Both the Australian and New Zealand securities regulators have enforcement responsibilities in relation to the Offer. If you need to make a complaint about the Offer, please contact the Securities Commission, Wellington, New Zealand. The Australian and New Zealand regulators will work together to settle your complaint.

The taxation treatment of Australian securities is not the same as for New Zealand securities.

If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser.

The Offer may involve a currency exchange risk. The currency for the securities is not New Zealand dollars. The value of the securities will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant. If you expect the securities to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars.

As noted in the Prospectus at Section 4.8, the Company will apply to the ASX for quotation of the Shares (but not the Options) offered under this Prospectus. If quotation is granted, the Shares offered under this Prospectus will be able to be traded on the ASX. If you wish to trade the Shares through that market, you will have to make arrangements for a participant in that market to sell the securities on your behalf. As the ASX does not operate in New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the securities and trading may differ from securities markets that operate in New Zealand.

KEY RISKS

The key risks associated with an investment in the Company are outlined in Section 7. A summary of some of the key risks include:

(a) Tapan Project – Contractual Risk

The Company is party to a conditional share sale and purchase agreement in relation to the Tapan Project ( Tapan Agreement ). The other parties to the agreement are located in Indonesia, and the shares to be acquired by the

Company are for an Indonesian proprietary company which holds the Tapan mining assets.

The Tapan Agreement has not yet settled and the Company is waiting on the vendors to provide it with all required documents. Until that occurs, there is no certainty that the agreement will complete. Obviously, such failure will have an adverse impact on the Company. However, the Company is continuing to use its best endeavours to enable settlement to occur. Furthermore, the Company is continuing to investigate other projects in and around Indonesia.

(b) International Operation

The Company is seeking to secure exploration and mining projects based in Indonesia. Indonesia is considered to be a developing country and, as such, subject to increased sovereign risk. These Indonesian operations are subject to a number of risks, including:

(i) difficulties in enforcing agreements and collecting receivables through foreign local systems;
(ii) potential difficulties in protecting rights and interests in assets;
(iii) difficulties in securing costs for transportation and shipping; and
(iv) restrictive governmental actions, such as foreign investment, imposition of trade quotas, tariffs and other taxes.

(c) Exploration risks

The mining tenements held by the Company are at various stages of exploration, and potential investors should understand that mineral exploration and development are high-risk undertakings. There can be no assurance that exploration of the tenements, or any other tenements that may be acquired in the future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit if identified, there is no guarantee that it can be economically exploited.

(d) Commodity Price Volatility & Exchange Rate Risk

If the Company achieves success leading to mineral production, the revenue it will derive through the sale of commodities exposes the potential income of the Company to commodity price and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include supply and demand fluctuations for coal, technological advancements, other mines coming on line, forward selling activities and other macro-economic factors. Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian Dollar as determined in International markets.

(e) Resource Estimates

Resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and

depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and mining plants which may, in turn, adversely affect the Company’s operations.

(f)

Operating risks

The Company’s operations are subject to various operational risks including general geological and mechanical risks associated with exploration and specific weather or climate risks associated with the areas where the Company’s operations are located.

A detailed list of the risks associated with an investment in the Company, including risks related to the Company’s business and operations is outlined in Section 7 of this Prospectus. Investors are encouraged to consider the matters outlined in Section 7 when deciding whether to make an investment in the Company.

ELECTRONIC PROSPECTUS

Any person accessing the electronic version of this Prospectus for the purpose of making an investment in the Company must be an Australian resident and must only access this Prospectus from within Australia.

The Corporations Act prohibits any person passing onto another person an Entitlement and Acceptance Form unless it is attached to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus. Any person may obtain a hard copy of this Prospectus free of charge by contacting the Company.

2. CORPORATE DIRECTORY

Directors

Underwriter

Mr Richard Poole (Chairman) Mr John Risinger (Managing Director) Mr Roger Steinepreis (Non-Executive Director) Mr Mark Stevenson (Non-Executive Director) Mr Philip Suriano (Executive Director) Mr Seiki Takahashi (Non-Executive Director)

Arthur Phillip Pty Ltd Level 33 Colonial Centre 52 Martin Place SYDNEY NSW 2000

Telephone: (02) 9227 8900 Facsimile: (02) 9227 8901

Company Secretary

Share Registry*

Ms Sylvie Dimarco

Computershare Investor Services Pty Limited Level 2 Reserve Bank Building 45 St Georges Terrace PERTH WA 6000

Telephone: 1300 787 272

Registered Office

Solicitors

Level 33 52 Martin Place SYDNEY NSW 2000

Steinepreis Paganin Lawyers and Consultants Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000

General Enquiries

Auditor*

Telephone: (02) 9227 8900 Facsimile: (02) 9227 8901

Robert Nielson Partners Level 7, 280 George Street SYDNEY NSW 2000

*These parties have been included for information purposes only. They have not been involved in the preparation of this Prospectus.

3. CHAIRMAN’S LETTER

Dear Shareholder

The Board is pleased to offer Shareholders the opportunity to participate in a two (2) for three (3) non-renounceable entitlements issue of Shares to raise up to approximately $2,447,920 (before expenses) together with one (1) free Option for every two (2) Shares issued exercisable at 4 cents on or before 31 July 2014 ( Entitlement Issue ).

All Shareholders registered as at 5.00pm (AEDT) on 27 October 2010 will be entitled to participate in the Entitlement Issue. The price payable on application for each Share is 2 cents.

The Closing Date for acceptances of the Offer is 5.00pm (AEDT) on 17 November 2010.

The Entitlement Issue is partially underwritten by Arthur Phillip Pty Ltd ( Arthur Phillip ) and any Securities not taken up by Shareholders pursuant to the Entitlement Issue will be allocated to the Underwriter (and sub-underwriters) (to a maximum of $2,000,000). Arthur Phillip has also agreed to place, on a best endeavours basis, any additional shortfall. The underwriting of the Entitlement Issue is on standard terms and conditions. The Underwriter has engaged subunderwriters to sub-underwrite a portion of its obligations under the Underwriting Agreement. A summary of the material terms of the underwriting agreement is set out in Section 8.3 of this Prospectus.

The Company is concentrating on two main areas; firstly securing and exploring thermal coal projects in Indonesia and secondly it is continuing exploration on the uranium projects in South Australia.

As announced on 16 September 2010, the Company is continuing with its efforts in Indonesia with the view to secure up to 13,000Ha within the Tapan coal belt. Assuming the Company does successfully secure this land, the Company intends to conduct further drilling within the Tapan project in order to prove up a larger resource and thereby provide the justification to start mining and invest in infrastructure. However, given the acquisition of the Tapan project has not yet completed, the Company is also reviewing a number of other projects in Indonesia in both Sumatra and Kalimantan. All of these projects are coal based. The work currently being undertaken by the Company’s geologist is to verify these projects in order to identify the project with the greatest prospect.

The Company continues with its exploration on the South Australian uranium project at Lake Surprise. However, during the first quarter, exploration activities were suspended due to wet weather and are planned to resume in the fourth quarter.

The Board takes this opportunity to thank all Shareholders for their past support and looks forward to your continued support in the future.

Yours faithfully

Richard Poole Chairman

4. DETAILS OF THE OFFER

4.1 Offer

By this Prospectus, the Company offers for subscription approximately 122,395,986 Shares and 61,197,993 Options pursuant to a pro-rata nonrenounceable entitlement issue to Shareholders of two (2) Shares for every three (3) Shares held on the Record Date at an issue price of 2 cents per Share, together with one (1) free Option for every two (2) Shares issued exercisable at 4 cents on or before 31 July 2014. Fractional entitlements will be rounded down to the nearest whole number.

Based on the capital structure of the Company (and assuming no existing Options are exercised prior to the Record Date), the maximum number of Securities to be issued pursuant to the Offer is approximately 122,395,986 Shares and 61,197,993 Options. The Offer will raise approximately $2,447,920 before costs. The purpose of the Offer and the use of funds raised are set out in Section 5 of this Prospectus.

Holders of existing Options will not be entitled to participate in the Offer. The Company currently has 2,976,190 Options on issue as at the date of this Prospectus, which Options may be exercised by the Option holder prior to the Record Date in order to participate in the Offer.

4.2 How to Accept the Offer

Your acceptance of the Entitlement Issue must be made on the Entitlement and Acceptance Form accompanying this Prospectus. Your acceptance must not exceed your Entitlement as shown on that form. If it does, your acceptance will be deemed to be for the maximum Entitlement.

You may participate in the Entitlement Issue as follows:

(a) if you wish to accept your Entitlement in full:
(i) complete the Entitlement and Acceptance Form, filling in the details in the spaces provided; and
(ii) attach your cheque for the amount indicated on the Entitlement and Acceptance Form by following the instructions set out on the Entitlement and Acceptance Form; or
(b) if you only wish to accept part of your Entitlement:
(i) fill in the number of Securities you wish to accept in the space provided on the Entitlement and Acceptance Form; and
(ii) attach your cheque for the appropriate application monies (at 2 cents per Share) by following the instructions set out on the Entitlement and Acceptance Form; or
(c) if you do not wish to accept all or part of your Entitlement, you are not obliged to do anything.

All cheques must be drawn on an Australian bank or bank draft made payable in Australian currency to “ Adavale Resources Limited – Entitlement Offer Account ” and crossed “ Not Negotiable ”.

Your completed Entitlement and Acceptance Form and cheque must reach the Share Registry no later than 5.00pm AEDT on the Closing Date.

The Offer is non-renounceable. Accordingly, a Shareholder may not sell or transfer all or part of their Entitlement.

4.3 Minimum Subscription

The minimum subscription in respect of the Offer is $2,447,920 (being the full subscription).

4.4 Underwriting

The Offer is partially underwritten by Arthur Phillip Pty Ltd (AFSL 258 057) to an aggregate amount of $2,000,000. Arthur Phillip has also agreed to place, on a best endeavours basis, any additional shortfall. Arthur Phillip has also engaged sub-underwriters to sub-underwrite a portion of the underwritten amount.

Refer to Section 8.2 of this Prospectus for further details of the terms of the underwriting and sub-underwriting.

4.5 Shortfall Offer

Any Entitlement not taken up pursuant to the Offer will form the Shortfall and will be dealt with in accordance with the Underwriting Agreement. Accordingly, Shareholders should not apply for the Shortfall unless contacted and directed to do so by the Underwriter. Subject to the terms of the Underwriting Agreement, the Company reserves the right to deal with any residual Shortfall in its sole discretion within three (3) months of the closing date of the Offer.

The offer of any Shortfall Securities is a separate offer made pursuant to this Prospectus and will remain open after the Closing Date. The issue price of any Shortfall Securities shall be 2 cents per Share being the price and terms at which the Entitlement has been offered to Shareholders pursuant to this Prospectus.

4.6 Entitlement and Acceptance Form and Shortfall Application Forms are binding

A completed and lodged Entitlement and Acceptance Form or Shortfall Application Form, together with the application monies for the number of Securities applied for, cannot be withdrawn and constitutes a binding application for the number of Securities specified in the Entitlement and Acceptance Form or Shortfall Application Form on the terms set out in this Prospectus. The Entitlement and Acceptance Form and Shortfall Application Form do not need to be signed to be binding.

If the Entitlement and Acceptance or Shortfall Application Form is not completed correctly, the Company, in its absolute discretion, can reject it or treat it as valid. The Company’s decision as to whether to accept or reject an Entitlement and Acceptance Form or Shortfall Application Form or how to construe, amend or complete it is final.

4.7 Rights and liabilities attaching to Securities issued under the Offer

The rights and liabilities attaching to Securities issued under the Offer are set out in Section 6 of this Prospectus.

4.8 ASX Listing

Application for official quotation by ASX of the Shares (but not the Options) offered pursuant to this Prospectus will be made within 7 days after the date of this Prospectus. If approval is not obtained from ASX before the expiration of 3 months after the date of issue of this Prospectus, (or such period as modified by the ASIC), the Company will not issue any Securities and will repay all application monies for the Securities within the time prescribed under the Corporations Act, without interest.

The fact that ASX may grant official quotation to the Shares is not to be taken in any way as an indication of the merits of the Company or the Securities now offered for subscription.

4.9 Allotment of Securities

Securities issued pursuant to the Offer will be allotted as soon as practicable after the Closing Date. The Company will allot the Securities on the basis of a Shareholder’s Entitlement. Where the number of Securities issued is less than the number applied for, or where no allotment is made, surplus application monies will be refunded without any interest to the applicant as soon as practicable after the Closing Date.

Pending the allotment and issue of the Securities or payment of refunds pursuant to this Prospectus, all application monies will be held by the Company in trust for the Applicants in a separate bank account as required by the Corporations Act. The Company, however, will be entitled to retain all interest that accrues on the bank account and each Applicant waives the right to claim interest.

4.10 Overseas Shareholders

This Offer does not, and is not intended to, constitute an offer in any place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus.

It is not practicable for the Company to comply with the securities laws of overseas jurisdictions having regard to the number of overseas Shareholders, the number and value of Securities these Shareholders would be offered and the cost of complying with regulatory requirements in each relevant jurisdiction. Accordingly, the Offer is not being extended and Securities will not be issued to Shareholders with a registered address which is outside Australia or New Zealand.

Shareholders resident in New Zealand should consult their professional advisors as to whether any government or other consents are required, or other formalities need to be observed, to enable them to exercise their Entitlements under the Offer.

4.11 Taxation Implications

The Directors do not consider that it is appropriate to give Applicants advice regarding the taxation consequences of applying for Securities under this Prospectus, as it is not possible to provide a comprehensive summary of the possible taxation consequences. The Company, its advisers and officers, do not accept any responsibility or liability for any taxation consequences to Applicants. Potential Applicants should, therefore, consult their own professional tax adviser in connection with the taxation implications of the Securities offered pursuant to this Prospectus.

4.12 Clearing House Electronic Sub-Register System (CHESS) and Issuer Sponsorship

The Company will not be issuing share certificates. The Company participates in CHESS, for those investors who have, or wish to have, a sponsoring stockbroker. Investors who do not wish to participate through CHESS will be issuer sponsored by the Company. Because the sub-registers are electronic, ownership of securities can be transferred without having to rely upon paper documentation.

Electronic registers mean that the Company will not be issuing certificates to investors. Instead, investors will be provided with a statement (similar to a bank account statement) that sets out the number of Securities allotted to them under this Prospectus. The notice will also advise holders of their Holder Identification Number or Security Holder Reference Number and explain, for future reference, the sale and purchase procedures under CHESS and issuer sponsorship.

Further monthly statements will be provided to holders if there have been any changes in their security holding in the Company during the preceding month.

4.13 Privacy Act

If you complete an application for Securities, you will be providing personal information to the Company (directly or by the Company’s share registry). The Company collects, holds and will use that information to assess your application, service your needs as a Shareholder, facilitate distribution payments and corporate communications to you as a Shareholder and carry out administration.

The information may also be used from time to time and disclosed to persons inspecting the register, bidders for your Securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers, mail houses and the Company’s share registry.

You can access, correct and update the personal information that we hold about you. Please contact the Company or its share registry if you wish to do so at the relevant contact numbers set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (Cth) (as amended), the Corporations Act and certain rules such as the ASX Settlement Operating Rules. You should note that if you do not provide the information required on the application for Securities, the Company may not be able to accept or process your application.

4.14 Withdrawal of Offer

The Company, in consultation with the Underwriter, reserves the right not to proceed with the Offer at any time before the issue of the Securities to Qualifying Shareholders. If the Offer does not proceed, the Company will return all application monies, without interest, as soon as practicable after giving notice of its withdrawal.

4.15 Enquiries

Shareholders with queries in relation to the Offer may contact the Company Secretary, Sylvie Dimarco, on +61 2 9227 8900.

5. PURPOSE AND EFFECT OF THE OFFER

5.1 Purpose of the Offer

The purpose of the Offer is to raise approximately $2,447,920 (before expenses).

The proceeds of the Offer are planned to be used in accordance with the table set out below:

Proceeds of the Offer	$
Ongoing development Tapan Project & Tapan Coal Belt1	700,000
Identification, Due Diligence and Acquisition costs of New projects	1,100,000
Working Capital	447,920
Expenses of the Offer3	200,000
Total	2,447,920

Notes:

Work required at the Tapan Project including additional drilling & mapping, mine development, pit preparation and acquisition of PT Prima Perkasa Abadi (pursuant to the conditional Tapan Agreement (refer to Section 8.2 for a summary of this agreement)).
Refer to Section 8.10 of this Prospectus for further details relating to the estimated expenses of the Offer.

The above table is a statement of current intentions as at the date of this Prospectus. As with any budget, intervening events and new circumstances have the potential to affect the manner in which funds are ultimately applied. The Board reserves the right to alter the way funds are applied on this basis.

5.2 Effect of the Offer and Pro Forma Consolidated Balance Sheet

The principal effect of the Offer will be to:

(a) increase the cash reserves by approximately $2,247,920 immediately after completion of the Offer after deducting the estimated expenses of the Offer; and
(b) increase the number of Shares on issue from 183,593,979, to approximately 305,989,965 Shares following completion of the Offer; and
(a) increase the number of Options on issue from 2,976,190 Options as at the date of this Prospectus, to 64,174,183 Options.

5.3 Consolidated Balance Sheet

The unaudited Balance Sheet as at 31 August 2010 and the unaudited Pro Forma Balance Sheet as at 31 August 2010 shown on the following page have been prepared on the basis of the accounting policies normally adopted by the Company and reflect the changes to its financial position. They have been prepared on the assumption that all Securities pursuant to the Offer in this

Prospectus are issued.

The unaudited Balance Sheets have been prepared to provide Shareholders with information on the assets and liabilities of the Company and pro-forma assets and liabilities of the Company as noted below. The historical and proforma financial information is presented in an abbreviated form, insofar as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial statements.

Consolidated Balance Sheet and Pro Forma Balance Sheet as at 31 August 2010

	PRO-FORMA PRIOR TO	PRO-FORMA AFTER TO
	RIGHTS ISSUE - 31 AUG	RIGHTS ISSUE - 31 AUG
	2010	2010
Assets Current Assets Total Cash on Hand Trade Debtors - Retail Other Current Assets Advances - Travel Non Current Assets Loan - Adavale Minerals Loan - Adavale Indon (UER) Indonesian Costs Loan - Norfolk Management Investment Adavale Indonesia Investment in Adavale Minerals Provision for Recoverability Total Assets Liabilities Current Liabilities Accounts Payable Other Creditors and Accruals GST Liabilities GST Paid PAYG Payable Total Liabilities Net Assets Equity Issued Capital Capital Raising Costs Total Shareholders' Equity Retained Earnings Current Year Earnings Total Equity	1,992,688 436 29,894 6,000	4,444,609 436 29,894 6,000
	2,029,019 2,578,289 1,067,582 525,534 15,000 100 1,500,000 (449,940)	4,480,939 2,578,290 1,067,582 525,534 15,000 100 1,500,000 (449,940)
	5,236,566 7,265,586 6,613 105,425 (3,130) 5,538	5,236,566 9,717,505 6,613 105,425 (3,130) 5,538
	114,445	114,445
	7,380,031	9,603,060
	35,158,224 (354,796)	37,610,144 (354,796)
	34,803,429 (27,558,552) (93,737)	37,255,348 (27,558,552) (93,737)
	7,151,140	9,603,060

5.4 Effect on Capital Structure

A comparative table of changes in the capital structure of the Company as a consequence of the Offer is set out below, assuming that the Offer is fully subscribed.

Shares
	Number
Shares on issue at date of Prospectus1	183,593,979
Shares offered pursuant to the Offer	122,395,986
Total Shares on issue after completion of the Offer	305,989,965

Notes:

The Company has also agreed to issue (but has not issued as at the date of this Prospectus):
a. 2,000,000 Shares to the shareholders of Adavale Coal Pty Ltd (formerly United Energy and Resources Pty Ltd and an unrelated party);
b. 2,000,000 Shares to the vendors under the Tapan Agreement (please refer to Section 8.2 of this Prospectus); and
c. 2,000,000 Shares to each of Directors, John Risinger and Philip Suriano, subject to Shareholder approval at the Company’s upcoming annual general meeting.

Options

Options
	Number
Unlisted Options exercisable at $0.21 on or before 30 November 20111	1,428,571
Unlisted Options exercisable at $0.21 on or before 1 December 20111	1,547,619
Unlisted Options exercisable at $0.04 on or before 31 July 2014 offered pursuant to the Offer	61,197,993
Total Options on issue after completion of the Offer2	64,174,183

Notes:

These Options may be exercised by the Option holders prior to the Record Date in order to participate in the Entitlement Issue.
The Company has agreed to issue 20,000,000 Options (which are exercisable subject to certain performance milestones being satisfied) to each of Directors, John Risinger and Philip Suriano. The issue of such Options is subject to Shareholder approval which is being sought at the Company’s upcoming annual general meeting.

6. RIGHTS AND LIABILITIES ATTACHING TO THE SECURITIES

6.1 Rights and Liabilities attaching to Shares

The following is a summary of the more significant rights and liabilities attaching to Shares to be issued pursuant to this Prospectus. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders. To obtain such a statement, persons should seek independent legal advice.

Full details of the rights and liabilities attaching to Shares are set out in the Company’s Constitution, a copy of which is available for inspection at the Company’s registered office during normal business hours.

General Meetings

Shareholders are entitled to be present in person, or by proxy, attorney or representative to attend and vote at general meetings of the Company.

Shareholders may requisition meetings in accordance with Section 249D of the Corporations Act and the Constitution of the Company.

Voting Rights

Subject to any rights or restrictions for the time being attached to any class or classes of Shares, at general meetings of Shareholders or classes of Shareholders:

(a) each Shareholder entitled to vote may vote in person or by proxy, attorney or representative;
(b) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote; and
(c) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder shall, in respect of each Share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for each Share held, but in respect of partly paid shares shall have a fraction of a vote equivalent to the proportion which the amount paid up bears to the total issue price for the share.

Dividend Rights

The Directors may from time to time declare and pay or credit a dividend in accordance with the Corporations Act. Subject to any special right as to dividends attaching to a share, all dividends will be declared and paid according to the proportion which the amount paid on the Share is to the total amount payable in respect of the Shares (but any amount paid during the period in respect of which a dividend is declared only entitles the Shareholder to an apportioned amount of that dividend as from the date of payment). The Directors may from time to time pay or credit to the Shareholders such interim dividends as they may determine. No dividends shall be payable except out of profits. A determination by the Directors as to the profits of the Company shall be conclusive. No dividend shall carry interest as against the Company.

The Directors may from time to time grant to Shareholders or any class of shareholders the right to elect to reinvest cash dividends paid by the Company by subscribing for Shares in the Company on such terms and conditions as the Directors think fit. The Directors may, at their discretion, resolve in respect of any dividend which it is proposed to pay or to declare on any Shares of the Company, that holders of such Shares may elect to forgo their right to the whole

or part of the proposed dividend and to receive instead an issue of Shares credited as fully paid to the extent and on the terms and conditions of the Constitution. The Directors may set aside out of the profits of the Company such amounts as they may determine as reserves, to be applied at the discretion of the Directors, for any purpose for which the profits of the Company may be properly applied.

Winding-Up

If the Company is wound up, the liquidator may, with the authority of a special resolution, divide among the Shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as he considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the Shareholders or different classes of Shareholders.

Transfer of Shares

Generally, Shares in the Company are freely transferable, subject to formal requirements, the registration of the transfer not resulting in a contravention of or failure to observe the provisions of a law of Australia and the transfer not being in breach of the Corporations Act and the Listing Rules.

Future Increase in Capital

The allotment and issue of any Shares is under the control of the Directors of the Company. Subject to restrictions on the issue or grant of securities contained in the Listing Rules, the Constitution and the Corporations Act (and without affecting any special right previously conferred on the holder of an existing share or class of shares), the Directors may issue Shares as they shall, in their absolute discretion, determine.

6.2 Terms of Options

The Options entitle the holder to subscribe for Shares on the following terms and conditions:

(a) Exercise Price : Each option entitles the holder to subscribe for 1 fully paid ordinary share in Adavale Resources Limited at a subscription price of $0.04 (4 cents) per Share.
(b) Manner of Exercise : The options are exercisable at any time prior to 5:00pm (AEDT) on 31 July 2014 by completing an option exercise form and delivering it to the Company’s Share Registry together with payment for the number of Shares in respect of which the Options are exercised and the option holding statement for those Options.
(c) Transferability of Options : Subject to the Corporations Act 2001, the ASX Listing Rules and the Company’s Constitution, the Options are freely transferable, but the Company will not apply to the ASX for the Options to be admitted to quotation.
(d) Ranking and Quotation of Shares : All Shares issued upon exercise of options will rank equally in all respects with the Company’s then existing Shares. Within 10 business days after the issue of Shares upon exercise of Options, the Company will apply to the ASX for those Shares to be admitted to quotation.

(e) Participation Rights : Holders of Options may only participate in a new issue of securities to holders of shares in the Company if an option has been exercised and a Share issued in respect of that Option before the record date for determining entitlements to the new issue, and the participation shall only be in respect of such Share issued. The Company must ensure that the record date for determining entitlements to that new issue in accordance with the ASX Listing Rules is at least 6 Business Days after the announcement of the offer.
(f) No Change to Option Terms : There will be no change to the exercise price of an option or the number of Shares over which an Option is exercisable in the event of the Company making a pro rata issue of Shares or other Securities to holders of Shares in the Company (other than a bonus issue in which case the exercise price of an Option will be adjusted down accordingly).
(g) Reorganisation of Capital : In the event of any re-organisation (including reconstruction, consolidation, subdivision, reduction or return of capital) of the issued capital of the Company, all of the Options will be reorganised as required by the ASX Listing Rules, but in all other respects the terms of exercise will remain unchanged.

Application for official quotation by ASX of the Options offered pursuant to this Prospectus will be made within 7 days after the date of this Prospectus.

7. RISK FACTORS

Applicants should consider the risk factors described below, together with information contained elsewhere in this Prospectus, before deciding whether to apply for Securities. Potential Applicants should consider that the investment in the Company is speculative and should consult their professional advisers before deciding whether to apply for Securities.

The following is not intended to be an exhaustive list of the risk factors to which the Company is exposed.

7.1 Contractual Risk

7.2 Country Risks

While Indonesian coal production is highly competitive by international standards, Indonesia’s export potential over the next ten years will depend to some extent on the perceived risks attached to investment in the coal mining sector. The coal industry in Indonesia is facing a range of legal, governance and other challenges in the transition to regional autonomy. To the extent that these risk factors continue to affect the mining sector, they can be expected to have an adverse impact on mining exploration and coal production and exports in Indonesia.

Changes to the mining law or to the other government legislation and regulations in Indonesia, or to the division of regulatory powers between the Central Government in Jakarta and local and provisional bodies, may materially impact on the ability of the Company to operate in Indonesia and on the ultimate profitability of any potential projects to be developed in Indonesia. In the event that an economic resource is identified in the Project there can be no assurance that all or any of the relevant approvals and permits necessary to conduct mining operations will be granted by the Indonesian government and other appropriate regulatory authorities.

The risk of terrorism activities in Indonesia and the resulting impact upon any future projects is also a relevant risk factor.

7.3 Exploration, project development and mining risks

Exploration for mineral resources involves many risks and hazards including environmental hazards (including discharge of pollutants or hazardous chemicals), industrial accidents, occupational and health hazards, unscheduled plant shutdowns or other processing problems, technical failures, labour force disruptions, the unavailability of material and equipment or exploration, production or supply infrastructure, unusual or unexpected rock formations, pit

slope failures, changes in the regulatory environment, weather conditions, caveins, rock bursts, water conditions and stock losses. Such occurrences could result in damage to, or destruction of, production facilities, personal injury or death, environmental damage, delays in mining, increased production costs and other monetary losses and possible legal liability to the owner or operator of the mine. The Company may become subject to liability for pollution or other hazards against which it has not insured or cannot insure, including those in respect of past mining activity for which it was not responsible.

7.4 Ability to exploit successful discoveries

It is possible that the Company may not be able to exploit commercially viable discoveries in which it holds an interest and few properties that are explored are ultimately developed into producing mines. Exploration may require external approvals or consents from relevant authorities and the granting of these approvals and consents is beyond the Company’s control. The granting of such approvals and consents may be withheld for lengthy periods, not given at all, or granted subject to the satisfaction of certain conditions which the Company cannot or may consider impractical or uneconomic to seek to meet. As a result of such delays, the Company may incur additional costs and losses, reduced revenue or lose part or all of its equity in a licence.

If the relevant approvals and consents are granted, there can be no assurance that any mineralisation discoveries will result in proven and probable reserves being attributed to the Company. If reserves are developed, it can take a number of years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish the viability of reserves though drilling and, in the cases of new properties, to construct mining and processing facilities. As a result of these uncertainties, no assurance can be given that the exploration programmes undertake by the Company will result in any commercial mining operation being brought into operation.

7.5 Title

The acquisition and retention of title to mineral rights is a detailed and timeconsuming process. Title to, and the area of, mineral resource claims may be disputed or challenged. Although the Company believes it has taken and is taking reasonable measures to secure title to its projects, there is no guarantee that title to its projects will be granted, that prospecting rights will be converted into mining rights or that title will not be challenged or impaired. Any successful challenged to the title of the Company’s projects could stop, materially delay or restrict the Company from processing with exploration activities, any development, or future mining operations.

7.6 Commodity Price Volatility and Exchange Rate Risks

The price for coal and uranium will depend on available markets at acceptable prices and transmission and distribution costs. Any substantial decline in the price of these minerals or an increase in transmission or distribution costs could have a material adverse effect on the Company.

Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets.

7.7 Resource Estimates

Resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. Even if the Company identifies a resource or reserve, actual ore reserves and resources (including grade and quantity) may differ from those estimated at an earlier time which may result in alterations to development and mining plans which may, in turn, adversely affect the Company’s operations.

7.8 Operational and technical risks

A range of factors may affect the current and future operations of the Company, including exploration, appraisal and possible production activities, including:

(a) geological conditions including inappropriately placed or timed petroleum generation or migration, ineffective seal or later disruption of the trap. A potential trap may also contain non-commercial volumes of petroleum due to adverse reservoir conditions or inadequate petroleum charge;
(b) limitations on activities due to seasonal weather patterns and cyclone activities;
(c) unanticipated operational and technical difficulties encountered in seismic survey, drilling and production activities;
(d) mechanical failure of operating plant and equipment;
(e) adverse weather conditions, industrial and environmental accidents, industrial disputes and other force majeure events;
(f) unavailability of drilling equipment;
(g) unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment;
(h) prevention of access by reason of political unrest, outbreak of hostilities, inability to obtain consents or approvals;
(i) contracting risk from third parties providing essential services; and
(j) potential problems in locating and securing the services in a timely and cost effective fashion of appropriately skilled employees, consultants or contractors.

7.9 Environmental Risks

Mining operations have inherent risks and liabilities associated with safety and damage to the environment and the disposal of waste products occurring as a result of coal exploration and production. The occurrence of any such safety or environmental incident could delay production or increase production costs.

The Company’s proposed operations have been designed to comply with known or reasonably predictable conditions, however, it is not possible to

predict all prevailing conditions that may affect the Company’s operations at all times in the future. Events, such as unpredictable rainfall may impact on the Company’s ongoing compliance with environmental legislation, regulations and licences. Significant liabilities could be imposed on the Company for damages, clean up costs or penalties in the event of certain discharges into the environment, environmental damage caused by previous operations or noncompliance with environmental laws or regulations.

7.10 Insurance Risks

Insurance coverage of all risks associated with mining exploration and production is not always available and, where available, the cost can be high. The Company will have insurance in place considered appropriate for the Company’s needs. The Company will not be insured against all possible losses, either because of the unavailability of cover or because the Directors believe the premiums are excessive relative to the benefits that would accrue. The Directors believe that the insurance they have in place is appropriate. The Directors will continue to review the insurance cover in place to ensure that it is adequate .

7.11 Competition Risk

The industry in which the Company will be involved is subject to domestic and global competition. Although the Company will undertake all reasonable due diligence in its business decisions and operations, the Company will have no influence or control over the activities or actions of its competitors, which activities or actions may, positively or negatively, affect the operating and financial performance of the Company’s projects and business.

7.12 Additional Requirements for Capital

The Company’s capital requirements depend on numerous factors. Depending on the Company’s ability to generate income from its operations, the Company may require further financing in addition to amounts raised under the capital raising. Any additional equity financing will dilute shareholdings, and debt financing, if available, may involve restrictions on financing and operating activities. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations and scale back its exploration programmes as the case may be.

7.13 Reliance on Key Management

The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Company if one or more of these employees cease their employment.

7.14 Government and legal risk

Changes in government, monetary policies, taxation and other laws can have a significant impact on the Company’s assets, operations and ultimately the financial performance of the Company and its securities.

7.15 Economic Risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s

exploration, development and production activities, as well as on its ability to fund those activities.

Further, share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance. Share market conditions are affected by many factors such as:

(a) general economic outlook;
(b) interest rates and inflation rates;
(c) currency fluctuations;
(d) changes in investor sentiment toward particular market sectors;
(e) the demand for, and supply of, capital; and
(f) terrorism or other hostilities.

7.16 Market Conditions

The market price of securities can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities in general and resource exploration stocks in particular. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company.

7.17 Investment Speculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the Securities offered under this Prospectus. Therefore, the Securities to be issued pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those securities.

Potential investors should consider that an investment in the Company is speculative and should consult their professional advisers before deciding whether to apply for Securities pursuant to this Prospectus.

8. ADDITIONAL INFORMATION

8.1 Continuous Disclosure Obligations

The Company is a “disclosing entity” (as defined in Section 111AC of the Corporations Act) for the purposes of Section 713 of the Corporations Act and, as such, is subject to regular reporting and disclosure obligations. Specifically, like all listed companies, the Company is required to continuously disclose any information it has to the market which a reasonable person would expect to have a material effect on the price or the value of the Company’s securities.

This Prospectus is a “transaction specific prospectus”. In general terms “transaction specific prospectuses” are only required to contain information in relation to the effect of the issue of securities on the Company and the rights attaching to the securities. It is not necessary to include general information in relation to all of the assets and liabilities, financial position, profits and losses or prospects of the issuing company.

This Prospectus is intended to be read in conjunction with the publicly available information in relation to the Company which has been notified to ASX and does not include all of the information that would be included in a prospectus for an initial public offering of securities in an entity that is not already listed on a stock exchange. Investors should therefore have regard to the other publicly available information in relation to the Company before making a decision whether or not to invest.

Having taken such precautions and having made such enquires as are reasonable, the Company believes that it has complied with the general and specific requirements of ASX as applicable from time to time throughout the 12 months before the issue of this Prospectus which required the Company to notify ASX of information about specified events or matters as they arise for the purpose of ASX making that information available to the stock market conducted by ASX.

Information that is already in the public domain has not been reported in this Prospectus other than that which is considered necessary to make this Prospectus complete.

The Company, as a disclosing entity under the Corporations Act states that:

(a) it is subject to regular reporting and disclosure obligations;
(b) copies of documents lodged with the ASIC in relation to the Company (not being documents referred to in Section 1274(2)(a) of the Corporations Act) may be obtained from, or inspected at, the offices of the ASIC; and
(c) it will provide a copy of each of the following documents, free of charge, to any person on request between the date of issue of this Prospectus and the Closing Date:
(i) the financial statements of the Company for the financial year ended 30 June 2010 being the last financial statements for a financial year, of the Company lodged with the ASIC before the issue of this Prospectus;
(ii) any half year financial statements of the Company lodged with ASIC since the lodgement of the last financial statements for

the year ended 30 June 2010 lodged with ASIC before the issue of this Prospectus; and

(iii)
any documents used to notify ASX of information relating to the Company in the period from lodgement of the financial statements referred to in paragraph (i) above until the issue of this Prospectus in accordance with the Listing Rules as referred to in Section 674(1) of the Corporations Act.

Copies of all documents lodged with the ASIC in relation to the Company can be inspected at the registered office of the Company during normal office hours.

The Company has lodged the following announcements with ASX since the lodgement of the 2010 audited financial statements:

Date	Description of Announcement
15/10/2010	Adavale Appendix 3B New Issue Announcement
15/10/2010	Adavale Secures Funding For Indonesian Coal Projects

ASX maintains files containing publicly available information for all listed companies. The Company’s file is available for inspection at ASX during normal office hours.

The announcements are also available through the Company’s website www.adavaleresources.com.au.

8.2 Conditional Share Sale and Purchase Agreement

On 21 June 2010, the Company entered into a conditional share sale agreement ( Tapan Agreement ) with PT Prima Perkasa Abadi ( PPA ) and each of the shareholders of PPA which at the time of settlement will represent 100% of the shareholders of PPA ( PPA Shareholders ), pursuant to which the PPA Shareholders will sell, and the Company will acquire, 100% of the PPA Shares ( Share Sale ).

The material terms of the Tapan Agreement are as follows:

(a) the purchase price for the share sale is Rp1,500,000,000 plus US$1,000 for each of the 1,000 shares in PPA and 2,000,000 shares in the Company;
(b) completion of the Tapan Agreement is conditional upon various conditions precedent as set out in the Tapan Agreement, including without limitation, the passing of shareholder resolutions approving the various matters contemplated in the agreement; and approval of the conversion of PPA from a PT Biasa to a foreign investment (PMA) company;
(c) following completion and during the life of the mine operated by the Company, pursuant to 2 IUPs (Operation Production Mining Business Licenses) held by the PPA, the Company and Adavale Indonesia Pty Ltd must pay Sunoto, Arman and Sukriansyah ( Sellers ) US$1.50 per tonne for every tonne of coal sold by PPA from PPA’s mining areas, as delineated by the 2 IUPs;

(d) the Company may terminate the Tapan Agreement by written notice to the Sellers if:
(i) in the sole opinion of the Company, the due diligence results are not to their satisfaction;
(ii) any fact, matter or event come to the notice of the Company at completion or prior to completion which constitutes a material breach by the Sellers of the Tapan Agreement;
(iii) any fact, matter or event come to the notice of the Company at completion or prior to completion which constitutes a breach of any of the warranties;
(e) the Sellers may terminate the Tapan Agreement by written notice given to the Company if any fact, matter or event come to the notice of the Company at completion or prior to completion which constitutes a material breach by the Sellers of the Tapan Agreement; and
(f) the construction, validity and performance of the Tapan Agreement shall be governed by the laws of England.

8.3 Underwriting Agreement

By an agreement between the Company and Arthur Phillip ( Underwriter ), the Offer is partially underwritten to an aggregate amount of $2,000,000 ( Underwriting Agreement ). Pursuant to the Underwriting Agreement, the Underwriter has also agreed to use its best endeavours to place any additional shortfall (if any).

Immediately after issue of the Shares the subject of the Offer, the Company must pay to the Underwriter an underwriting commission equal to 6% of the total aggregate offer price of the Shares. The Company will also pay the Underwriter a commission of 6% on all funds raised in excess of the Underwritten Amount through the placement of any additional shortfall by the Underwriter.

In addition, the Company must pay to the Underwriter all costs and expenses reasonably and properly incurred by the Underwriter in relation to the Offer.

All definitions and clauses referred to in the below summary are as applied in the Underwriting Agreement.

The obligation of the Underwriters to underwrite the Offer for the amount specified in the Underwriting Agreement is subject to certain events of termination. The Underwriters may terminate their obligations under the respective Underwriting Agreements if:

(a) adverse change : any adverse change occurs which materially impacts or is likely to impact the assets, operational or financial position of the Company or a related corporation (including but not limited to an administrator, receiver, receiver and manager, trustee or similar official being appointed over any of the assets or undertaking of the Company or a related corporation).

(b) alteration of capital structure or constitution : the Company alters its capital structure or its constitution without the prior written consent of the Underwriter.
(c) ASX listing : ASX does not give approval for the Shares to be listed for official quotation, or if approval is granted, the approval is subsequently withdrawn, qualified or withheld.
(d) banking facilities : the Company’s bankers terminate or issue any demand or penalty notice or amending the terms of any existing facility or claiming repayment or accelerated repayment of any facility or requiring additional security for any existing facility.
(e) change in laws : any of the following occurs:
(i) the introduction of legislation into the Parliament of the Commonwealth of Australia or of any State or Territory of Australia; or
(ii) the public announcement of prospective legislation or policy by the Federal Government, or the Government of any State or Territory; or
(iii) the adoption by the ASIC, its delegates, ASX, the Reserve Bank of Australia or any other regulatory authority of any regulations or policy,

which does or is likely to prohibit, restrict or regulate the principal business of the Company, the Offer or the operation of stock markets generally.

(f) default : the Company is in default of any of the terms and conditions of this Agreement or breaches any warranty or covenant given or made by it under this Agreement.
(g) due diligence : there is a material omission from the results of the due diligence investigation performed in respect of the Offer or the results of the investigation or the verification material are false or misleading.
(h) Event of Insolvency : an Event of Insolvency occurs in respect of a related corporation.
(i) extended Force Majeure : a Force Majeure, which prevents or delays an obligation under this Agreement, lasting in excess of 2 weeks occurs.
(j) failure to comply : the Company or any related corporation fails to comply with any of the following:
(i) a provision of its constitution;
(ii) any statute;
(iii) a requirement, order or request, made by or on behalf of the ASIC or any Governmental Agency; or
(iv) any material agreement entered into by it.

(k) general meeting required : ASX or the ASIC or any other governmental agency requires the Company to, or stipulates that the Company should, convene a general meeting to consider any aspect of the issue of the Shares, including, without limitation, the participation of the Underwriter or any sub-underwriter.
(l) hostilities : there is an outbreak of hostilities or a material escalation of hostilities (whether or not war has been declared) after the date of this Agreement involving one or more of Australia, Philippines, Indonesia, Japan, Russia, the United Kingdom, the United States of America, or the Peoples Republic of China.
(m) Index change : the S&P ASX 200 Index as determined at close of trading falls to a level that is 90% or less of the level at the close of trading on the date of this Agreement.
(n) indictable offence : a director of the Company or any related corporation is charged with an indictable offence.
(o) investigation : any person is appointed under any legislation in respect of companies to investigate the affairs of the Company or a related corporation.
(p) Judgment against a related corporation : a judgment in an amount exceeding $50,000 is obtained against the Company or a related corporation and is not set aside or satisfied within 7 days.
(q) Prescribed Occurrence : a Prescribed Occurrence occurs.
(r) return of capital or financial assistance : the Company or a related corporation takes any steps to undertake a proposal contemplated under section 257A or passes or takes any steps to pass a resolution under section 260B of the Corporations Act, without the prior written consent of the Underwriter.
(s) sub-underwriters : any of the sub-underwriters to the Offer do not comply with their respective obligations under the sub-underwriting agreements or threaten to not comply with their respective obligations under the sub-underwriting agreements.
(t) Suspension of debt payments : the Company suspends payment of its debts generally.

8.4 Sub-Underwriting Agreements

Arthur Phillip has entered into a number of sub-underwriting agreements with various parties, some of which are related parties as they are directors of the Company or companies associated with directors of the Company. Other subunderwriters are unrelated parties of the Company. Arthur Phillip has entered into sub-underwriting agreements in respect of the entire underwritten amount.

Set out below are the details of the sub-underwriting commitments of the relevant directors of the Company:

relevant directors of the Company:
Director/Entity	Amount	Shares	Options
Fontelina Pty Ltd (a company associatedwith Richard	$600,000	30,000,000	15,000,000

Poole)
Blueknight Corporation Pty Ltd (a company associated with Roger Steinepreis)	$400,000	20,000,000	10,000,000
Holloman Energy Investments LLC (a company associated with Mark Stevenson)	$250,000	12,500,000	6,250,000
Mark Stevenson	$25,000	1,250,000	625,000
Seiki Takahashi	$80,000	4,000,000	2,000,000
Total Related Party Sub-underwriting	$1,460,000	67,750,000	33,875,000

Each of the sub-underwriters will receive a sub-underwriting fee of 3% of the subunderwritten amount.

8.5 Converting Loan Facility

The Company has entered into a Convertible Loan Agreement with Arthur Phillip to the value of $1,000,000 ( Loan ). The Convertible Loan Agreement and the provision of the Loan is subject to Shareholder approval.

In consideration for Arthur Phillip providing the Loan to the Company, the Company has agreed to issue, subject to shareholder approval, to Arthur Phillip 10,000,000 options each to acquire a Share at an exercise price of $0.04 on or before 31 July 2014 ( Arthur Phillip Options ).

The terms of the Loan are summarised as follows:

(a) the Loan has a face value of $1,000,000;
(b) the Company may make multiple draw downs under the Loan;
(c) interest shall accrue on the Loan at the rate of 8%;
(d) if the Loan has not been repaid or converted, the Company will repay any or all of the Loan on the date which is twenty four months after the date of execution of the agreement;
(e) where an event of default occurs, Arthur Phillip may require the Company to repay any or all of the Loan plus any interest;
(f) the Loan is convertible into Shares at a conversion price of 5 cents per Share;
(g) the conversion of the Loan into Shares as outlined in (f) is subject to and conditional upon the Company obtaining Shareholder approval for the issue of the Shares; and
(h) the Loan is an unsecured debt instrument ranking alongside general secured creditors.

The Loan and the Arthur Phillip Options are subject to shareholder approval at the Company’s upcoming annual general meeting.

8.6 Effect to voting power of Underwriters

To comply with the requirement to fully disclose the underwriters’ potential voting power in the Company and the effect of the underwriting, the table below sets out various scenarios to indicate the effect on the Company’s shareholding depending on the Shortfall (if any). The potential maximum increase in the voting power of the Underwriter and the related party subunderwriters are set out below (in the event there is a maximum 100% Shortfall which will only occur if no Shareholders take up their Entitlement under the Offer). It also assumes that the Underwriter is unable to place the remaining Shortfall over and above the underwritten amount of $2,000,000.

As at the date of this Prospectus the Underwriter (and its sub-underwriters) have a relevant interest in the Securities as set out in the table below.

For the purposes of the figures in the table below it has been assumed that the Underwriter and the sub-underwriters will not take up their Entitlements (as they have indicated to the Company that they will not do so) but are issued Shares pursuant to the terms of the Underwriting Agreements.

Table (excluding exercise of free attaching options)

Person/Entity	Current Share Holding	Current % Interest	Shares pursuant to Underwriting Commitment	Total Shares after Underwriting Commitment	% Interest following completion of the Offer
Arthur Phillip	Nila	Nil	Nilb	Nil	Nil
Richard Poole/Fontelina Pty Ltd	14,431,333	7.86%	30,000,000	44,431,333	15.67%
Roger Steinepreis/Blueknight Corporation PtyLtd	10,160,400	5.53%	20,000,000	30,160,400	10.64%
Mark Stevenson/Holloman Energy Investments LLC	7,504,314	4.09%	15,000,000	22,504,314	7.94%
Seiki Takahashi	22,227,106	12.11%	4,000,000	26,227,106	9.25%
Total	54,323,153	29.59%	69,475,000	123,798,153	34.25%

Notes:

a As at the date of this Prospectus, Arthur Phillip does not hold any Shares in the Company. However, as set out in Section 8.5, Arthur Phillip has entered into a Converting Loan Facility with the Company pursuant to which it will be issued with 10,000,000 Options and should the Loan be converted, Arthur Phillip may be issued with up to 20,000,000 Shares.
b This figure assumes that all of the sub-underwriters satisfy their obligations and the Underwriter will not subscribe for any of the Shortfall.

Arthur Phillip is a related party of the Company as Richard Poole is a common director to both Arthur Phillip and the Company. The sub-underwriters listed below are also related parties of the Company for the following reasons:

(a) Fontelina Pty Ltd: ( Fontelina ) shares a common director, Richard Poole, with the Company;
(b) Blueknight Corporation Pty Ltd ( Blueknight ): Blueknight shares a common director, Roger Steinepreis, with the Company;
(c) Seiki Takahashi: Seiki Takahashi is a director of the Company;
(d) Holloman Energy Investments, LLC ( HEI ): HEI shares a common director, Mark Stevenson, with the Company; and
(e) Mark Stevenson: Mark Stevenson is a director of the Company.

The potential number of Shares held by the Underwriter and the sub-underwriters and their respective voting powers in the table above show the potential effect of the underwriting of the Offer. However, it is unlikely that no Shareholders will take up their Entitlement under this Offer and the voting power of the Underwriters will reduce for each Entitlement taken up by other Shareholders and any Shortfall subscribed for by Shareholders in addition to their Entitlement.

8.7 Directors’ interests

Other than as set out below or elsewhere in this Prospectus, no Director nor any firm in which such a Director is a partner, has or had within 2 years before the lodgement of this Prospectus with the ASIC, any interest in:

(a) the formation or promotion of the Company;
(b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer pursuant to this Prospectus; or
(c) the Offer pursuant to this Prospectus,

and no amounts have been paid or agreed to be paid (in cash or Shares or otherwise) to any Director or to any firm in which any such Director is a partner, either to induce him to become, or to qualify him as, a Director or otherwise for services rendered by him or by the firm in connection with the formation or promotion of the Company or Offer pursuant to this Prospectus.

Directors’ interests in securities of the Company at the date of this Prospectus are:

are:
Name	Shares	Options	Entitlement
			Shares	Options
Mr Richard Poole	14,431,333	Nil	9,620,888 Shares	4,810,444 Options
Mr John Risinger1	8,626,293	Nil	5,750,862 Shares	2,875,431 Options
Mr Roger Steinepreis	10,160,4001	Nil	6,773,600 Shares	3,386,800 Options
Mr Mark Stevenson	7,504,314	Nil	5,002,876 Shares	2,501,438 Options
Mr Philip Suriano2	1,666,666	Nil	1,111,110 Shares	555,555 Options

Mr Seiki Takahashi	22,227,106	Nil	14,818,070 Shares	7,409,035 Options

Notes:

1 It is proposed that John Risinger be issued with 1,000,000 Shares and 20,000,000 Options (subject to certain performance related milestones). The issue of such securities is subject to shareholder approval at the Company’s upcoming annual general meeting.
2 It is proposed that Philip Suriano be issued with 1,000,000 Shares and 20,000,000 Options (subject to certain performance related milestones). The issue of such securities is subject to shareholder approval at the Company’s upcoming annual general meeting.

The Constitution of the Company provides that the non-executive Directors may be paid for their services as Directors, a sum not exceeding such fixed sum per annum as may be determined by the Company in general meeting, to be divided among the Directors and in default of agreement then in equal shares. Directors, companies associated with the directors or their associates are also reimbursed for all reasonable expenses properly incurred in the course of conducting their duties which include, but are not in any way limited to, out of pocket expenses, travelling expenses, disbursements made on behalf of the Company and other miscellaneous expenses.

If any of the Directors are called upon to perform extra services or make any special exertions on behalf of the Company or its business, the Directors may remunerate this Director in accordance with such services or exertions, and this remuneration may be either in addition to or in substitution for the remuneration provided in the form of directors’ fees.

The table below sets out the expected annual remuneration payable to the Directors for the current financial year, inclusive of directors’ fees and superannuation.

superannuation.
Director	Current Financial Year
Mr Richard Poole	$24,000
Mr John Risinger	$204,000
Mr Roger Steinepreis	$24,000
Mr Mark Stevenson	$24,000
Mr Philip Suriano	$144,000
Mr Seiki Takahashi	$24,000

The Company paid to the current Directors a total of $372,000 for the year ended 30 June 2009 and $264,000 for the year ended 30 June 2010. The current Directors have been paid fees totalling approximately $70,000 from the end of the previous financial year until the date of this Prospectus.

8.8 Interests and Consents of Experts and Advisers

Other than as set out below or elsewhere in this Prospectus, no expert, underwriter, promoter or any other person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of this Prospectus, nor any firm in which any of those persons is or was a partner, nor any company with which any of those persons is or was associated, has or had within 2 years before the lodgement of this Prospectus with the ASIC, any interest in:

(a) the formation or promotion of the Company; or
(b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer of securities pursuant to this Prospectus; or
(c) the Offer of Securities pursuant to this Prospectus,

and no amounts have been paid or agreed to be paid (in cash or Shares or otherwise) to any expert, underwriter, promoter or any other person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of this Prospectus, or to any firm in which any of those persons is or was a partner, or to any company with which any of those persons is or was associated, for services rendered by that person, or by the firm or the company, in connection with the formation or promotion of the Company or the Offer pursuant to this Prospectus.

Pursuant to Section 716 of the Corporations Act, Arthur Phillip has given and has not withdrawn its consent to being named as Underwriter and Lead Manager to the Offer in the Corporate Directory of this Prospectus in the form and context in which it is named. Arthur Phillip has not caused or authorised the issue of this Prospectus, does not make or purport to make any statement in this Prospectus and takes no responsibility for any part of this Prospectus.

Arthur Phillip will be paid an underwriting fee of approximately $146,875, assuming $2,447,920 is raised under the Offer. Arthur Phillip will also be paid a corporate advisory fee of $25,000. In the past two years, Arthur Phillip has been paid $448,250 by the Company. As at the date of this Prospectus, Arthur Phillip does not have a relevant interest in any Securities although employees and other parties associated with Arthur Phillip may hold Securities. Mr Richard Poole, a Director of the Company, controls Arthur Phillip Pty Ltd.

Pursuant to Section 716 of the Corporations Act, Steinepreis Paganin has given, and has not withdrawn its consent to being named as Solicitors to the Company in the Corporate Directory of this Prospectus in the form and context in which it is named. Steinepreis Paganin has not caused or authorised the issue of this Prospectus, does not make or purport to make any statement in this Prospectus and takes no responsibility for any part of this Prospectus.

Steinepreis Paganin act as solicitors to the Company. Steinepreis Paganin will be paid approximately $15,000 for services in relation to this Prospectus. In the past two years, Steinepreis Paganin has been paid $90,000 by the Company. Mr Roger Steinepreis, a Director of the Company, is a partner of Steinepreis Paganin.

8.9 Legal Proceedings

There is no litigation, arbitration or proceedings pending against or involving the Company as at the date of this Prospectus.

8.10 Estimated Expenses of Offer

In the event that the Offer is fully subscribed, the estimated expenses of the Offer (excluding GST) are as follows:

ASIC Fees ASX Fees Underwriting Fee Legal Expenses Printing and other expenses Total	$ 2,068 32,559 146,8751 15,000 3,498
	200,000

Notes

1Assumes $2,447,920 raised under the Offer.

8.11 Market Price of Shares

The Company is a disclosing entity for the purposes of the Corporations Act and its Shares are enhanced disclosure securities quoted on ASX.

The highest and lowest market sale prices of the Company’s Shares on ASX during the three months immediately preceding the date of lodgement of this Prospectus with the ASIC and the respective dates of those sales were:

Highest: $0.028 on 4 August 2010 Lowest: $0.02 on 12 October 2010

The latest available closing sale price of the Company’s Shares on ASX prior to the lodgement of this Prospectus with the ASIC was $0.021 on 18 October 2010.

8.12 Electronic Prospectus

Pursuant to Class Order 00/044, the ASIC has exempted compliance with certain provisions of the Corporations Act to allow distribution of an electronic prospectus and electronic application form on the basis of a paper prospectus lodged with the ASIC, and the publication of notices referring to an electronic prospectus or electronic application form, subject to compliance with certain conditions.

If you have received this Prospectus as an electronic Prospectus, please ensure that you have received the entire Prospectus accompanied by the application form. If you have not, please phone the Company and the Company will send you, for free, either a hard copy or a further electronic copy of this Prospectus, or both.

The Company reserves the right not to accept an application form from a person if it has reason to believe that when that person was given access to the electronic application form, it was not provided together with the electronic Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered.

9. AUTHORITY OF DIRECTORS

9.1 Directors’ Consent

Each of the Directors of Adavale Resources Limited has consented to the lodgement of this Prospectus with the ASIC in accordance with Section 720 of the Corporations Act

Dated the 18[th] day of October 2010

==> picture [210 x 57] intentionally omitted <==

Roger Steinepreis Director For and on behalf of ADAVALE RESOURCES LIMITED

10. DEFINITIONS

AEDT means Australian Eastern Daylight Time.

Applicant means a Shareholder who applies for Securities pursuant to the Offer.

ASIC means the Australian Securities and Investments Commission.

ASX Settlement Operating Rules means the settlement rules of the securities clearing house which operates CHESS.

ASX means the ASX Limited (ACN 008 624 691) or the financial market operated by it, as the context requires).

Board means the board of Directors unless the context indicates otherwise.

Business Day means a day on which trading takes place on the stock market of ASX.

Closing Date means the closing date of the Offer, being 5.00pm (AEDT) on 17 November 2010 (unless extended).

Company means Adavale Resources Limited (ABN 91 008 719 015).

Constitution means the Company’s constitution as at the date of this Prospectus.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of the Company at the date of this Prospectus.

Dollar or $ means Australian dollars.

Entitlement means the entitlement of a Shareholder who is eligible to participate in the Offer.

Entitlement Issue means the issue of Securities offered by this Prospectus.

Entitlement and Acceptance Form means the entitlement and acceptance form either attached to or accompanying this Prospectus.

Listing Rules or ASX Listing Rules means the Listing Rules of the ASX.

Offer means the non-renounceable entitlement offer pursuant to this Prospectus of two (2) Shares for every three (3) Shares held by a Shareholder on the Record Date to raise approximately $2,447,920 together with one (1) free Option for every two (2) Shares issued exercisable at 4 cents on or before 31 July 2014.

Official List means the official list of ASX.

Option means an option to acquire a Share.

Prospectus means this prospectus.

Qualifying Shareholders means all Shareholders at 5.00pm (AEDT) on the Record Date whose registered addresses are in Australia and New Zealand.

Quotation and Official Quotation means official quotation on ASX.

Record Date means 5.00pm (AEDT) on 27 October 2010.

Related Corporation has the meaning given to that term in the Corporations Act.

Securities means Shares and/or Options (as the context permits).

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a shareholder of the Company.

Share Registry means Computershare Investor Services Pty Limited.

Shortfall or Shortfall Securities means those Securities under the Offer not applied for by Shareholders under their Entitlement .

Shortfall Application Form means the shortfall application form attached to or accompanying this Prospectus.

Shortfall Offer means the offer as described in Section 4.5.

Tapan Project means the Tapan coal project located in North Sumatra.

Underwriter or Arthur Phillip means Arthur Phillip Pty Ltd (ABN 55 100 908 101).

AI assistant

ADAVALE RESOURCES LIMITED — Capital/Financing Update 2010

64300_rns_2010-10-18_890bd712-d4dd-4982-b2ab-0e372f9f45c0.pdf

ADAVALE RESOURCES LIMITED ABN 91 008 719 015

ENTITLEMENT ISSUE PROSPECTUS

IMPORTANT NOTICE

TABLE OF CONTENTS

1. SUMMARY OF IMPORTANT DATES AND IMPORTANT NOTES

TIMETABLE AND IMPORTANT DATES*

IMPORTANT NOTES

KEY RISKS

(b) International Operation

(c) Exploration risks

(d) Commodity Price Volatility & Exchange Rate Risk

(e) Resource Estimates

(f)

ELECTRONIC PROSPECTUS

2. CORPORATE DIRECTORY

Directors

Underwriter

Company Secretary

Share Registry*

Registered Office

Solicitors

General Enquiries

Auditor*

3. CHAIRMAN’S LETTER

4. DETAILS OF THE OFFER

4.1 Offer

4.2 How to Accept the Offer

4.3

Minimum Subscription

4.4

Underwriting

4.5 Shortfall Offer

4.6 Entitlement and Acceptance Form and Shortfall Application Forms are binding

4.7

Rights and liabilities attaching to Securities issued under the Offer

4.8 ASX Listing

4.9 Allotment of Securities

4.10 Overseas Shareholders

4.11

Taxation Implications

4.12 Clearing House Electronic Sub-Register System (CHESS) and Issuer Sponsorship

4.13 Privacy Act

4.14 Withdrawal of Offer

4.15

Enquiries

5. PURPOSE AND EFFECT OF THE OFFER

5.1 Purpose of the Offer

Notes:

5.2 Effect of the Offer and Pro Forma Consolidated Balance Sheet

5.3 Consolidated Balance Sheet

5.4 Effect on Capital Structure

Shares

Notes:

Options

Notes:

6. RIGHTS AND LIABILITIES ATTACHING TO THE SECURITIES

6.1 Rights and Liabilities attaching to Shares

General Meetings

Voting Rights

Dividend Rights

Winding-Up

Transfer of Shares

Future Increase in Capital

6.2 Terms of Options

7. RISK FACTORS

7.1 Contractual Risk

7.2 Country Risks

7.3

Exploration, project development and mining risks

7.4 Ability to exploit successful discoveries

7.5

Title

7.6

Commodity Price Volatility and Exchange Rate Risks

7.7 Resource Estimates

7.8

Operational and technical risks

ADAVALE RESOURCES LIMITED Capital/Financing Update 2010