BOWEN COKING COAL LIMITED

Bowen Coking Coal Limited ACN 064 874 620

Notice of General Meeting

General Meeting to be held at Level 11, London House, 216 St George’s Terrace, Perth, Western Australia, on Monday 7 May 2018, commencing at 11.00am (WST).

Important

This Notice of General Meeting should be read in its entirety. If Shareholders are in doubt as to how to vote, they should seek advice from their professional adviser prior to voting.

Shareholders should refer to the Independent Expert’s Report contained inside this Notice. The Independent Expert has determined that the Proposed Transaction referred to in this Notice is not fair but reasonable to the non-associated Shareholders.

CONTENTS ............................................................................................................... 2
NOTICE OF GENERAL MEETING ............................................................................ 3
EXPLANATORY STATEMENT .................................................................................. 5
1. PROPOSED TRANSACTION .......................................................................... 7
2. REGULATORY INFORMATION ..................................................................... 19
3. ADDITIONAL INFORMATION ........................................................................ 29
4. DEFINITIONS ................................................................................................. 30
SCHEDULE 1 – PARTIES’ VOTING POWER ......................................................... 33
SCHEDULE 2 – PRO FORMA STATEMENT OF FINANCIAL POSITION ............... 34
PROXY FORM ......................................................................................................... 36
ANNEXURE A – INDEPENDENT EXPERT’S REPORT .......................................... 38

NOTICE OF GENERAL MEETING

Notice is given that a general meeting of the shareholders of Bowen Coking Coal Limited ACN 064 874 620 will be held at Level 11, London House, 216 St George’s Terrace, Perth, Western Australia, on Monday 7 May 2018, commencing at 11.00am (WST).

Important: The Proposed Transaction requires Shareholder approval under the Listing Rules and the Corporations Act. The Proposed Transaction will not proceed if the Resolutions are not passed. Further, each Resolution is subject to, and conditional on, each of the other Resolutions being passed. Accordingly, the Resolutions should be considered collectively as well as individually.

The Explanatory Statement that accompanies and forms part of this Notice of General Meeting describes in more detail the matters to be considered.

Business

Resolutions 1(a), (b), and (c) – Acquisition of Purchase Rights / Hillalong East Project

To consider and, if thought fit, to pass each of the following Resolutions as ordinary resolutions :

“That:

(a) subject to each other Resolution being passed, for the purposes of item 7 of section 611 of the Corporations Act, and for all other purposes, approval is given for the Company to issue 30,000,000 Shares to Cape Coal Pty Ltd ( Cape Coal ) causing Cape Coal to increase its Relevant Interest in the Shares such that the Voting Power of Cape Coal increases to a maximum of 20.02%;
(b) subject to each other Resolution being passed, for the purposes of Listing Rule 10.1, and for all other purposes, approval is given for the Company to acquire all of Cape Coal’s rights and to assume all of Cape Coal’s obligations and liabilities under the Sale and Purchase Agreement and the Royalty Agreements; and
(c) subject to each other Resolution being passed, for the purposes of Section 208 of the Corporations Act, Listing Rule 10.11, and for all other purposes, approval is given for the Company to issue 30,000,000 Shares to Cape Coal under the Heads of Agreement,

on the terms and conditions set out in the Explanatory Statement.”

Independent Expert’s Report

Shareholders should carefully consider the Independent Expert’s Report prepared by BDO for the purposes of all of the Resolutions. The Independent Expert’s Report comments on the fairness and reasonableness of the Proposed Transaction to the non-associated Shareholders. The Independent Expert has determined that the transaction is not fair but reasonable to the non-associated Shareholders.

Voting exclusion statements

Resolution 1(a)

The Company will disregard any votes cast in favour of this Resolution by Cape Coal, or any associate of Cape Coal (each, an Excluded Person ). However, the Company need not disregard a vote if it is cast by an Excluded Person as proxy for a person who is entitled to vote in accordance with a specified direction on the Proxy Form. Resolution 1(b)

The Company will disregard any votes cast in favour of this Resolution by or on behalf of each Excluded Person. However, the Company need not disregard a vote if: (a) it is cast by an Excluded Person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or (b) it is cast by the Chair as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides. Resolution 1(c)

The Company will disregard any votes cast in favour of this Resolution by or on behalf of an Excluded Person. However, the Company need not disregard a vote if: (a) it is cast by an Excluded Person as proxy for a person who is entitled to

vote, in accordance with the directions on the Proxy Form; or (b) it is cast by the Chair as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

The Company also need not disregard a vote if: (a) it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and (b) it is not cast on behalf of Cape Coal or any of Cape Coal’s associates.

By order of the Board

Stephen Brockhurst Company Secretary Bowen Coking Coal Limited

3 April 2018

EXPLANATORY STATEMENT

Important information

This Explanatory Statement has been prepared for the information of the shareholders of Bowen Coking Coal Limited ACN 064 874 620 ( Company ) in connection with the Resolutions to be considered at the General Meeting to be held at Level 11, London House, 216 St George’s Terrace, Perth, Western Australia, on Monday 7 May 2018 commencing at 11.00am (WST).

The purpose of this Explanatory Statement is to provide Shareholders with all information known to the Company which is material to a decision on how to vote on the Resolutions in the accompanying Notice of General Meeting.

This Notice and Explanatory Statement should be read in its entirety. If Shareholders are in doubt as to how to vote, they should seek advice from their professional adviser prior to voting.

Scope of disclosure

The law requires that this Explanatory Statement set out all other information that is reasonably required by Shareholders in order to decide whether or not it is in the Company’s interests to pass the Resolutions and which is known to the Company.

The Company is not aware of any relevant information that is material to the decision on how to vote on the Resolutions other than as is disclosed in this Explanatory Statement or previously disclosed to Shareholders by the Company by notification to the ASX.

Interpretation

Capitalised terms which are not otherwise defined in this Notice and Explanatory Statement have the meanings given to those terms in section 4.

References to “$” and “A$” in this Notice and Explanatory Statement are references to Australian currency unless otherwise stated.

References to time in this Notice and Explanatory Statement relate to the time in Perth, Western Australia.

Voting exclusion statements

Certain voting restrictions apply to the Resolutions as detailed beneath the Resolutions in the Notice.

Proxies

Please note that:

a Shareholder entitled to attend and vote at the General Meeting is entitled to appoint a proxy;
a proxy need not be a Shareholder;
a Shareholder may appoint a body corporate or an individual as its proxy;

a body corporate appointed as a Shareholder’s proxy may appoint an individual as its representative to exercise any of the powers that the body may exercise as the Shareholder’s proxy; and
Shareholders entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms. If a Shareholder appoints a body corporate as its proxy and the body corporate wishes to appoint an individual as its representative, the body corporate should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that company’s representative. The authority may be sent to the Company or its share registry in advance of the General Meeting or handed in at the General Meeting when registering as a corporate representative.

To vote by proxy, please complete and sign the enclosed Proxy Form and send by:

post to the Company at Level 11, 216 St Georges Terrace, Perth Western Australia 6000;
facsimile to the Company at+61 08 9463 6103; or
email to the Company Secretary at [email protected]

so that it is received by no later than 11.00am (WST) on 5 May 2018. Proxy Forms received later than this time will be invalid.

Voting intentions of the Chair

The Chair intends to vote all available proxies in favour of the Resolutions.

Voting entitlements

In accordance with regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001 (Cth), the Board has determined that a person’s entitlement to vote at the General Meeting will be the entitlement of that person set out in the register of Shareholders as at 5.00pm (WST) on Saturday 5 May 2018. Accordingly, transactions registered after that time will be disregarded in determining a Shareholder’s entitlement to attend and vote at the General Meeting.

1. PROPOSED TRANSACTION

1.1 Background

Bowen Coking Coal Limited ACN 064 874 620 ( Company ) holds a suite of coking coal exploration assets in the Bowen Basin of Queensland. The Company acquired these assets through the acquisition of the issued capital of Coking Coal One Pty Ltd (ACN 615 317 907) ( CCO ) from Cape Coal Pty Ltd ( Cape Coal ). This was a transaction that required the Company to re-comply with the admission requirements of the ASX. Shareholders approved the acquisition of CCO on 10 August 2017. The Company subsequently issued a prospectus and completed a fundraising and its securities were reinstated to trading on the ASX on 11 October 2017.

The Company’s material assets comprise the following interests in coal exploration Projects in the Bowen Basin. The Company has a 100% interest in the tenements making up each of these Projects, other than its 15% interest in the Lilyvale and 5% interest in the Mackenzie Projects, in each of which it is a participant in a joint venture with Stanmore Coal Limited.

•	Cooroorah	MDL 453	100%
•	Comet Ridge	EPC 1230 and MLA 70005	100%
•	Hillalong	EPC 1824	100%
•	Lilyvale	EPC 2157 and EPC 1687	15%
•	Mackenzie	EPC 2081	5%
•	Isaac River	EPC 830 and MDL 444	100%

( Existing Projects )

Since re-listing, the Company has:

acquired the Isaac River Project;
drilled two exploration holes at the Cooroorah Project, intersecting the Mammoth (Aries/Castor), Pollux and Pisces seams, and conducted coal quality and washability tests;
commenced an update to the Cooroorah resource estimate in accordance with the JORC Code;
commenced a concept mining study on the Cooroorah Project;
commenced a review of previous studies of the Comet Ridge Project, and beneficiation and yield analysis studies; and
worked with the joint venture partner on the Lilyvale Joint Venture to design an exploration program which is expected to commence in the dry season.

For more detailed information on the Projects, please refer to the Independent Expert’s Report and in particular to the Independent Specialist Report.

Transaction Agreements

In line with its stated objective of searching for additional projects that are complementary to its existing assets, the Company, on 12 February 2018, entered into a binding Heads of Agreement with Cape Coal to acquire (and assume), subject to Shareholder approval and other conditions precedent, Cape Coal’s rights, obligations and liabilities ( Purchase Rights ) under a Sale and Purchase Agreement between Cape Coal and Rio Tinto Exploration Pty Ltd ( RTX ), to acquire 100% of the Hillalong East Coking Coal Project (comprising EPC 2141 and EPC 1860) ( Hillalong East Project ) ( Heads of Agreement ). For the avoidance of doubt the Purchase Rights also include Cape Coal’s obligations and liabilities under the Royalty Agreements.

Subsequently, on 9 March 2018, the Company, CCO, Cape Coal and RTX entered into a binding Deed of Assignment and Assumption in which it has been agreed that CCO will acquire the Purchase Rights and the Company will guarantee CCO’s performance of its obligations as purchaser under the Principal Agreements ( Assignment Agreement ).

The Hillalong East Project is located in the Bowen Basin and is considered to be prospective for coking coal. Further details on the Hillalong East Project is set out in section 1.5.

Cape Coal’s Purchase Rights are primarily contained in the Sale and Purchase Agreement made between Cape Coal and RTX on 21 December 2017 ( Sale and Purchase Agreement ) as varied by a deed of variation dated on or about 19 February 2018. The Sale and Purchase Agreement provides that Cape Coal agrees to acquire the Project for the following consideration:

$100,000 in cash payable to RTX on RTX Completion; and
An additional $1,000,000 (subject to CPI indexation) upon the grant of a Mining Lease over any part of the Hillalong East Project ( Second Component Consideration ). The Second Component Consideration will be payable in cash, or, if at the time payment is due the holder (or the parent company of the holder) of 75% or more in the particular granted tenement is a listed entity, the Second Component Consideration will be satisfied by the issue of fully paid shares in the capital of that listed entity (the issue being subject to shareholder approval).

In addition, a royalty of 1.25% of gross FOB revenue from all coal sold from the Hillalong East Project is payable to RTX ( Royalty ).

RTX has an option to buy back 51% of the Hillalong East Project at fair market value on completion of a Pre-Feasibility study or, if there is no Pre-Feasibility Study completed, a Feasibility Study, ( Back-in Option ). If RTX exercises the Back-in Option a joint venture will be formed with the holder of the Hillalong East Project on a 51:49 basis. Should a joint venture be formed RTX will be the manager of the joint venture and its right to receive the Royalty will end.

Cape Coal and RTX have also entered into the Royalty Agreements in relation to the obligation to pay the Royalty which will be assigned to the Company.

In order for the Company (though CCO) to take an assignment of the Purchase Rights, and to assume Cape Coal’s obligations under the Principal Agreements, the Company and Cape Coal entered into the Heads of Agreement. Pursuant to the Heads of Agreement, the Company will acquire Cape Coal’s Purchase Rights. In consideration for the assignment of the Purchase Rights, the Company has agreed (subject to Shareholder approval) to issue to Cape Coal 30,000,000 Shares (to be escrowed for 12 months) ( Consideration Shares ) and to reimburse Cape Coal for direct legal expenses (estimated to be approximately $50,000) at BCB Completion.

In addition, and as set out above, the Company, CCO, Cape Coal and RTX have entered into the Assignment Agreement to agree that CCO shall take an assignment, and assume, the Purchase Rights from Cape Coal, and the Company shall guarantee CCO’s performance of its obligations under the Principal Agreements.

BCB Completion is subject to satisfaction or waiver of the condition precedent that the Company obtain Shareholder approval for the acquisition of the Purchase Rights.

A summary of the Principal Agreements is set out in section 1.2.

A summary of the Heads of Agreement and Assignment Agreement is set out in sections 1.3 and 1.4.

Shareholder Approvals

The current holder of the Hillalong East Project, RTX, is not a related party of the Company or Shareholder.

Cape Coal is a related party of the Company. Its controlling shareholder is Redel Resources Pty Ltd, which is in turn controlled by Mr Gerhard Redelinghuys, the Managing Director. Mr James Agenbag, a non-executive Director, is also a shareholder of Cape Coal. The value of the Consideration Shares is greater than the “substantial asset” threshold in Listing Rule 10.2 (being greater than 5% of the Company’s shareholders’ equity as set out in the accounts most recently given to ASX by the Company before the announcement of the Proposed Transaction). Accordingly, the Company is required to obtain Shareholder approval of the Proposed Transaction for the purposes of Listing Rule 10.1.

In addition, the Company is required to obtain Shareholder approval for the purposes of item 7 of section 611 of the Corporations Act due to Cape Coal acquiring a relevant interest in the Company from the issue of the Consideration Shares which, when aggregated with the Shares that it already holds, gives Cape Coal a Voting Power in the Company which exceeds 20%.

As Cape Coal is a related party of the Company, for the reasons set out above, the Company is also required to obtain Shareholder approval for the purposes of Section 208 of the Corporations Act and Listing Rule 10.11 for the issue of the Consideration Shares.

An Independent Expert’s Report has been prepared by BDO to assess the fairness and reasonableness of the Proposed Transaction (see Annexure A). The Independent Expert’s Report contains an Independent Specialist Report prepared by Salva Mining which considers the value of the Hillalong East Project. The Independent Expert’s Report considers the value of the Consideration Shares.

1.2 Sale and Purchase Agreement (including the Royalty Agreements)

The key terms of the Sale and Purchase Agreement are set out below.

The Sale and Purchase Agreement provides for the sale and purchase of the Tenements free from encumbrances.
The consideration payable to RTX for the purchase of the Tenements includes:
$100,000 (exclusive of GST) payable in cash on completion of the sale and purchase of the Tenements; and
$1 million (exclusive of GST) within 10 Business Days after the grant of a mining lease over any part of the Project ( Second Component Purchase Price ), payable either in:
- i. Cash (if sub-paragraph ii does not apply, or if shares cannot be issued by the listed entity pursuant to paragraph ii); or
- ii. if the holder of a 75% or more interest in the granted Mining Lease is a listed entity, that number of shares in the listed entity required to satisfy the Second Component Purchase Price. The issue of shares is to be subject to a number of conditions, including shareholder approval, if required by the listed entity.

The value of the Second Component Purchase Price is subject to adjustment on the basis of CPI increases.

RTX Completion is subject to each Tenement receiving an indicative approval from the Minister for registration of the transfer of a 100% interest in the Tenements to the

purchaser (which will be CCO following BCB Completion), with any conditions which are contained in each indicative approval being satisfactory to the purchaser acting reasonably ( Condition ). The Condition must be satisfied before the date that is 60 days after the date of the Sale and Purchase Agreement (or a later date as agreed). (The date for satisfaction of this Condition has since been extended to 29 April 2018 by a deed of variation to the Sale and Purchase Agreement dated 19 February 2018).

RTX Completion is due to occur on the date that is 5 Business Days after the date of satisfaction of the Condition (or such later date as agreed by the parties).

With effect from RTX Completion, RTX is granted an option to purchase a 51% legal and beneficial interest ( Back-in Interest ) in the purchaser’s interest in the Tenements (including mining information) and the coal within the area of the relevant Tenement ( Back-in Option ) if:

A Pre-Feasibility Study is completed; or
A Feasibility Study is completed without a prior pre-feasibility study being undertaken.

RTX must pay $10.00 for the grant of the Back-in Option.

RTX has ninety days after it receives either the Pre-Feasibility Study or the Feasibility Study (as applicable) to exercise the Back-in Option, which must be exercised by notice in writing.

RTX shall retain the Back-in Option notwithstanding the future sale, assignment or transfer of the Royalty to a third party by RTX.

RTX must pay what is determined to be the fair market value of the Back-in Interest to the purchaser of the Tenements in consideration for the exercise of the Back-in Option. If the parties cannot agree the fair market value, then there is provision for appointment of an expert who will determine the fair market value.

If RTX exercises the Back-in Option, then an unincorporated joint venture will be deemed to have been entered on the following terms:
RTX will hold a 51% interest with the purchaser holding 49% interest in the joint venture;
RTX will be appointed as manager of the joint venture and will retain the right to remain as manager so long as it holds a participating interest of at least 50% in the joint venture;
Each party to the joint venture is obliged to contribute to the joint venture costs in accordance with their participating interests;
- Rights of pre-emption apply in relation to the transfer of a joint venture interest; and
If a joint venture party defaults in its obligations under the joint venture, and the default is not remedied, or is incapable of being remedied, the non-defaulting party can proceed to trigger the sale of the defaulting party’s interest in the joint venture to the non-defaulting party.
The Sale and Purchase Agreement also contemplates the assignment of the Purchase Rights to CCO or to the listed entity.

The Sale and Purchase Agreement is otherwise on terms and conditions considered standard for agreements of this nature.

Royalty Deed and Royalty Mortgage Deed

Pursuant to the Sale and Purchase Agreement, Cape Coal has entered into the Royalty Deed and the Royalty Mortgage Deed in relation to the acquisition of the Tenements.
The Royalty Deed provides that the royalty payable is equal to 1.25% of the gross FOB revenue in respect of saleable coal sold.
Pursuant to the Royalty Deed FOB revenue means the gross invoiced revenue from the sale of the coal product, and if the sale is on a basis other than FOB, the gross invoiced revenue will additionally include the amount of any deemed FOB costs less any non-FOB costs incurred in respect of the sale of that product. If the coal product is not sold on an arm’s length basis, the Royalty will be calculated on the basis of the price obtained for the sale of the coal product.
The Royalty is payable until the earlier of the date of surrender of the Tenements or conveyance to RTX and the date which RTX exercises its the Back-In Option.
A deed of assignment and assumption is required to be entered into by Cape Coal as assignor, CCO as assignee, RTX as continuing party and the Company as guarantor of CCO’s performance of obligations under the Royalty Deed in order to effect assignment of the Purchase Rights to CCO. This has been effected by the Assignment Agreement. The Royalty Deed is otherwise on standard terms and conditions (including obligations to maintain the Tenements, and submit to independent audit).
Pursuant to the Royalty Mortgage Deed, Cape Coal (and any assignee) grants a security interest for the due and punctual payment of the Royalty to RTX. There are restrictions on dealing with the Tenements without RTX’s consent (including creation of any encumbrances). The security interest will only be released upon payment of all money which is payable to RTX and upon assignment of the Tenements, the assignee entering into a charge on the same terms and conditions. Otherwise the Royalty Mortgage Deed is on standard terms and conditions.

1.3 Heads of Agreement

The key terms of the Heads of Agreement are set out below.

Pursuant to the Heads of Agreement the Company agrees, subject to the conditions precedent described below, to take the benefit of all of Cape Coal’s rights, and to assume all of Cape Coal’s obligations and liabilities under the Sale and Purchase Agreement (including Cape Coal’s rights, obligations and liabilities under the Royalty Agreements).
The consideration payable by the Company is as follows:
the Consideration Shares; and
on BCB Completion, reimbursement of legal expenses of up to $50,000 in cash.
BCB Completion is subject to certain conditions, including the Company being satisfied with its due diligence inquiries into the Tenements in its absolute discretion, obtaining all necessary Shareholder approvals in respect of the transactions under the Heads of Agreement, and the Company, Cape Coal and RTX entering a deed of assignment and assumption.

The Company, CCO, Cape Coal and RTX have entered into the Assignment Agreement which satisfies the last condition described in the preceding paragraph.
The conditions must be satisfied or waived by the date which is 60 Business Days after the date of the Heads of Agreement (or such other date as agreed in writing by the parties). The Heads of Agreement also provides that Cape Coal shall be obliged to extend the date for RTX Completion under the Sale and Purchase Agreement to allow for BCB Completion to occur. This has been done by the deed of variation to the Sale and Purchase Agreement dated on or about 19 February 2018, which extended the date for satisfaction of the Condition to 29 April 2018.
BCB Completion is due to occur within 5 business days after the date on which the last condition precedent is satisfied or waived by agreement by the parties.

1.4 Assignment Agreement

The key terms of the Assignment Agreement are set out below.

The Assignment Agreement provides that with effect from the effective date, Cape Coal as assignor assigns to CCO (as assignee) the Purchase Rights and CCO agrees to assume the Purchase Rights.
The effective date for the assignment is the date that the condition precedent is satisfied.
The condition precedent to the assignment and assumption of the Purchase Rights is that the Company must obtain all necessary Shareholder approvals contemplated under the Heads of Agreement. The condition precedent must be satisfied on or before 29 April 2018.
RTX as the continuing party consents to the assignment and assumption evidenced by the Assignment Agreement and releases and discharges Cape Coal from any claim in relation to future obligations.
The Company agrees to be bound to the parent company guarantee set out in the Sale and Purchase Agreement (which terms and conditions are considered standard for a parent company guarantee).
The Assignment Agreement is otherwise on standard terms and conditions for a deed of this nature.

1.5 Hillalong East Project

Under the Proposed Transaction, the Company is seeking to acquire the Hillalong East Project which comprises a 100% interest in each of:

EPC 2141; and
EPC 1860,

( Tenements ).

The Tenements are located in the Bowen Basin and are considered to be prospective for coking coal.

This section 1.5 provides a brief overview of the Tenements. Please refer to section 9 of the Independent Specialist Report prepared by Salva Mining included in the Independent Expert’s

Report for further information on the Tenements. Shareholders may also refer to the Company’s announcement to ASX on 15 February 2018 for further information.

EPC 2141 comprises 16 sub-blocks covering an area of 51 km[2 ] approximately 100 km west of Mackay. EPC 1860 comprises 2 sub-blocks covering an area of 6.4 km[2] , approximately 45km west north west of Nebo. EPC 2141 is located adjacent to and directly up dip from the Company’s Hillalong Project (EPC 1824).

EPC 1860 is located just to the south of the “Elphinstone” extension to the Hail Creek Mine.

EPC 2141 was granted on 12 February 2013 and renewed on 8 November 2017 and expires on 11 February 2023. EPC 1860 was granted on 20 August 2012 and expires on 19 August 2022.

The coal bearing formations of interest within EPC 2141 are held within the Blackwater Group, an upper Permian package of generally uniform sandstones, mud and siltstones, tuffaceous lithotypes and coal seams ranging in thickness. The Blackwater Group contains the Moranbah Coal Measures, Fort Cooper Coal Measures and the Rangal Coal Measures

The key interest in EPC 2141 is the presence of the Rangal Coal Measures at depths from subcrop to approximately 200m. The seams sub-crop within the lease and dip steeply to the west at the limb of the Hillalong anticline into EPC 1824 which is currently owned by the Company. Having access to EPC2141 thus creates access to a larger area containing the target seams, but also to an area where the seams are known to occur much shallower than in EPC 1824.

The Moranbah Measures were also encountered from 28m deep on the Tenement, but are regarded as a secondary target due to lower coking properties observed in the initial analysis.

Figure 1. Location of Hillalong East Project and surrounding mines and projects

==> picture [385 x 541] intentionally omitted <==

The priority target seams for the Project are the Elphinstone and Hynds seams (Leichardt and Vermont equivalents) from the Rangal Coal Measures. Exploration by RTX has also intersected seams from the Moranbah Measures from 28m deep and is regarded as a secondary target due to low coking qualities observed in the initial analysis.

Intruded coal seams are known to be common in the area. Zones of North – South thrust faulting has been identified by RTX following seismic surveys across the project.

The Company’s announcement released to ASX on 15 February 2018 included exploration results at the Hillalong East Project, and a Competent Person’s Statement from Mr Troy Turner

of Xenith Consulting. The Company confirms that it is not aware of any new information or data that materially affects the information about exploration results at the Hillalong East Project included in the 15 February 2018 announcement.

If the Proposed Transaction completes, the Company proposes to commence exploration activities on the Tenements by undertaking:

The construction of a database of all available exploration data from historic exploration reports and the RTX exploration program;
Designing an exploration program to test the priority target areas;
Drilling of approximately 4 open holes; and
Follow up the open hole drilling with core drilling and quality analysis, depending on the outcome of the initial open hole drilling.

The above activities are expected to cost approximately $500,000 and would likely take place commencing Quarter 3 2018. The Company will likely fund this work using existing cash reserves.

1.6 Indicative timetable

The indicative timetable for the Proposed Transaction is set out below.

Event	Date
Announcement of the Proposed Transaction	15 February 2018
Completion of due diligence into the Hillalong East Project	26 March 2018
Notice of General Meeting sent to Shareholders	6 April 2018
General Meeting	7 May 2018
BCB Completion	14 May 2018

Note: The dates shown in the table above are indicative only and may vary subject to the Corporations Act, the Listing Rules and other applicable laws. If BCB Completion is to occur after 29 April 2018, an extension to the date for satisfaction of the condition precedent in the Sale and Purchase Agreement will be required.

1.7 Pro forma capital structure

The table below shows the capital structure of the Company at the date of this Notice and upon BCB Completion of the Proposed Transaction.

Security	Existing	Completion
Existing Shares (held by parties other	398,161,810	398,161,810
than Cape Coal and its associates)
Shares held by Cape Coal and its	71,325,000	101,325,000
associates1
Total Shares	469,486,810	499,486,810

Options (quoted, exercisable at $0.04,	50,000,000	50,000,000
expiring on 30 October 2019)
Options (unquoted, exercisable at	30,000,000	30,000,000
$0.02, expiring on 30 October 2019)
Total Options	80,000,000	80,000,000
Class A Performance Shares held by	13,000,000	13,000,000
Cape Coal
Class B Performance Shares held by	13,000,000	13,000,000
Cape Coal
Total Performance Shares	26,000,000	26,000,000
Fully diluted Share capital	575,486,8102	605,486,8102

Notes:

1 Cape Coal’s associates include Gerard Redelinghuys, Redel Resources and James Agenbag. Refer to Section 2.1 of the Explanatory Statement for further information regarding Cape Coal’s associates.

2 Assumes that no additional Shares are issued between the date of this Notice and BCB Completion including pursuant to an exercise of existing Options.

1.8 Pro forma statement of financial position

The unaudited pro forma statement of financial position for the Company showing the position of the Company at BCB Completion set out in Schedule 2.

1.9 Independent Expert’s Report

The Independent Expert’s Report assesses whether the Proposed Transaction is fair and reasonable to Shareholders who are not associated with Cape Coal. The Independent Expert’s Report also contains an assessment of the advantages and disadvantages of the Proposed Transaction. This assessment is designed to assist Shareholders in reaching their voting decision with respect to the Resolutions.

BDO has prepared the Independent Expert’s Report and has provided an opinion that it believes the Proposed Transaction is, on balance, not fair but reasonable to Shareholders who are not associated with Cape Coal. It is recommended that all Shareholders read the Independent Expert’s Report in full which is set out in Annexure A.

1.10 Advantages of the Proposed Transaction

Mr Redelinghuys and Mr Agenbag are Directors of the Company and Cape Coal, and are associates of Cape Coal and accordingly they have refrained from giving their view of the advantages of the Proposed Transaction.

The Independent Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on the Resolutions.

The acquisition of the Tenements complements the Company’s existing Project portfolio and provides the Company with an opportunity to increase its holdings in Queensland coking coal. In pursuing the acquisition of the Tenements, the Company can pursue the opportunity to create growth in the value of the Shares.
The acquisition of the Hillalong East Project could create operational synergies with the

Company’s existing tenements insofar as the extended holding will now be directly abutting Rio Tinto’s Hail Creek Mining Lease which hosts rail infrastructure, thus reducing the amount of interested parties to be negotiated with for infrastructure access.

Exploration to date has demonstrated the coal seams sub-cropping in EPC 2141 and then dipping from EPC 2141 into the Company’s EPC 1824, potentially creating a larger target and shallower access to coal.
The deal structure provides limited short-term constraints on the Company, and creates the opportunity for future knowledge sharing and funding opportunities if RTX exercises the Back-In Option and form a Rio Tinto managed joint venture.
There is the potential for longer term benefits if RTX exercises the Back-In Option and participates as a joint venture partner. RTX’s status as a major resource company means that it has the ability to choose the most promising projects to pursue implying that the Hillalong East Project would then be a good prospect.
The Independent Expert has concluded that the Proposed Transaction is not fair but reasonable to non-associated Shareholders. In view of this conclusion, to present the outcome of the Independent Expert’s report in a balanced way as a matter to be considered by shareholders, the Independent Expert’s Report is also included in the list of disadvantages of the Proposed Transaction. See the Independent Expert’s Report at Annexure A for further information.

1.11 Disadvantages of the Proposed Transaction

Mr Redelinghuys and Mr Agenbag are Directors of the Company and Cape Coal, and are associates of Cape Coal and accordingly they have refrained from giving their view of the disadvantages of the Proposed Transaction.

The Independent Directors are of the view that the following non-exhaustive list of disadvantages of the Proposed Transaction may be relevant to a Shareholder’s decision on how to vote on the Resolutions.

The Independent Expert has concluded that the Proposed Transaction is not fair but reasonable to non-associated Shareholders. In view of this conclusion, to present the outcome of the Independent Expert’s report in a balanced way as a matter to be considered by shareholders, the Independent Expert’s Report is also included in the list of advantages of the Proposed Transaction. See the Independent Expert’s Report at Annexure A for further information.
The Proposed Transaction will result in the interests of non-associated Shareholders in the Company being diluted by approximately 5.1%. This will in turn reduce the Voting Power of each non-associated Shareholder and may therefore reduce its influence on the Company.
Dilution risk – Under the Sale and Purchase Agreement, upon a mining lease being granted over any part of the Hillalong East Project, the Company will need to satisfy the Second Component Purchase Price by cash payment or if it is still at least a 75% holder of the interests in the Hillalong East Project (either directly or indirectly held) it will (subject to Shareholder approval) issue Shares to satisfy the Second Component Purchase Price. As at 22 March 2018, the closing share price for Shares traded on ASX was $0.016 which equates to approximately 62,500,000 Shares to be issued to RTX. Accordingly, existing Shareholders may be diluted further.
There may be an adverse effect resulting from the payment of the Royalty to RTX on the Company’s cash position. However, if the Royalty becomes payable in the future then it would only be on the basis of the Hillalong East Project developing to the stage

of being a producing mine. The increase in the value of the Company as a result of this would be to the benefit of Shareholders.

• The Company and its Shareholders will be exposed to certain risks associated with the Hillalong East Project, including:

exploration risk – the exploration of minerals is a speculative endeavour and there can be no assurance that any exploration undertaken on the Tenements will result in the discovery of significant coal mineralisation;
coal prices – any substantial decrease in coal prices may cause the Tenements to decrease in value or may otherwise make advancing the Hillalong East Project uneconomical;
tenure – the Hillalong East Project comprises two mining tenements. The Company will be required to comply with certain conditions (including minimum exploration commitments) in order to maintain the Tenements in good standing and to retain tenure over them. There can be no assurance that any application by the Company to renew a tenement, or convert a tenement into a mining or production lease, will be granted;
contract risk – if RTX were to exercise its Back-in Option to acquire a 51% interest in the Project a joint venture would be formed. There is an inherent risk that the counterparty could default or otherwise breach the agreement which may have a materially adverse impact on the Company; and
other risks common to mineral exploration assets or the mineral exploration industry.

• As at 31 December 2017, the Company had $3,117,000 in cash. (The Company’s cash and cash equivalents at 28 February 2018 were $2,497,263, following expenditure on exploration assets of $452,049 (including the acquisition of the Isaac River Project) and $175,427 on administration and employee benefit expenses.) The Company will be required to reimburse the legal expenses of Cape Coal incurred in negotiating the Sale and Purchase Agreement of up to $50,000 at BCB Completion. These funds will be drawn from existing cash reserves. In order to undertake initial exploration activities on the Project, the Company will again use existing cash reserves.

• The Company may be required to raise further capital in the future to augment its cash reserves, which may further dilute Shareholders, and there can be no assurance that such funding would be available at a reasonable price or at all.

Upon and following BCB Completion, Cape Coal and its associates will have a Voting Power in the Company of more than 20%. It is noted that Cape Coal and its associates already have a Voting Power of 15.19% which may deter a takeover offer for the Company as Cape Coal would be able to block a compulsory acquisition of the Shares under the Corporations Act for so long as it holds more than 10% of the number of Shares on issue. Takeover offers may be attractive to Shareholders as they are often made at a premium to the market price of Shares.

2. REGULATORY INFORMATION

2.1 Resolution 1(a) – Item 7 of section 611 of the Corporations Act – Issue of Consideration Shares to Cape Coal

Takeover prohibition

Section 606 of the Corporations Act prohibits a person from acquiring a Relevant Interest in the issued voting shares of a listed company if the acquisition would result in that person’s (or another person’s) Voting Power in the company increasing:

from 20% or below to more than 20%; or
from a starting point that is above 20% and below 90%.

Voting Power

The Voting Power of a person in a company is determined in accordance with section 610 of the Corporations Act. It is aimed at grouping together and counting the percentage of all voting shares in a company that are controlled by a person and its associates (i.e. their Relevant Interests).

Relevant Interests

Section 608(1) of the Corporations Act provides that a person has a Relevant Interest in securities if that person:

is the holder of the securities;
has power to exercise, or control the exercise of, a right to vote attached to the securities; or
has power to dispose of, or exercise control over the disposal of, the securities.

It is immaterial whether the power or control is direct or indirect, and it does not matter how remote the Relevant Interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

In addition, section 608(3) of the Corporations Act provides that, if a body corporate has a Relevant Interest in securities, a person will also have a Relevant Interest in those securities if:

the person has Voting Power in the body which is above 20%; or
the person controls the body.

Associates

In determining who is an associate for the purposes of calculating a person’s Voting Power, section 12(2) of the Corporations Act provides that:

the following entities are associates of a body corporate:
another body corporate which it controls;
another body corporate which controls it; and
another body corporate that is controlled by the same entity which controls it;

a person will be an associate of another person if they have, or propose to enter into, a relevant agreement for the purpose of controlling or influencing:
the composition of a body’s board; or
the conduct of a body’s affairs; and
a person will be an associate of another person if they are acting, or propose to act, in concert in relation to the affairs of a body.

Item 7 of section 611 of the Corporations Act

Item 7 of section 611 of the Corporations Act provides an exception to the prohibition in section 606 where the acquisition of the Relevant Interest has been approved by shareholders in a general meeting, provided that:

no votes are cast in favour of the resolution by the person proposing to make the acquisition or their associates; and
shareholders are given all information known to the acquirer or the company that was material to the decision on how to vote.

The acquisition of Shares by Cape Coal as a result of being issued the Consideration Shares on BCB Completion will result in Cape Coal acquiring a Relevant Interest in the Shares which will increase the Voting Power of Cape Coal from below 20% to more than 20%.

In light of the above, the Company is seeking the approval of Shareholders under item 7 of section 611 of the Corporations Act for Cape Coal to acquire Voting Power in the Company in excess of 20% for the purposes of section 606 of the Corporations Act.

Prescribed information

The following information is required to be provided to Shareholders under the Corporations Act and ASIC Regulatory Guide 74: Acquisitions approved by members for the purposes of obtaining approval under item 7 of section 611 of the Corporations Act. Shareholders are also referred to the Independent Expert’s Report prepared by BDO which is set out in Annexure A.

Identity of the acquirer and its associates

For the purposes of this Notice the Company can disclose that each of Cape Coal and its associates hold a Relevant Interest in the Company for the following reasons:

Cape Coal was incorporated on 12 April 2012 with its principal activities being the exploration and development of mining projects. Cape Coal also occasionally invests in ASX listed coal companies.
Cape Coal is currently a substantial holder of the Company as it is the registered holder of a 14.9% Relevant Interest in the Company. Cape Coal’s Relevant Interest will increase to 20.02% as a result of being issued the Consideration Shares on BCB Completion as consideration for the assignment of the Purchase Rights (if the Resolutions in this Notice are passed by Shareholders);
Gerhard Redelinghuys is an associate of Cape Coal because he controls Cape Coal indirectly through his control of Redel Resources and he is one of two directors of Cape Coal. Mr Redelinghuys accordingly holds a Relevant Interest in the securities held in the Company by Cape Coal. In addition to his Relevant Interest in the securities held by Cape Coal, Mr Redelinghuys also holds 1,325,000 Shares directly, with the result that Mr Redelinghuys’ Relevant Interest in the Company (at the date of this Notice) is 15.2%. Mr Redelinghuys’ Relevant Interest in the Company will increase to 20.3% as

a result of Cape Coal being issued the Consideration Shares on BCB Completion as consideration for the assignment of the Purchase Rights (if the Resolutions in this Notice are passed by Shareholders);

Redel Resources is an associate of Cape Coal because it is the controlling shareholder of Cape Coal with 58% of the issued shares in Cape Coal. Redel Resources accordingly has a Relevant Interest in the securities held in the Company by Cape Coal; and
Mr James Agenbag could be viewed as an associate of Cape Coal because he is one of two directors of Cape Coal and could be considered to jointly control Cape Coal with Mr Redelinghuys. Mr Agenbag accordingly has a Relevant Interest in the securities held in the Company by Cape Coal.

Shareholders may also wish to refer to the table of Relevant Interests of Cape Coal and its associates set out in Schedule 1 for the Voting Power of Cape Coal, Mr Redelinghuys and Mr Agenbag.

As noted above Cape Coal is an Australian company which is controlled by Mr Gerhard Redelinghuys (through his shareholding in Redel Resources). Mr Redelinghuys is the Company’s Managing Director. Mr Agenbag also could be viewed as jointly controlling Cape Coal with Mr Redelinghuys as he is one of only two directors of Cape Coal, even though he only has an 8% shareholding in Cape Coal. Mr Agenbag is a Director of the Company. Cape Coal is therefore considered to be a related party of the Company under Chapter 2E of the Corporations Act.

Mr Redelinghuys has 24 years’ experience in financial and project development within the mining sector. After studying finance at the University of Pretoria in South Africa, Gerhard joined Price Waterhouse Coopers before commencing his employment with EXXARO Resources Ltd (former ISCOR and KUMBA Resources) in 1995. Since 1995 he has held various senior management positions in both open cut and underground mining operations in South Africa. He has held directorships in Australia, including the position of Managing Director of Exxaro Australia Pty Ltd. In addition to his business analysis experience, Gerhard has extensive experience in mining project acquisitions and deal making on an international level. Gerhard was the owner’s representative on a multi-billion underground coal project in Queensland. In 2013, Gerhard became a graduate member of the Australian Institute of Company Directors. Mr Redelinghuys as Managing Director of the Company receives emoluments of $220,000 per annum plus superannuation.

Mr Agenbag has 14 years’ experience in the mining industry covering all phases of business and project development, process design, including the commissioning and optimisation of processing facilities across multiple commodities. After completing his Chemical Engineering degree at the University of Stellenbosch in 2003, Mr Agenbag worked as a process design engineer at EPCM companies including GRD Minproc Limited and DRA Global. In 2008, Mr Agenbag moved to Australia to help build DRA’s Brisbane office. His responsibilities included research and development of new business and client management in Southern Africa, Australia and Indonesia. Mr Agenbag also has substantial experience in beneficiation optimisation with emphasis on various technologies including some technologies where he jointly holds patent rights. Mr Agenbag has delivered technical papers within his area of expertise within the chemical engineering area. More recently, he has been responsible for the process engineering discipline across Peabody Energy Australia PCI Pty Ltd coal projects. Mr Agenbag has been accredited with ECSA as a Professional Engineer. He is a Member of IEAust (Chem), and is an active Member of the South African and Australian Coal Processing Societies.

Mr Agenbag receives emoluments of $3,000 per month plus superannuation from the Company for his role as non-executive Director.

Please see section 2.2 for further information relating to Cape Coal and its relationship to the Company.

Effect on the acquirers’ Voting Power

As at the date of this Notice, Cape Coal has a Relevant Interest in 14.91% of the total Shares on issue and Gerhard Redelinghuys’ Relevant Interest is equal to 15.19%.

The maximum Voting Power that Cape Coal and its associates will obtain in the Company as a result of being issued the Consideration Shares at BCB Completion of the Heads of Agreement is as follows:

Cape Coal’s Voting Power will increase to 20.02%, which is an increase of 5.11%; and
For the reasons set out above, Gerhard Redelinghuys Voting Power will increase to 20.29%, which is an increase of 5.1%.

If all of the Performance Shares convert into Shares and all of the existing Options are exercised following BCB Completion (and assuming no other Shares are issued by the Company), the maximum Voting Power that Cape Coal and its associates will obtain in the Company is as follows:

Cape Coal’s Voting Power will increase to 20.8%; and
Gerhard Redelinghuys’ Voting Power will increase to 21.03%.

Schedule 1 also sets out the effect on Cape Coal’s and its associates’ Voting Power as a result of the issue of the Consideration Shares at BCB Completion.

Reasons for the proposed acquisition

Cape Coal commenced negotiations with RTX on 5 February 2016 to acquire the Hillalong East Project, before any transaction was contemplated with the Company on the selling of CCO on 21 April 2017 which completed on 28 September 2017. The Shares are being issued to Cape Coal under the Heads of Agreement as consideration for the assignment of Cape Coal’s Purchase Rights under the Sale and Purchase Agreement. As noted in sections 1.1 and 1.4, a formal Assignment Agreement has been entered into between the Company, CCO, Cape Coal and RTX to confirm (amongst other things) the assignment of the Purchase Rights to CCO as well as RTX’s consent to the assignment of the Purchase Rights to CCO.

The assignment of the Purchase Rights to CCO will allow the Company to acquire the Hillalong East Project from RTX on the terms of the Sale and Purchase Agreement.

Summaries of the key advantages and disadvantages of the Proposed Transaction are set out in sections 1.10 and 1.11.

Timing of the proposed acquisition

Cape Coal will acquire the Consideration Shares at BCB Completion which is anticipated to occur on or about 14 May 2018. The indicative timetable for the Proposed Transaction is set out in section 1.6.

Material terms of the proposed acquisition

Summaries of the key terms of the Principal Agreements, the Heads of Agreement and the Assignment Agreement are set out in sections 1.2, 1.3 and 1.4 respectively, and a summary of the Proposed Transaction generally is set out in section 1.

Other relevant agreements

The Company notes that ASX will impose a 12 month escrow period on all of the Shares to be issued under the Heads of Agreement in accordance with Listing Rule 10.7. The Company will

enter into an escrow agreement with Cape Coal and its controllers in respect of the Shares on the terms and conditions set out in Appendix 9A of the Listing Rules.

Other than as disclosed in this Explanatory Statement (including the summaries of the Principal Agreements, Heads of Agreement and Assignment Agreement) there are no material agreements that are relevant to the Proposed Transaction.

Acquirers’ intentions regarding the future of the Company

Other than as disclosed elsewhere in this Notice, Cape Coal and its associates:

have no current intention of making any changes to the business of the Company;
do not propose to inject further capital into the Company;
do not intend to change the employment arrangements of the Company;
do not propose to transfer any assets between the Company and Cape Coal, or their associates;
have no intention to otherwise redeploy the fixed assets of the Company; and
do not intend to change the financial or dividend distribution policies of the Company.

These intentions are based on information concerning the Company, its business and the business environment which is known to Cape Coal at the date of this Notice. Final decisions regarding these matters will only be made by Cape Coal in light of material information and circumstances at the relevant time. Accordingly, the statements set out above are statements of current intention only, which may change as new information becomes available to them or as circumstances change.

Directors’ interests

Mr Redelinghuys and Mr Agenbag have a material personal interest in the outcome of Resolution 1(a), as Mr Redelinghuys is indirectly the controlling shareholder of Cape Coal, and Mr Agenbag is a director and 8% shareholder of Cape Coal.

Accordingly, Mr Redelinghuys and Mr Agenbag decline making a recommendation in relation to Resolution 1(a).

Independent Expert’s Report

The Independent Expert’s Report assesses whether the Proposed Transaction is fair and reasonable to the Shareholders who are not associated with Cape Coal. The Independent Expert’s Report also contains an assessment of the advantages and disadvantages of the Proposed Transaction. This assessment is designed to assist Shareholders in reaching their voting decision with respect to the Resolutions.

BDO has prepared the Independent Expert’s Report and has provided an opinion that it believes the Proposed Transaction is, on balance, not fair but reasonable to Shareholders who are not associated with the Sellers. It is recommended that all Shareholders read the Independent Expert’s Report in full which is set out in Annexure A.

Independent Directors’ recommendation

As the Resolutions are inter-conditional, each Independent Director recommends that Shareholders vote in favour of Resolution 1(a) for the reasons including as set out in the Independent Expert’s Report and as set out in section 1.10. Each Independent Director

considers that the potential advantages and upside discussed in section 1.10 justify the potential disadvantages in section 1.11.

2.2 Resolution 1(b) – Listing Rule 10.1 – Acquisition of Purchase Rights

Listing Rule 10.1 provides that an entity must ensure that it obtains prior shareholder approval if it, or any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to, a person in a position to influence the entity, including:

a related party;
a child entity;
a substantial holder who has held a voting power of 10% or more in the entity over the past 12 months;
an associate of any of the foregoing; and
a person whose relationship to the entity is such that ASX considers approval should be obtained.

The purpose of Listing Rule 10.1 is to protect shareholders from a value shifting transaction with a person in a position of influence being undertaken without shareholder approval.

Related Party

As discussed in section 2.1, Cape Coal is indirectly controlled by Mr Redelinghuys, a related party of the Company, due to Redel Resources’ 58% shareholding in Cape Coal. Section 228(4) of the Corporations Act provides that an entity that is controlled by a related party (in this case Mr Redelinghuys as Director and controlling Shareholder), is a related party.

Therefore, Cape Coal is a related party of the Company with the result that the Company is required to obtain Shareholder approval of the acquisition of the Purchase Rights for the purposes of Listing Rule 10.1.

Cape Coal is also a substantial Shareholder with a Voting Power of 14.91%. For the reasons set out in section 2.1, Mr Redelinghuys Voting Power in the Company is (at the date of this Notice) 15.19%

Substantial asset

An asset is substantial if its value or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the entity as set out in the latest accounts given to ASX under the Listing Rules. The Company’s equity interests in the latest accounts given to ASX are $7,188,912. Five% of this amount is $359,446. The Independent Expert Report gives values for the Consideration Shares on a pre- and post- Transaction basis, and including a premium for control in the pre-Transaction valuation (see Independent Expert’s Report). (The Hillalong East Project the subject of the Purchase Rights has been valued in the Independent Specialist Report between $0.7 million (low) and $1.3 million (high) with a preferred value of $1.0 million.) Accordingly, the Purchase Rights constitute a substantial asset for the purposes of the Listing Rules.

Classified asset

Listing Rule 10.7 provides that if an acquisition to which Listing Rule 10.1 applies is of a classified asset then the consideration must be restricted securities unless the consideration is reimbursement of expenditure incurred in developing the classified asset. A classified asset includes an interest in a mineral exploration area. The Tenements, and therefore the rights to

acquire the Tenements which are assigned under the Heads of Agreement and the Assignment Agreement (that is, the Purchase Rights), constitute a classified asset.

Therefore, ASX will impose a 12 month escrow period on all of the Shares to be issued under the Heads of Agreement. The Company will enter into escrow agreements with Cape Coal and its controllers on the terms and conditions set out in Appendix 9A of the Listing Rules.

The payment of cash consideration to RTX under the Sale and Purchase Agreement is not subject to Listing Rule 10.7 because RTX is not a related party of the Company, nor does it have a relationship of another kind set out in Listing Rule 10.1.

Independent Expert’s Report

In accordance with Listing Rule 10.10.2, an Independent Expert’s Report which assesses the fairness and reasonableness of the Proposed Transaction is set out in Annexure A.

BDO has prepared the Independent Expert’s Report and has provided an opinion that it believes the Proposed Transaction is, on balance, not fair but reasonable to Shareholders not associated with Cape Coal. It is recommended that all Shareholders read the Independent Expert’s Report in full.

Directors’ recommendation

As the Resolutions are inter-conditional, each Independent Director recommends that Shareholders vote in favour of Resolution 1(b) having regard to the Independent Expert’s Report and including for the reasons set out in section 1.10. Each Independent Director considers that the potential advantages and upside discussed in section 1.10 justify the potential disadvantages in section 1.11 .

Messrs Redelinghuys and Agenbag both have a material personal interest in the outcome of Resolution 1(b) for the reasons set out in section 2.1, and accordingly decline to make a recommendation.

2.3 Resolution 1(c) – Related Party Issues - Issue of Consideration Shares to Cape Coal

Listing Rule 10.11 provides that a company must not issue equity securities to a related party, or a person whose relationship with the company or a related party is, in ASX’s opinion, such that approval should be obtained, without the approval of holders of ordinary securities. Further, exception 14 of Listing Rule 7.2 states that approval pursuant to Listing Rule 7.1 is not required if shareholder approval is obtained under Listing Rule 10.11.

Section 208 of the Corporations Act prohibits the giving of a financial benefit to a related party of a public company, without the approval of its shareholders by ordinary resolution, on which the votes of the related party and their associates are not to be counted.

Cape Coal is a related party of the Company because it is controlled by Mr Redelinghuys, the Managing Director. Mr Agenbag is a director of Cape Coal, and is also a minority shareholder of Cape Coal. Redel Resources is the controlling shareholder of Cape Coal. Please see sections 2.1 and 2.2 for further information on Cape Coal and its relationship to the Company.

Each of Cape Coal and Mr Redelinghuys have advised that they will not be voting on this Resolution. Mr Agenbag and Redel Resources do not directly hold any Shares.

If Resolution 1(c) is approved, the Shares issued will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1 as those securities, once issued, will be excluded from the calculations under Listing Rule 7.1.

In addition to the information set out elsewhere in this Explanatory Statement, particularly under sections 2.1 and 2.2, the following information is provided to Shareholders as required by Listing Rule 10.13 and Chapter 2E of the Corporations Act in relation to Resolution 1(c):

(a) Name of the person receiving the financial benefit

Cape Coal.

(b) Maximum number of securities to be issued

30,000,000 Shares.

(c) Date by which the entity will issue the securities

The Shares will be issued at BCB Completion, which is anticipated to be on or about 14 May 2018 (If BCB Completion is to occur after 29 April 2018, this will require an extension to the date for satisfaction of the condition precedent under the Sale and Purchase Agreement). In any event, no Shares will be issued to Cape Coal later than 1 month after the General Meeting (other than to the extent permitted by any waiver or modification of the Listing Rules).

(d)

Relationship that requires shareholder approval

Cape Coal is a related party of the Company. Please see sections 2.1 and 2.2 for further information on Cape Coal and its relationship to the Company.

(e) Issue price of the securities

No cash consideration will be provided as the Consideration Shares are being issued under the Heads of Agreement as consideration for CCO acquiring the Purchase Rights. The number of Consideration Shares was determined by the Company to represent the value of the Purchase Rights based on the 30 day VWAP calculated in the 30 days on which trading in the Shares occurred on ASX immediately prior to (but excluding) the date the Heads of Agreement was entered into (being 12 February 2018).

The deemed issue price of the Shares is $0.0183 based on the 30 day VWAP calculated in the 30 days on which trading in the Shares occurred on ASX immediately prior to (but excluding) 12 February 2018.

The 30 day VWAP has been calculated on the basis of the following:

Date/Time	Open	High	Low	Close	Volume	Value	Trades	VWAP
09-Feb-18	0.017	0.017	0.016	0.016	869,565	14,646.08	5	0.0168
08-Feb-18	0.016	0.017	0.015	0.017	1,857,042	30,087.82	14	0.0162
07-Feb-18	0.015	0.016	0.015	0.016	2,024,477	30,704.64	12	0.0151
06-Feb-18	0.016	0.017	0.012	0.015	5,913,651	87,953.57	40	0.0148
05-Feb-18	0.016	0.017	0.016	0.016	2,419,834	39,722.92	16	0.0164
02-Feb-18	0.017	0.017	0.017	0.017	1,654,529	28,126.99	12	0.017
01-Feb-18	0.017	0.017	0.017	0.017	1,070,000	18,190.01	3	0.017
31-Jan-18	0.017	0.017	0.017	0.017	621,786	10,570.36	7	0.017
30-Jan-18	0.018	0.018	0.017	0.018	494,443	8,599.97	5	0.0173
29-Jan-18	0.018	0.019	0.017	0.017	2,452,642	43,569.04	17	0.0177
25-Jan-18	0.018	0.018	0.018	0.018	73,861	1,329.50	2	0.018
24-Jan-18	0.017	0.017	0.017	0.017	1,363,060	23,172.01	11	0.017

23-Jan-18	0.019	0.019	0.019	0.019	114,306	2,171.81	1	0.019
22-Jan-18	0.019	0.019	0.019	0.019	501,115	9,521.19	7	0.019
19-Jan-18	0.018	0.021	0.018	0.019	1,267,000	23,373.54	10	0.0184
18-Jan-18	0.02	0.02	0.02	0.02	150,000	3,000.00	2	0.02
17-Jan-18	0.018	0.021	0.018	0.02	694,312	13,823.15	10	0.0199
16-Jan-18	0.021	0.021	0.019	0.02	732,287	13,962.21	11	0.019
15-Jan-18				0.02
12-Jan-18	0.0215	0.0215	0.02	0.02	4,544,110	94,328.79	25	0.0207
11-Jan-18	0.022	0.022	0.022	0.022	2,469,314	54,324.90	21	0.022
10-Jan-18	0.02	0.022	0.02	0.021	10,771,876	221,411.53	55	0.0205
09-Jan-18	0.018	0.019	0.018	0.019	4,084,835	76,363.91	23	0.0186
08-Jan-18	0.018	0.018	0.017	0.018	2,440,000	42,680.01	17	0.0174
05-Jan-18	0.018	0.018	0.017	0.017	1,129,470	19,300.98	11	0.017
04-Jan-18	0.019	0.019	0.019	0.019	100,000	1,900.00	1	0.019
03-Jan-18	0.019	0.019	0.018	0.019	2,087,100	38,867.80	7	0.0186
02-Jan-18	0.019	0.019	0.018	0.018	1,071,415	19,563.82	6	0.0182
29-Dec-17	0.018	0.019	0.018	0.019	1,301,058	24,013.16	9	0.0184
28-Dec-17	0.017	0.018	0.017	0.018	1,588,272	28,563.90	6	0.0179
27-Dec-17	0.017	0.018	0.017	0.017	196,778	3,507.95	3	0.0178
22-Dec-17	0.018	0.018	0.018	0.018	1,803,677	32,466.18	12	0.018

					57,861,815	1,059,817.74

30 Day trading VWAP to 9 February 0.018316

In addition, Shareholders should note the valuations of the Consideration Shares in the Independent Expert’s Report].

(f) Cape Coal’s existing interest in the Company

Section 1.7 of the Explanatory Statement sets out Cape Coal’s existing interest in the Company’s securities.

(g) Dilutionary effect of the issue of the Consideration Shares to Cape Coal

The issue of Consideration Shares to Cape Coal for the acquisition of the Purchase Rights will have a dilutionary effect on existing Shareholders’ interests in the Company. The dilutionary effect is set out in section 1.11.

(h)

Terms of the issue

The Consideration Shares will rank equally in all respects with existing Shares on issue. A summary of the terms and conditions for the issue of the Consideration Shares are set out in the Heads of Agreement which is summarised in section 1.3. A summary of the terms and conditions for the acquisition of the Purchase Rights are set out in the Heads of Agreement and the Assignment Agreement which are respectively summarised in section 1.3 and 1.4.

(i) Intended use of funds raised

No funds will be raised as the Consideration Shares are being issued under the Heads of Agreement as consideration for CCO acquiring the Purchase Rights.

Independent Directors’ recommendation

As the Resolutions are inter-conditional, each Independent Director recommends that Shareholders vote in favour of Resolution 1(c), having considered the Independent Expert Report and for the reasons set out in section 1.10. Each Independent Director considers that the potential advantages and upside discussed in section 1.10 justify the potential disadvantages in section 1.11. Each Independent Director further confirms that they do not have any material personal interest in the outcome of the Resolution.

Each of Mr Redelinghuys and Mr Agenbag declines to make a recommendation in relation to Resolution 1(c) due to their material personal interest in the outcome of the Resolution. Due to their material personal interest in the Proposed Transaction, each of Mr Redelinghuys and Mr Agenbag excluded themselves from voting on the transaction in the board meeting that considered the Proposed Transaction.

3. ADDITIONAL INFORMATION

3.1 Relevant Interests of Directors

The Relevant Interests of the Directors in the securities of the Company are set out below.

Director		Shares	Options	Class A	Class B	Voting
				Performance	Performance	Power
				Shares	Shares
Gerhard		71,325,000	Nil	13,000,000	13,000,000	15.19%
Redelinghuys1
James		70,000,000	Nil	13,000,000	13,000,000	14.91%
Agenbag2
Ariel	Eddie	2,000,000	15,000,0003	Nil	Nil	0.04%
King
Steven		6,000,0004	-	-	-	1.28%
Formica

Notes:

Includes 1,325,000 Shares purchased on market and held directly by Gerhard Redelinghuys. Gerhard Redelinghuys is the controller of Cape Coal and therefore also has a Relevant Interest in the 70 000 000 Shares and 26,000,000 Performance Shares held by Cape Coal.
James Agenbag is one of two directors of Cape Coal and accordingly could be viewed as jointly controlling Cape Coal. Mr Agenbag therefore could be considered to have a Relevant Interest in the Shares and Performance Shares held by Cape Coal.
Includes 5,000,000 unlisted options exercisable at $0.02 each on or before 30 October 2019 and 10,000,000 quoted options exercisable at $0.04 each on or before 30 October 2019.
These Shares are held by Stevsand Investments Pty Ltd, a company controlled by Steven Formica.

3.2 ASIC and ASX’s role

The fact that the Notice of General Meeting, Explanatory Statement and any other relevant documentation has been received by ASX and ASIC is not to be taken as an indication of the merits of the Resolutions, the Proposed Transaction, or the Company. ASIC, ASX and their respective personnel take no responsibility for the contents of such documentation or any decision a Shareholder may make in reliance on that documentation.

4. DEFINITIONS

ASIC means the Australian Securities and Investments Commission.

Assignment Agreement means the Deed of Assignment and Assumption between the Company, CCO, Cape Coal and RTX dated 9 March 2018.

ASX means ASX Limited ACN 008 624 691 or the Australian Securities Exchange, as the context requires.

Back-in Option means the option to acquire a 51% interest in the Hillalong East Project as described in section 1.2.

BCB Completion means completion of the acquisition of the Purchase Rights in accordance with the Heads of Agreement.

BDO means BDO Corporate Finance (WA) Pty Ltd (ACN 124 031 045).

Board means the board of Directors.

Business Day means a day other than a Saturday, Sunday or public holiday in Perth, Western Australia.

Cape Coal means Cape Coal Pty Ltd (ACN 157 757 732).

CCO means the Company’s wholly-owned subsidiary Coking Coal One Pty Ltd (formerly known as Bowen Coking Coal Pty Ltd (ACN 615 317 907).

Chair means the chairperson of the Meeting.

Company means Bowen Coking Coal Limited (ACN 064 874 620).

Consideration Shares means 30,000,000 Shares to be issued to Cape Coal pursuant to the Assignment Agreement.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company.

Excluded Person has the meaning given in the relevant voting exclusion statement below the Resolutions.

Explanatory Statement means this explanatory statement incorporated in the Notice.

Feasibility Study means a comprehensive study of the technical, commercial and economic viability of mining a coal resource identified within the Hillalong East Project, including all exploration, geological, engineering, environmental and other relevant data together with capital and operating cost and cash flow estimates and be of a standard and contain the details and scope which would be acceptable to reputable banks and other financial institutions for the purposes of providing financing for establishing and carrying out the proposed mining.

FOB means free on board.

General Meeting means the general meeting convened by this Notice to be held on 7 May 2018, commencing at 11.00am (WST).

GST means goods and services tax as defined in A New Tax System (Goods and Services Tax) Act

1999.

Heads of Agreement means the Heads of Agreement between the Company and Cape Coal dated on or about 12 February 2018.

Hillalong East Project means the Tenements.

Independent Directors means Messrs Ariel (Eddie) King and Steven Formica.

Independent Expert’s Report means the independent expert’s report prepared by BDO which is set out in Annexure A.

Independent Specialist Report means the independent specialist report prepared by Salva Mining which is included in the Independent Expert’s Report.

JORC or JORC Code means the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 Edition, prepared by the Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia.

Listing Rules means the official listing rules of ASX.

Notice or Notice of General Meeting means the notice of general meeting incorporating this Explanatory Statement.

Option means an option to acquire a Share.

Pre-Feasibility Study means a preliminary study conducted to determine the commercial feasibility and viability for the extraction and sale of coal from an area within the Tenements including such matters as determination of grade, tonnage and associated cost estimates, projections and market analysis as may be necessary to evaluate economic viability and to derive a preferred project concept to take forward for assessment under a Feasibility Study.

Principal Agreements means the Sale and Purchase Agreement and the Royalty Agreements.

Project means an exploration project tenement of the Company described in section 1.1, as the context requires.

Proposed Transaction means the Company’s proposed acquisition of:

(a) the Purchase Rights; together with
(b) the Tenements pursuant to the Sale and Purchase Agreement.

Proxy Form means the proxy form attached to this Notice.

Purchase Rights means all of Cape Coal’s contractual rights, obligations and liabilities under the Principal Agreements.

Redel Resources means Redel Resources Pty Ltd (ACN 155 689 080).

Relevant Interest has the meaning given in section 608 of the Corporations Act.

Resolution means a resolution contained in the Notice.

Royalty means a royalty payable to RTX equal to 1.25% of the gross FOB revenue from all coal sold from the Project pursuant to the Royalty Deed.

Royalty Agreements refer to the Royalty Deed together with the Royalty Mortgage Deed.

Royalty Deed means the royalty deed between Cape Coal and RTX dated 21 December 2017.

Royalty Mortgage Deed means the royalty mortgage deed between Cape Coal and RTX dated 21 December 2017.

RTX means Rio Tinto Exploration Pty Ltd (ACN 000 057 125).

RTX Completion means the completion of the sale and purchase of the Hillalong East Project pursuant to the Sale and Purchase Agreement.

Sale and Purchase Agreement means the sale and purchase agreement dated 21 December 2017 between Cape Coal and RTX in which Cape Coal agreed to purchase, and RTX agreed to sell, the Tenements (together with all mining information, core samples (taken from the Tenement)), as amended by a deed of variation dated on or about 19 February 2018.

Salva Mining means Salva Mining Pty Ltd (ACN 614 245 840).

Second Component Purchase Price has the meaning set out in section 1.2 of the Explanatory Statement.

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

Shareholder means a holder of one or more Shares.

Tenements means EPCs 1860 and 2141.

Voting Power has the meaning given in section 610 of the Corporations Act.

VWAP means volume weight average market price of a Share.

WST means Western Standard Time, being the time in Perth, Western Australia.

SCHEDULE 1 – PARTIES’ VOTING POWER

Shareholder	Existing Completion
	Shares Performance Shares1 Voting Power Shares Performance Shares1 Voting Power
Cape Coal2	70,000,000 26,000,000 14.91 % 100,000,000 26,000,000 20.02%6
Redel Resources Pty Ltd3	70,000,000 26,000,000 14.91% 100,000,000 26,000,000 20.02%6
Gerhard Redelinghuys4	71,325,000 26,000,000 15.19% 101,325,000 26,000,000 20.29%7
James Agenbag5	70,000,000 26,000,000 14.91% 100,000,000 26,000,000 20.02%6
Total	71,325,000 26,000,000 15.19% 101,325,000 26,000,000 20.29%

Notes:

These comprise Class A and Class B Performance Shares which are convertible into Shares on a 1 for 1 basis on the achievement of the relevant milestones.
Cape Coal is, and will be, the registered holder of the Shares, Performance Shares and the Voting Power described.
Redel Resources has a Relevant Interest in the securities described because it is the controlling shareholder of Cape Coal.
Mr Redelinghuys has a Relevant Interest in the securities described because he controls Redel Resources and consequently indirectly controls Cape Coal.
Mr Agenbag could be viewed as having a Relevant Interest in the securities described because he is one of two directors of Cape Coal and accordingly could be viewed as jointly controlling Cape Coal with Mr Redelinghuys.
On a fully diluted basis, assuming all Performance Shares have converted into Shares, and all Options existing as at the date of this Notice have been exercised, the Voting Power will increase to 20.8%.
On a fully diluted basis, assuming all Performance Shares have converted into Shares, and all Options existing as at the date of this Notice have been exercised, Mr Redelinghuys’s Voting Power will increase to 21.03%.

SCHEDULE 2 – PRO FORMA STATEMENT OF FINANCIAL POSITION

POSITION
	Consolidated
	Reviewed 31 Dec 2017 $ Pro-forma adjustments Pro-forma 31 Dec 2017 $
Current assets Cash and cash equivalents Trade and other receivables Other current assets Total current assets Non-current assets Exploration assets Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Total current liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity Reserves Accumulated losses TOTAL EQUITY	3,116,954 (150,000) 2,966,954 91,669 91,669 27,657 27,657
	3,236,280 (150,000) 3,086,280
	4,367,980 580,000 4,947,980
	4,367,980 580,000 4,947,980
	7,604,260 430,000 8,034,260
	415,348 415,348
	415,348 415,348
	415,348 415,348

	7,188,912 430,000 7,618,912
	49,281,181 480,000 49,761,181 800 800 (42,093,069) (50,000) (42,143,069)
	7,188,912 430,000 7,618,912

Pro-forma adjustments comprise:

Under the Sale and Purchase Agreement between Cape Coal and RTX, $100,000 in cash is payable to RTX on RTX Completion.
Under the Heads of Agreement, Cape Coal has agreed to assign to BCB all its rights and obligations in terms of the Sale and Purchase Agreement in exchange for the issue to Cape Coal of 30,000,000 Shares and reimbursement of direct legal expenses (estimated at approximately $50,000) at BCB Completion.

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PROXY FORM

Bowen Coking Coal Limited ACN 064 874 620

I/We of being a member of Bowen Coking Coal Limited ACN 064 874 620 entitled to attend and vote at the General Meeting, hereby appoint Name of Proxy OR the Chair of the General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, and subject to the relevant laws, as the proxy sees fit, at the General Meeting to be held at Level 11, London House, 216 St George’s Terrace, Perth, Western Australia, on Monday 7 May 2018 at 11.00am (WST), and at any adjournment thereof.

Important for ALL Resolutions: The Company will disregard any votes cast in favour of Resolutions 1(a), 1(b) or 1(c) by your proxy if your proxy is an Excluded Person, unless you are not an Excluded Person and you mark the appropriate box opposite the relevant Resolution in the panel below (directing your proxy to vote for or against, or to abstain from voting).

The Chair intends to vote all available proxies in favour of the Resolutions. If you have appointed the Chair as your proxy (or the Chair becomes your proxy by default), and you wish to give the Chair specific voting directions on a Resolution, you should mark the appropriate box opposite the Resolution in the panel below (directing the Chair to vote for, against or to abstain from voting).

OR

Voting on business of the General Meeting For Against Abstain Resolution 1(a) Item 7 of section 611 of the Corporations Act – Issue of Consideration Shares to Cape Coal Resolution 1(b) Listing Rule 10.1 – Acquisition of Purchase Rights Resolution 1(c) Related Party Issues – Issue of Consideration Shares to Cape Coal

Note: If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority.

If two proxies are being appointed, the proportion of voting rights this proxy represents is ___%

Signature of Member(s): Date: ________ Individual or Member 1 Member 2 Member 3 Sole Director/Company Secretary Director Director/Company Secretary Contact Name: Contact Ph (daytime): _____

Instructions for Proxy Form

1. Your name and address

Please print your name and address as it appears on your holding statement and the Company’s share register. If Shares are jointly held, please ensure the name and address of each joint shareholder is indicated. Shareholders should advise the Company of any changes. Shareholders sponsored by a broker should advise their broker of any changes. Please note you cannot change ownership of your securities using this form.

2. Appointment of a proxy

You are entitled to appoint no more than two proxies to attend and vote on a poll on your behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of your voting rights. If you appoint two proxies and the appointment does not specify this proportion, each proxy may exercise half of your votes.

If you wish to appoint the Chair of the General Meeting as your proxy, please mark the box. If you leave this section blank or your named proxy does not attend the General Meeting, the Chair will be your proxy. A proxy need not be a Shareholder.

3. Voting on Resolutions

You may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item your vote will be invalid on that item.

4. Signing instructions

You must sign this form as follows in the spaces provided:

( Individual ) Where the holding is in one name, the holder must sign.
( Joint holding ) Where the holding is in more than one name, all of the shareholders should sign.
( Power of attorney ) If you have not already lodged the power of attorney with the Company’s share registry, please attach a certified photocopy of the power of attorney to this form when you return it.
( Companies ) Where the company has a sole director who is also the sole company secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act) does not have a company secretary, as sole director can also sign alone. Otherwise this form must be signed by a director jointly with either another director or a company secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the meeting a “Certificate of Appointment of Corporate Representative” should be produced prior to admission.

5. Return of a Proxy Form

To vote by proxy, please complete and sign the enclosed Proxy Form (and any power of attorney and/or second Proxy Form) and return by:

post to the Company at Level 11, 216 St Georges Terrace, Perth Western Australia 6000;
facsimile to the Company at+61 08 9463 6103; or
email to the Company Secretary at steve@mining_corporate.com.au

so that it is received by no later than 11.00am (WST) on Saturday 5 May 2018.

Proxy Forms received later than this time will be invalid.

ANNEXURE A – INDEPENDENT EXPERT’S REPORT

BOWEN COKING COAL LIMITED Independent Expert’s Report

OPINION: Not fair but reasonable

22 March 2018

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Financial Services Guide

22 March 2018

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (‘ we ’ or ‘ us ’ or ‘ ours ’ as appropriate) has been engaged by Bowen Coking Coal Limited (‘ BCB ’) to provide an independent expert’s report on the proposal to acquire the Hillalong East Coking Coal Project (‘ Hillalong East Project ’) from Cape Coal Pty Ltd (‘ Cape Coal ’). You will be provided with a copy of our report as a retail client because you are a shareholder of BCB.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (‘ FSG ’). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

Who we are and how we can be contacted;
The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;
Any relevant associations or relationships we have; and
Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

Financial services we are licensed to provide

We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients.

When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

BDO CORPORATE FINANCE (WA) PTY LTD

Financial Services Guide

Page 2

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Fees, commissions and other benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee payable to BDO Corporate Finance (WA) Pty Ltd for this engagement is approximately $28,000.

Other assignments

We provided the Investigating Accountant’s Report for BCB’s Prospectus on reinstatement to the ASX in July 2017 when the Company was named Cabral Resources Limited, for fees of $10,000.

Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee from BCB for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 West Perth WA 6872.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (‘ FOS ’). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is 12561. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below.

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Free call: 1800 367 287 Facsimile: (03) 9613 6399 Email: [email protected]

Contact details

You may contact us using the details set out on page 1 of the accompanying report.

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1.	Introduction	1
2.	Summary and Opinion	1
3.	Scope of the Report	4
4.	Outline of the Proposed Transaction	7
5.	Profile of Bowen Coking Coal Limited	8
6	Profile of Cape Coal	13
7	Economic analysis	14
8	Australian Coal Industry	16
9	Valuation approach adopted	19
10	Valuation of Bowen Coking Coal Limited prior to the Proposed Transaction	21
11	Valuation of Bowen Coking Coal Limited following the Proposed Transaction	30
12	Is the Proposed Transaction fair?	33
13	Is the Proposed Transaction reasonable?	34
14	Conclusion	37
15	Sources of information	37
16	Independence	38
17	Qualifications	38
18	Disclaimers and consents	39

Appendix 1 – Glossary and copyright notice

Appendix 2 – Valuation Methodologies

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22 March 2018

The Directors Bowen Coking Coal Limited Level 19, Waterfront Place 1 Eagle Street BRISBANE QLD 4000

Dear Directors

INDEPENDENT EXPERT’S REPORT

1. Introduction

On 15 February 2018, Bowen Coking Coal Limited (‘ BCB ’ or ‘ the Company ’) announced that it had entered into a binding Heads of Agreement with Cape Coal Pty Ltd (‘ Cape Coal ’) to acquire Cape Coal’s rights under agreements with Rio Tinto Exploration Pty Ltd (‘ RTX ’) to acquire 100% of the Hillalong East Coking Coal Project (‘ Hillalong East Project ’), comprising Exploration Permit for Coal (‘ EPC ’) 2141 and EPC 1860, with the consideration being 30 million ordinary shares in BCB and the reimbursement of legal expenses up to a maximum of $50,000 (‘ Proposed Transaction ’).

2. Summary and Opinion

2.1 Purpose of the report

The directors of BCB have requested that BDO Corporate Finance (WA) Pty Ltd (‘ BDO ’) prepare an independent expert’s report (‘ our Report ’) to express an opinion as to whether or not the acquisition of the Hillalong East Project is fair and reasonable to the non-associated shareholders of BCB (‘ Shareholders ’).

Our Report is prepared pursuant to ASX Listing Rule (‘ Listing Rule ’) 10.1 and item 7 of section 611 of the Corporations Act 2001 Cth (‘ the Corporations Act ’) and is to be included in the Explanatory Memorandum and Notice of Meeting to be provided to the shareholders of BCB in order to assist the Shareholders in their decision whether or not to approve the Proposed Transaction.

Our Report also addresses the requirements of section 208 of the Corporations Act and Listing Rule 10.11.

2.2 Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (‘ ASIC Regulatory Guide 74 ‘Acquisitions Approved by Members’ ( ‘RG 74’ ), Regulatory Guide 111 ‘Content of Expert’s Reports’ (‘ RG 111 ’) and Regulatory Guide 112 ‘Independence of Experts’ (‘ RG 112 ’).

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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In arriving at our opinion, we have assessed the terms of the Proposed Transaction as outlined in the body of our Report. We have considered:

how the value of a BCB share prior to the Proposed Transaction on a control basis compares to the value of a BCB share following the Proposed Transaction on a minority basis;
other factors which we consider to be relevant to Shareholders in their assessment of the Proposed Transaction; and
the position of Shareholders should the Proposed Transaction not proceed.

2.3 Opinion

We have considered the terms of the Proposed Transaction as outlined in the body of this report and have concluded that, in the absence of an alternate offer, the Proposed Transaction is not fair but reasonable to Shareholders.

In our opinion, the Proposed Transaction is not fair because the value of a BCB share following the Proposed Transaction on a minority basis is less than the value of a BCB share prior to the Proposed Transaction on a control basis.

However, we consider the Proposed Transaction to be reasonable because the advantages of the Proposed Transaction to Shareholders are greater than the disadvantages. In particular:

The acquisition of the Hillalong East Project is complementary to BCB’s existing Queensland coal projects in the Bowen Basin;
Operational synergies from proximity of Hillalong East Project and the existing Hillalong Project; and
Possibility of future involvement of Rio Tinto in realising the full value of its projects.

2.4 Fairness

In section 12 we determined that the value of a BCB share prior to the Proposed Transaction on a control basis compares to the value of a BCB share following the Proposed Transaction on a minority interest basis, as detailed below:

		Low	Preferred	High
	Ref
		$	$	$
Value of a BCB share prior to Proposed Transaction on a control basis	10	$0.0135	$0.0178	$0.0214
Value of a BCB share following Proposed Transaction on a minority basis	11	$0.0104	$0.0143	$0.0181

We note from the table above that, whilst there is a large overlap, overall the value prior to the Proposed Transaction on a control basis is higher than the value following the Proposed Transaction on a minority basis. Therefore, we consider that the Proposed Transaction is not fair.

The above value ranges are graphically presented below:

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----- Start of picture text -----

Valuation Summary
Value of BCB share prior to the
Proposed Transaction on a
control basis
Value of BCB share following the
Proposed Transaction on a
minority basis
0.010 0.015 0.020 0.025
Value ($)
----- End of picture text -----

2.5 Reasonableness

We have considered the analysis in section 13 of this report, in terms of both

advantages and disadvantages of the Proposed Transaction; and
other considerations, including the position of Shareholders if the Proposed Transaction does not proceed and the consequences of not approving the Proposed Transaction.

In our opinion, the position of Shareholders if the Proposed Transaction is approved is more advantageous than the position if the Proposed Transaction is not approved. Accordingly, in the absence of any other relevant information and/or an alternate proposal we believe that the Proposed Transaction is reasonable for Shareholders.

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES	ADVANTAGES AND DISADVANTAGES
Section	Advantages Section	Disadvantages
13.4	Acquisition of Hillalong East Project is complementary to BCB’s existing Bowen Basin coal projects 13.5	Dilution of interests
13.4	Operational synergies from the proximity of Hillalong East Project to BCB’s existing Hillalong Project 13.5	Royalty to be paid to Rio Tinto
13.4	Longer term benefits to shareholders from Rio Tinto participation 13.5	Future dilution to Rio Tinto

Other key matters we have considered include:

Section	Description
13.1	Alternative proposal
13.2	Practical level of control
13.3	Consequences of not approving the Proposed Transaction

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3. Scope of the Report

3.1 Purpose of the Report

ASX Listing Rule 10.1

ASX Listing Rule 10.1 requires that a listed entity must obtain shareholders’ approval before it acquires or disposes of a substantial asset from certain persons, including related parties, when the consideration to be paid for the asset or the value of the asset being disposed of constitutes more than 5% of the equity interest of that entity at the date of the latest published accounts. Based on the reviewed accounts as at 31 December 2017, the value of the consideration paid for the asset is approximately 6% of the equity interest of BCB.

Listing Rule 10.1 applies where the vendor or acquirer of the relevant asset is a related party of the listed entity. Gerhard Redelinghuys is a director of BCB and controls Cape Coal and is therefore a related party for the purposes of Listing Rule 10.1. In addition, James Agenbag is a director of BCB and owns shares in Cape Coal.

Listing Rule 10.10.2 requires the Notice of Meeting for shareholders’ approval to be accompanied by a report by an independent expert expressing their opinion as to whether the Proposed Transaction is fair and reasonable to the shareholders whose votes are not to be disregarded.

Accordingly, an independent expert’s report is required for the Proposed Transaction. The report should provide an opinion by the expert stating whether or not the terms and conditions in relation thereto are fair and reasonable to the Shareholders.

Corporations Act section 611 – Acquisition of substantial interests

Section 606 of the Corporations Act expressly prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued shares of a public company, unless a full takeover offer is made to all shareholders or that person can avail itself of one of the other exceptions in section 611 of the Corporations Act. As a result of the Proposed Transaction, Cape Coal (and associates) will increase its interest in BCB from 15.19% to 20.29% on an undiluted basis.

Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting.

RG 74 states that the obligation to supply shareholders with all information that is material can be satisfied by the non-associated directors of the entity, by either:

undertaking a detailed examination of the Proposed Transaction themselves, if they consider that they have sufficient expertise, experience and resources; or
by commissioning an Independent Expert's Report.

The directors of BCB have commissioned this Report to satisfy this obligation.

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Corporations Act section 208 – Need for member approval for financial benefit and ASX Listing Rule 10.11

Section 208 prohibits the giving of a financial benefit to a related party of the company, without the approval of its shareholders. Cape Coal is a related party of BCB because it is controlled by Gerhard Redelinghuys, the managing director of BCB.

Listing Rule 10.11 provides that a company must not issue shares to a related party without the approval of shareholders.

We note that neither Corporations Act section 208 nor Listing Rule 10.11 specifically require the directors to commission an independent expert’s report but that the opinion provided in our Report addresses the issues relevant to BCB shareholders in assessing whether to approve the Proposed Transaction in relation to Corporations Act section 208 and Listing Rule 10.11.

3.2 Regulatory guidance

Neither the Listing Rules nor the Corporations Act define the meaning of ‘fair and reasonable’. In determining whether the Proposed Transaction is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. RG 111 provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

RG 111 suggests that where the Proposed Transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism used to effect it. RG 111 suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with a takeover bid.

In our opinion, the Proposed Transaction is a control transaction as defined by RG 111 and we have therefore assessed the Proposed Transaction as a control transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders.

3.3 Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is equal to or greater than the value of the securities which are the subject of the offer. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length. When considering the value of the securities which are the subject of the offer in a control transaction it is inappropriate for the expert to apply a discount on the basis that the shares being acquired represent a minority or portfolio interest; as such, the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if, despite being ‘not fair’, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

a comparison between the value of a BCB share prior to the Proposed Transaction on a control basis and the value of a BCB share following the Proposed Transaction on a minority basis (fairness – see Section 12 ‘Is the Proposed Transaction Fair?’); and
an investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolutions relating to the Proposed Transaction, after reference to the value derived above (reasonableness – see Section 13 ‘Is the Proposed Transaction Reasonable?’).

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3.4 APES 225 ‘Valuation Services’ compliance

This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’ (‘ APES 225 ’).

A Valuation Engagement is defined by APES 225 as follows:

‘an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.’

This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.

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4. Outline of the Proposed Transaction

BCB completed a backdoor listing in 2017. It acquired a set of coal exploration/development tenements in the Bowen Basin in Queensland by acquiring Coking Coal One Pty Ltd (CCO), then called Bowen Coking Coal Pty Ltd from Cape Coal. Mr Gerhard Redelinghuys, the managing director of BCB, controls Cape Coal, and Mr James Agenbag, a non-executive director of BCB, is also a director and shareholder of Cape Coal. BCB raised $4.5 million at 2.3 cents per share under a prospectus lodged on 3 August 2017, and was reinstated to trading on the Australian Securities Exchange (ASX) on 11 October 2017.

Cape Coal entered into a Sale and Purchase Agreement in respect of EPCs 2141 and 1860 with Rio Tinto Exploration Pty Ltd (RTX) on 21 December 2017. (Cape Coal had recommenced negotiations with RTX on 5 February 2016.) BCB on 12 February 2018 entered into a Heads of Agreement with Cape Coal to be assigned Cape Coal’s rights and obligations under the Sale and Purchase Agreement, in consideration of which BCB will issue Cape Coal 30,000,000 fully paid ordinary shares at a deemed issue price of the 30 day VWAP over the 30 days leading up to execution of the HOA. The shares will be subject to 12 months’ escrow under the ASX Listing Rules. Cape Coal is also to be reimbursed legal expenses incurred in relation to the Sale and Purchase Agreement, up to a maximum amount of $50,000.

The consideration payable to RTX under the Sale and Purchase Agreement is $100,000 in cash, the issue of $1,000,000 in scrip (or cash) upon the grant of a Mining Lease (this is not expected to happen for several years), and a royalty of 1.25% of all coal sold from the tenements. RTX also has a claw-back under which it can elect to acquire 51% of the tenements at market value, in the event that the holder releases a PreFeasibility Study or a Feasibility Study. The Sale and Purchase Agreement was varied by a Deed of Variation such that the conditions precedent end date is set at 29 April 2018.

On 9 March 2018, the Company, CCO, Cape Coal and RTX entered into a binding Deed of Assignment and Assumption in which it has been agreed that CCO will acquire the Purchase Rights and the Company will guarantee CCO’s performance of its obligations as purchaser under the Principal Agreements (Assignment Agreement).

BCB has 469,486,810 fully paid shares on issue, of which Cape Coal holds 70,000,000 and Gerhard Redelinghuys (an associate of Cape Coal) holds 1,325,000. The issue of 30,000,000 shares to Cape Coal will take Cape Coal (and associates) over the 20% threshold at 20.29%, being 100,000,000 shares (Cape Coal) and 1,325,000 shares (Gerhard Redelinghuys) of 499,486,810 shares which will then be on issue).

Full details of the Proposed Transaction are set out in the Notice of Meeting.

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5. Profile of Bowen Coking Coal Limited

5.1 History

BCB is a Queensland based coking coal exploration company with a portfolio of advanced exploration assets.

Prior to mid-2017, the Company’s principal activity was iron ore mineral exploration in Brazil and it was known as Cabral Resources Limited ( ‘CBS’ ).

In April 2017, CBS signed a binding term sheet to acquire BCB and over the following few months the Company took the various steps necessary to be re-listed on the ASX as BCB with its principal business being coking coal exploration in Queensland. This included issuing a prospectus in August 2017 and changing its name in September 2017.

The prospectus led to the issue, on 28 September 2017, of 200,434,782 shares at 2.3 cents per share to raise $4.61 million before costs.

The Company was readmitted to the ASX on 11 October 2017 as Bowen Coking Coal Limited.

The current directors and senior management of BCB are:

Mr Ariel King, Non-Executive Chairman;
Mr Gerhard Redelinghuys, Managing Director;
Mr Steven Formica, Non-Executive Director; and
Mr James Agenbag, Non-Executive Director.

5.2 Projects

BCB currently has the following projects all in the Bowen Basin in Queensland:

5.3.1 Comet Ridge Coking Coal Project

The Comet Ridge Coking Coal Project ( ‘Comet Ridge’ ) was acquired by BCB from Acacia Coal Limited in September 2017, for the consideration of 17,391,304 ordinary fully paid shares and $350,000 in cash. Comet Ridge is located 60 kilometres ( ‘km’ ) east of Emerald and 25km south of the township of Comet in Queensland. The Company engaged Xenith Consulting during the quarter ended 31 December 2017 to review previous studies conducted on Comet Ridge.

5.3.2 Cooroorah Coking Coal Project

The Cooroorah Coking Coal Project ( ‘Cooroorah’ ) was acquired by BCB from Australian Pacific Coal Limited in October 2017. Cooroorah is located 17km north of Blackwater in Queensland. In November 2017, the Company commenced its maiden drilling program to target all four coal seams for resource delineation and to test the washability and coking coal quality. In December 2017, this drilling concluded, with intersection being successful at all coal seams. In February 2018, BCB announced that it had completed its maiden raw coal quality analysis, with high quality raw coal being identified.

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5.3.3 Hillalong Coking Coal Project

The Hillalong Coking Coal Project ( ‘Hillalong’ ) was acquired by BCB from Australian Pacific Coal Limited in October 2017. Hillalong is located in the northern Bowen Basin approximately 105km southwest of Mackay in Queensland.

5.3.4 Isaac River Coking Coal Project

The Isaac River Coking Coal Project ( ‘Isaac River’ ) was acquired by BCB from Aquila Coal Pty Ltd and Eagle Downs Pty Ltd in December 2017. Isaac River is located in the Bowen Basin, approximately 30km west of Moranbah and 130km southwest of Mackay in Queensland.

5.3.5 Lilyvale Joint Venture

BCB holds a 15% ownership in the Lilyvale Coking Coal Project ( ‘Lilyvale’ ), with Stanmore Coal Limited holding the remaining 85%. Lilyvale is located 25km north east of Emerald in the Bowen basin in Queensland and is in close proximity to BHP Mitsubishi Alliance’s Gregory Crinum operating coking coal mine and bordering Rio Tinto’s Kestrel mine.

5.3.6 Mackenzie Joint Venture

BCB holds a 5% ownership in the Mackenzie Coking Coal Project ( ‘Mackenzie’ ), with Stanmore Coal Limited holding the remaining 95%. Mackenzie is located between the Ensham and Curragh operating mines and is adjacent to the Washpool coking coal project, which is also targeting the Burngrove Coal Formation.

Source: BCB’s 2017 Annual Report and ASX Announcements

5.4 Historical Statement of Financial Position

Statement of Financial Position	Reviewed at Audited as at
	31-Dec-17 30-Jun-17
	$ $
CURRENT ASSETS
Cash and cash equivalents	3,116,954 325,153
Trade and other receivables	91,669 31,731
Other assets	27,657 234,882
TOTAL CURRENT ASSETS	3,236,280 591,766
NON-CURRENT ASSETS
Exploration assets	4,367,980 -
TOTAL NON-CURRENT ASSETS	4,367,980 -
TOTAL ASSETS	7,604,260 591,766
CURRENT LIABILITIES
Trade and other payables	415,348 61,928
TOTAL CURRENT LIABILITIES	415,348 61,928
TOTAL LIABILITES	415,348 61,928
NET ASSETS	7,188,912 529,838

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Statement of Financial Position	Reviewed at Audited as at
	31-Dec-17 30-Jun-17
	$ $
EQUITY
Contributed equity	49,281,181 42,064,761
Reserves	800 800
Accumulated losses	(42,093,069) (41,535,723)
TOTAL EQUITY	7,188,912 529,838

Source: BCB’s reviewed financial report for the half-year ended 31 December 2017 and audited financial statements for the year ended 30 June 2017

We note the following in relation to BCB’s historical statement of financial position:

Cash and cash equivalents increased mainly as a result of $4.0 million (after capital raising costs of $0.6 million) raised from the issue of shares in September 2017 via a prospectus.
Exploration assets as at 31 December 2017 are comprised of the following:
Acquisition of CCO, Cooroorah Project, Hillalong Project and Comet Ridge Project - $3,969,837;
Other exploration expenditure - $348,143.

5.5 Historical Statement of Comprehensive Income

Statement of Comprehensive Income	Reviewed 6m ended Audited Year ended
	31-Dec-17 30-Jun-17
	$ $
Other income	12,694 13,487
Administration expenses	(414,240) (433,040)
Employee benefits expense	(155,800) (141,000)
Exploration expenditure and project evaluation costs	- -
Impairment of loans	- (87,738)
Loss before income tax	(557,346) (648,291)
Income tax benefit	- -
Loss attributable to owners of the Company	(557,346) (648,291)
Other comprehensive income, net of tax
Total comprehensive loss for the year attributable to the Company	(557,346) (648,291)

Source: BCB’s reviewed financial report for the half year ended 31 December 2017 and audited financial statements for the year ended 30 June 2017

We note that as BCB underwent significant change from April 2017 it is not appropriate to address the performance from 1 July 2017 to 31 December 2017 with reference to the year to 30 June 2017.

BCB’s expenditure for the six months to 31 December 2017 reflects its Queensland exploration activities.

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5.6 Capital Structure

The share structure of BCB as at 19 March 2018 is outlined below:

	Number
Total ordinary shares on issue	469,486,810
Top 20 shareholders	193,726,960
Top 20 shareholders - % of shares on issue	41.26%

Source: BCB Share Registry

The range of shares held in BCB as at 19 March 2018 is as follows:

	Number of Ordinary	Number of Ordinary	Percentage of Issued
Range of Shares Held	Shareholders	Shares	Shares (%)
1 - 1,000	918	216,503	0.05%
1,001 - 5,000	163	438,858	0.09%
5,001 - 10,000	35	284,633	0.06%
10,001 - 100,000	272	17,573,769	3.74%
100,001 - and over	320	450,973,047	96.06%
TOTAL	1,708	469,486,810	100.00%

Source: BCB Share Registry

The ordinary shares held by the most significant shareholders as at 19 March 2018 are detailed below:

Name	Number of Shares	Percentage of Issued Shares (%)
Cape Coal Pty Ltd	70,000,000	14.91%
Area Coal Pty Ltd	54,347,826	11.58%
Acacia Coal Limited	17,391,304	3.70%
Mrs Lily Mah	17,043,478	3.63%
Subtotal	158,782,608	33.82%
Others	310,704,202	66.18%
Total ordinary shares on	469,486,810	100.00%
Issue

Source: BCB Share Registry

The options and performance shares on issue as at 19 March 2018 are as set out below.

Options and performance shares	Number	Expiry date/ lapse date	Fair value	Exercise price	Cash raised if exercised ($)
Class A Performance Shares	13,000,000	28 Sep 2019	$0.023		299,000
Class B Performance Shares	13,000,000	28 Sep 2019	$0.023		299,000
Unlisted Options	30,000,000	30 Oct 2019		$0.020	600,000
Listed Options	50,000,000	30 Oct 2019		$0.040	2,000,000
TOTAL	106,000,000

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Class A Performance Shares were issued to Cape Coal as part of the CCO acquisition in September 2017. They convert into Ordinary Shares on a 1:1 ratio upon the delineation of an increase in JORC-compliant inferred resources of at least 30 million tonnes of coal on the Company’s projects, and a 30 day VWAP share price hurdle of 5 cents.

Class B Performance Shares were issued to Cape Coal as part of the CCO acquisition in September 2017. They convert into Ordinary Shares on a 1:1 ratio upon the delineation of an increase in JORC-compliant inferred resources of at least 50 million tonnes of coal on the Company’s projects.

The above Listed and Unlisted Options were issued to directors and other investors in April 2016.

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6 Profile of Cape Coal

6.1 Background and history

Cape Coal was incorporated on 12 April 2012 with its principal activities being the exploration and development of mining projects.

CCO was incorporated on 13 October 2016 as a 100% owned subsidiary of Cape Coal to host its coal interests. CCO held the interests in the Lilyvale and Mackenzie Projects, and in the contracts to acquire the Hillalong, Comet Ridge and Cooroorah Projects, at the time that BCB acquired 100% of the issued capital of CCO in 2017. Cape Coal was issued 70,000,000 fully paid ordinary shares, 13,000,000 Class A Performance Shares, and 13,000,000 Class B Performance Shares by BCB in consideration for the acquisition of 100% of the issued capital of CCO.

Cape Coal also holds a 10% interest in Neala Mining Pty Ltd, a private company holding the Mahura Muthla diamond mine in South Africa, as well as 100% of the Capella gold project located in Queensland. Cape Coal also occasionally invests in ASX listed coal companies.

6.2 Directors

The directors of Cape Coal are as follows:

Gerhardus Redelinghuys
James Agenbag

6.3 Shareholders

The ordinary shares held by all shareholders as at 19 March 2018 are detailed below:

Name	Number of Shares	Percentage of Issued Shares (%)
Redel Resources Pty Ltd	580,000	58.00%
Capri Resources Pty Ltd	155,000	15.50%
Progeo Pty Ltd	130,000	13.00%
James Agenbag	80,000	8.00%
Pieter Van Wyk	55,000	5.50%
Total ordinary shares on Issue	1,000,000	100.00%

Source: Cape Coal Share Registry

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7 Economic analysis

7.1 Global

In our analysis we consider global economic conditions as an important factor in the outlook of BCB and coking coal going forward, due to the significant export market within the coal industry.

Overall, the global economy has strengthened over the past year. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth picked up in the Asian economies in 2017, partly supported by increased international trade. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth.

The pick-up in the global economy has contributed to a rise in oil and other commodity prices over the past year. Even so, Australia's terms of trade are expected to decline over the next few years, but remain at a relatively high level.

Globally, inflation remains low, although higher commodity prices and tight labour markets are likely to see inflation increase over the next couple of years. Long-term bond yields have risen but are still low. Market volatility has increased from the very low levels of last year. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus. Financial conditions remain expansionary, with credit spreads narrow.

7.2 Australia

We have considered the following factors as being significant to BCB and the coal industry in terms of evaluating the current economic climate in Australia:

Domestic growth

The RBA’s forecast is for the Australian economy to grow faster in 2018 than it did in 2017. Business conditions are positive and non-mining business investment is increasing. Higher levels of public infrastructure investment are also supporting the economy. Further growth in exports is expected after temporary weakness at the end of 2017. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.

Unemployment

Employment grew strongly over the past year and the unemployment rate declined. Employment has been rising in all states and has been accompanied by a significant rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead, with a further gradual reduction in the unemployment rate expected. Notwithstanding the improving labour market, wage growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time. Consistent with this, the rate of wage growth appears to have troughed and there are reports that some employers are finding it more difficult to hire workers with the necessary skills.

Inflation

Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. Inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in

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retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.

Interest Rates

The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at the 6 March 2018 meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Currency movements

On a trade-weighted basis, the Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast. This appreciation of the Australian dollar may have a direct effect on the exporting of coking coal going forward.

Source: www.rba.gov.au Statement by Phillip Lowe, Governor: Monetary Policy Decision 6 March 2018

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8 Australian Coal Industry

In the following paragraphs we have addressed the key characteristics of the Australian Coal Industry:

8.1 Background

Coal deposits are found below the earth’s surface with the quality of a coal deposit determined by the length of time in formation, commonly known as its ‘organic maturity’, temperature and pressure. The rank of coal refers to the physical and chemical properties that coals of different maturities possess. Lower rank coals such as lignite generally possess a much lower organic maturity, have a soft texture, a dull earthly appearance and are characterized by high moisture levels and low energy (carbon) content. Higher ranked coals such as Anthracite, which is the highest ranking coal, are harder, stronger, contain less moisture, and produce more energy.

To date coal has been mined by two broad methods, opencast mining and underground mining, the choice of extraction method determined by the geology of the coal deposit.

The two major coal types are coking coal and thermal coal.

Coking coal is used for the production of metallurgical coke, which is used as a reductant in the production of both iron and steel. It is primarily used because of its high carbon content and coking characteristics, however it is also used for the smelting and casting of base metals. Of the different types of coking coal, hard coal is the most valuable as it produces the highest quality coke. Semi soft coking coal and Pulverised Coal Injection are used more in blending with hard coking coal to be used as an auxiliary fuel source to increase the effectiveness of blast furnaces.

Thermal coal, also referred to as steaming coal generally contains less carbon than coking coal therefore it cannot be used in the production of steel. It is therefore primarily used as an energy source for coal fired power plants. The major producers of thermal coal are China, USA and India, with the largest importers being China, Japan and South Korea.

We note that BCB is wholly focused on coking coal.

8.2 Prices

Coal is a global commodity and, as such, prices are determined by global supply and demand factors. With both the international community and the world’s dependency on energy growing, fuel products are the single most important input affecting global economic growth.

The continued growth of emerging nations such as India and China are key drivers for the coal demand. In particular, the demand for electricity in these emerging nations is considered to be a key determinant for the current performance of the industry. Worldwide, electricity generators account for over 41.0% of coal consumption. The demand for coking coal is inextricably linked to the demand for coke as an input into iron ore production via blast furnaces. The demand for coking coal is implicitly linked to changes in blast furnace technology, whereby improvements may reduce the requirement for coking coal and thus reduce demand. Chinese demand has increased due to domestic production constraints caused by supply side reforms and the anti-pollution drive from Beijing.

Coking coal prices plummeted over the four years through 2015-16. Demand for metallurgical coal declined over the period, in line with weaker steel production activity in major export destinations such as China. However, coking coal rebounded significantly in 2016-17, largely due to industrial policy changes in China. In April 2016, the Chinese Government announced that it would restrict the number of

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production days per year at Chinese coal mines from 330 to 276. In July 2016, torrential rain in the major coal producing province of Shanxi in northern China also caused a supply disruption for black coal. This benefited Australian producers, as the loss of Chinese supply led to significant increases in the global prices of metallurgical and thermal coal. This trend enabled industry revenue to surge by 55.4% in 201617. In addition, the purity of Australian black coal is particularly high, enabling some industry firms to charge a premium over global prices for black coal.

In 2017-18, industry revenue is expected to fall from the recent high due to the effects of Cyclone Debbie. This cyclone damaged coal production and export facilities in Queensland in March 2017. Several mines were unable to transport their output due to the temporary closure of Goonyella rail line, which was damaged by floods. In addition, Chinese demand for imported coal is expected to fall slightly in the current year due to the reactivation of some Chinese coal mines. As a result, industry revenue is expected to fall by 4.1% in 2017-18.

China’s coking coal imports fell by 19% year on year in January 2018 on reduced restocking demand, as steel mills were reportedly well stocked in preparation for increased activity after the Chinese New Year holiday period. The theme of restocking will continue into March as mills assess their stocks ahead of authorities lifting China’s restrictions to industrial activity. Reports suggest that mills have remained on the sidelines over the last few weeks, hoping for coking coal prices to fall further before restocking.

With restrictions to China’s steel output about to be lifted, steel mill margins will once again come into focus. Elevated steel margins encourage steel mills to boost output, increasing demand for iron ore and coking coal. And while China’s plan is to close another 30Mt of steel capacity, that would still leave ~200Mt of official spare capacity in China. Unofficially that number could be higher. More importantly, the spare capacity gives enough headroom for Chinese steel production to rise higher. Slowing steel demand growth in China should curb any strong steel supply growth, but elevated margins remain a key upside risk to our steel production outlook.

China’s domestic coking coal supply remains the other major driver of coking coal prices. Improving rail transport infrastructure should help support China’s coal production, which has been constrained by safety checks, and more recently, cold weather. Our confidence that China’s domestic production will recover reflects the domestic coking coal contract signed by Shanxi Coking Coal Limited at RMB 1300/t (Free On Rail) (or ~US$160/t (FOB Australia) for 2018. With spot prices at ~US$235/t (FOB Australia), Chinese steel mills will look to cheaper domestic coal. The agreement effectively sets a floor price on seaborne coking coal prices this year.

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Coking Coal Historical Price

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$350
$300
$250
$200
$150
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$0
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8.3 Outlook

Operators in the black coal mining industry are expected to face difficult operating conditions over the next five years. Fluctuations in the world prices of coking and steaming coal will have a strong effect on industry revenue over the period. Other trends, such as the value of the Australian dollar and concerns over environmental issues, are also likely to affect demand for steaming and coking coal. Industry revenue is forecast to decline at an annualised 3.6% over the five years through 2022-23, to $50.4 billion.

The industry is projected to focus on increasing production from existing assets over the next five years, as participants attempt to raise efficiency and productivity. Although the global prices of thermal and metallurgical coal increased significantly in 2016-17, these prices are expected to gradually fall over the next five years. Export revenue is expected to decline over the next five years, although the total volume of black coal production is anticipated to increase. Industry profitability is anticipated to fall over the next five years, albeit from a high base. This fall will likely be driven by softer coal prices and weaker domestic demand, restricting returns for black coal miners.

Source: IBIS World & BDO Analysis

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9 Valuation approach adopted

There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows:

Capitalisation of future maintainable earnings (‘ FME ’)
Discounted cash flow (‘ DCF ’)
Quoted market price basis (‘ QMP ’)
Net asset value (‘ NAV ’)
Market based assessment.

A summary of each of these methodologies is outlined in Appendix 2.

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information. In our assessment of the value of a BCB share we have chosen to employ the following methodologies:

9.1 Valuation of a BCB share prior to the Proposed Transaction

In our assessment of the value of a BCB share prior to the Proposed Transaction, we have chosen to employ the following methodologies:

NAV on a going concern basis as our primary valuation methodology; and
QMP as our secondary methodology as this represents the value that a Shareholder can receive for a share if sold on market.

We have also considered the capital raising price achieved in the most recent capital raising being that associated with reinstatement to the ASX in October 2017.

We have chosen these methodologies for the following reasons:

BCB’s primary asset class, its exploration assets, do not currently generate any income nor are there any historical profits that could be used to represent future earnings, so the FME approach is not appropriate;
BCB currently has no foreseeable future net cash inflows, so the application of the DCF valuation approach is not appropriate;
consequently, we have adopted the NAV approach as our primary valuation methodology. BCB’s primary assets, its interests in the Queensland mining tenements, are not producing assets and no revenue or cash flows are currently generated by these assets and therefore we consider that the NAV approach is best suited for the valuation; and
we have adopted QMP as our secondary approach. The QMP basis is a relevant methodology to consider because BCB’s shares are listed on the ASX. This means there is a regulated and observable market where BCB’s shares can be traded. However, in order for the QMP methodology to be considered appropriate, the Company’s shares should be liquid and the market should be fully informed of the Company’s activities.

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Independent specialist valuation

In valuing BCB’s Australian mineral assets as part of our NAV valuation, we have relied on the independent specialist valuation performed by Salva Mining Consultants (‘ Salva ’) in accordance with the Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets 2015 (‘ the Valmin Code’ ) and the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (‘ the JORC Code’ ). We are satisfied with the valuation methodologies adopted by Salva, which we believe are in accordance with industry practice and compliant with the requirements of the Valmin Code. A copy of Salva’s valuation report is attached in Appendix 3.

9.2 Valuation of BCB Shares following the Proposed Transaction

In our assessment of the value of a BCB share following the Proposed Transaction, we have chosen to employ the NAV (sum-of-parts) as our primary valuation methodology, having consideration for:

the value of BCB’s interest in the Hillalong East Project (placing reliance on Salva’s independent specialist valuation opinion);
the value of the other assets and liabilities of BCB;
commitment to pay up to $50,000 for reimbursement of legal expenses; and
the effect of the share issue as part of the Proposed Transaction on the number of issued shares of BCB.

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10 Valuation of Bowen Coking Coal Limited prior to the Proposed Transaction

10.1 Net Asset Valuation of Bowen Coking Coal Limited

The value of BCB’s assets on a going concern basis is reflected in our valuation below:

Net asset valuation Notes	Reviewed as at Low Preferred High
	31-Dec-17 valuation valuation valuation
	$ $ $ $
CURRENT ASSETS
Cash and cash equivalents a	3,116,954 2,497,263 2,497,263 2,497,263
Trade and other receivables	91,669 91,669 91,669 91,669
Other assets	77,657 77,657 77,657 77,657
TOTAL CURRENT ASSETS	3,286,280 2,666,589 2,666,589 2,666,589
NON-CURRENT ASSETS
Exploration Assets b	4,317,980 4,100,000 6,100,000 7,800,000
TOTAL NON-CURRENT ASSETS	4,317,980 4,100,000 6,100,000 7,800,000
TOTAL ASSETS	7,604,260 6,766,589 8,766,589 10,466,589
CURRENT LIABILITIES
Trade and other payables	415,348 415,348 415,348 415,348
TOTAL CURRENT LIABILITIES	415,348 415,348 415,348 415,348
TOTAL LIABILITES	415,348 415,348 415,348 415,348
NET ASSETS	7,188,912 6,351,241 8,351,241 10,051,241
Shares on issue (number)	469,486,810 469,486,810 469,486,810 469,486,810
Value per share ($)	$0.0135 $0.0178 $0.0214

Source: BDO analysis

We have been advised that there has not been a significant change in the net assets of BCB since 31 December 2017 other than as set out in the following paragraphs. The table above indicates the net asset value of a BCB share is between $0.0135 and $0.0214.

The following adjustments were made to the net assets of BCB as at 31 December 2017 in arriving at our valuation.

Note a: Cash and cash equivalents

We have adjusted the cash and cash equivalents balance to the 28 February 2018 balance per the management accounts of BCB. We have agreed the balance for cash and cash equivalents to the relevant underlying documentation for BCB including bank reconciliations.

The major cash impacts since 31 December 2017 are as follows:

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BCB
Pre Transaction Cash Balance					$
Cash and cash equivalents balance as at 31			December 2017		3,116,954
Net cash movement in two months to 28	February			2018	(619,691)
Cash and cash equivalents balance as at		28 February 2018			2,497,263

Cash and cash equivalents at 28 February 2018, was $2,497,263 compared to $3,116,954 at 31 December 2017. The decrease of $619,691 was primarily the result of expenditure on exploration assets of $452,049 including the acquisition of Isaac River, and administration and employee benefits expenses of $175,427, and non-material movements on receivable and payable balances.

Note b: Exploration and evaluation expenditure

Valuation of BCB’s Mineral Assets

We instructed Salva to provide an independent market valuation of the exploration assets held by BCB. Salva considered a number of different valuation methodologies when valuing the exploration assets of BCB.

Salva adopted the following methodology:

Comparable market transactions method; and
Geo-Scientific method.

We consider these methods to be appropriate for BCB’s exploration assets, given the early stage of development for the existing Australian mineral assets.

Full details of Salva’s valuation are provided in Appendix 3 to our Report.

The range of values for 100% of each of BCB’s exploration assets as assessed by Salva is set out below:

Project		Valuation ($M)
	Lower	Preferred	Higher
Cooroorah	2.3	3.4	4.5
Comet Ridge	0.9	1.3	1.6
Lilyvale	0.0	0.1	0.1
Hillalong	0.6	0.9	1.1
Mackenzie	0.1	0.1	0.1
Isaac River	0.2	0.3	0.4
Total	4.1	6.1	7.8

Source: Salva Mining Consultants

The table above indicates a range of values between $4.1 million and $7.8 million, with a preferred value of $6.1 million.

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Consideration of dilution from exercise of options and performance rights

We have also addressed the impact on the valuation by considering the possible exercise of all options (and performance shares) currently on issue.

We note that the exercise price of the listed options is above the top of our range for the value of a BCB share and therefore we have not calculated a diluted price based on their exercise. Similarly, the performance rights only convert upon the achievement of JORC related milestones which would have the effect of increasing the value of BCB as a whole, so we have not calculated a hypothetical diluted price.

However, the unlisted options with an exercise price of $0.02 are within the range of our assessed value so we have addressed the dilution effect of those options being exercised as set out in the table below based on 30 million additional shares and $600,000 of additional cash from exercise.

BCC	Low Preferred High
Dilutedposition	$ $ $
Adjusted net assets	6,951,241 8,351,241 10,051,241
Adjusted shares on issue (number)	499,486,810 499,486,810 499,486,810
Value per share ($)	$0.0139 $0.0167 $0.0201

10.2 Quoted Market Prices for BCB Securities

To provide a comparison to the valuation of BCB in Section 10.1, we have also assessed the quoted market price for a BCB share.

The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

RG 111.11 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

control over decision making and strategic direction;
access to underlying cash flows;
control over dividend policies; and
access to potential tax losses.

Whilst Cape Coal will not be obtaining 100% of BCB, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. The expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness has been considered in Section 13.

Therefore, our calculation of the quoted market price of a BCB share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest

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basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control.

Minority interest value

Our analysis of the quoted market price of a BCB share is based on the pricing prior to the announcement of the Proposed Transaction. This is because the value of a BCB share after the announcement may include the effects of any change in value as a result of the Proposed Transaction. However, we have considered the value of a BCB share following the announcement when we have considered reasonableness in Section 13.

Information on the Proposed Transaction was announced to the market on 15 February 2018. Therefore, the following chart provides a summary of the share price movement from the date of the Company’s readmittance to the ASX on 11 October 2017 to 14 February 2018 which was the last trading day prior to the announcement of the Proposed Transaction.

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----- Start of picture text -----

BCB share price and trading volume history
0.030 70.0
Volume Closing share price
60.0
0.025
50.0
0.020
40.0
0.015
30.0
0.010
20.0
0.005
10.0
0.000 -
Share Price ($) Volume (millions)
----- End of picture text -----

Source: Bloomberg

The daily price of BCB shares from 11 October 2017 to 14 February 2018 has ranged from a low of $0.015 in February 2018 to a high of $0.026 in October 2017.

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During this period a number of announcements were made to the market. The key announcements are set out below:

		Closing Share Price	Closing Share Price	Closing Share Price Three	Closing Share Price Three
	Announcement	Following Announcement		Days After Announcement
Date

		$ (movement)		$ (movement)
11/01/2018	Quarterly Activities Report	0.022	4.8%	0.020	9.1%
21/12/2017	More Significant Coal Intercepts at Cooroorah	0.018	5.9%	0.018	0.0%
14/12/2017	Cooroorah Drilling Update	0.019	11.8%	0.017	10.5%
04/12/2017	BCB Acquires Isaac River Coking Coal Project	0.019	9.5%	0.019	0.0%
30/11/2017	Results of Meeting	0.022	4.8%	0.019	13.6%
27/11/2017	Drilling Commences at Cooroorah	0.019	5.6%	0.022	15.8%
14/11/2017	Cooroorah Exploration Update	0.019	13.6%	0.020	5.3%
27/10/2017	Quarterly Activities and Cashflow Report	0.020	9%	0.020	0%

Source: Bloomberg, BDO analysis

On 11 January 2018, the Company released its Quarterly Activities Report for the quarter ended 31 December 2017. On the date of the announcement, BCB’s share price increased by 4.8% to $0.022. However, over the subsequent three trading days the share price decreased by 9.1% to $0.020.

On 21 December 2017, the Company announced that the second drill hole at Cooroorah had been successfully completed. On the date of the announcement, BCB’s share price increased by 5.9% to $0.018. Over the subsequent three trading days the share price remained unchanged.

On 14 December 2017, the Company announced that the first drill hole at Cooroorah had been successfully completed. On the date of the announcement, BCB’s share price increased by 11.8% to $0.019. However, over the subsequent three days the share price decreased by 10.5% to $0.017.

On 4 December 2017, the Company announced that they had entered into an asset sale agreement with Aquila Coal Pty Ltd and Eagle Downs Pty Ltd to acquire 100% of Isaac River. On the date of the announcement, BCB’s share price decreased by 9.5% to $0.019. Over the subsequent three trading days the share price remained unchanged.

On 30 November 2017, the Company released the results of the Annual General meeting, containing four resolutions that had been passed by shareholders. On the date of the announcement, BCB’s share price increased by 4.8% to $0.022. However, over the subsequent three trading days the share price decreased by 13.6% to $0.019.

On 27 November 2017, the Company announced that drilling had commenced at Cooroorah. On the date of the announcement, BCB’s share price increased by 5.6% to $0.019. Over the subsequent three trading days, the share price increased by a further 15.8% to $0.022.

On 14 November 2017, the Company announced that it had commenced the Cooroorah exploration program. On the date of the announcement, BCB’s share price decreased by 13.6% to $0.019. However, over the subsequent three trading days the share price increased by 5.3% to $0.020.

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On 27 October 2017, the Company released its Quarterly Activities Report for the quarter ended 30 September 2017. On the date of the announcement, BCB’s share price decreased by 9% to $0.020. Over the subsequent three trading days the share price remained unchanged.

To provide further analysis of the market prices for a BCB share, we have also considered the weighted average market price for 10, 30, 60 and 90 day periods to 14 February 2018.

Share Price per unit	14-Feb-18	10 Days	30 Days	60 Days	90 Days
Closing price	$0.017
Volume weighted average price (VWAP)		$0.016	$0.018	$0.019	$0.021

Source: Bloomberg, BDO analysis

The above weighted average prices are prior to the date of the announcement of the Proposed Transaction, to avoid the influence of any increase in price of BCB shares that has occurred since the Proposed Transaction was announced.

An analysis of the volume of trading in BCB shares for the four months to 14 February 2018 is set out below:

Trading days	Share price	Share price	Cumulative volume	As a % of
	low	high	traded	Issued capital
1 Day	$0.017	$0.017	-	0.00%
10 Days	$0.012	$0.018	17,400,665	3.71%
30 Days	$0.012	$0.022	51,405,082	10.95%
60 Days	$0.012	$0.024	129,085,372	27.49%
90 Days	$0.012	$0.029	317,554,523	67.64%

Source: Bloomberg, BDO analysis

This table indicates that BCB’s shares display a high level of liquidity, with 67.64% of the Company’s current issued capital being traded in a four month period. RG 111.69 states that for the quoted market price methodology to be an appropriate methodology there needs to be a ‘liquid and active’ market in the shares and allowing for the fact that the quoted price may not reflect their value should 100% of the securities not be available for sale. We consider the following characteristics to be representative of a liquid and active market:

Regular trading in a company’s securities;
Approximately 1% of a company’s securities are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
There are no significant but unexplained movements in share price.

A company’s shares should meet all of the above criteria to be considered ‘liquid and active’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

In the case of BCB, we consider there to be a liquid and active market for the Company’s shares as a result of 67.64% of the Company’s current issued capital being traded over a four-month period prior to the announcement of the Proposed Transaction. Furthermore we do not consider there to have been any significant unexplained price movements in trade volume during the period.

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Our assessment is that a range of values for BCB shares based on market pricing, after disregarding post announcement pricing, is between $0.016 and $0.019.

Control Premium

We have reviewed the control premiums paid by acquirers of energy companies (including coal companies) listed on the ASX. We have summarised our findings below:

Year	Number of Transactions	Average Deal Value (AU$m)	Average Control Premium (%)
2018	0	n/a	n/a
2017	3	53.33	99.28
2016	3	115.35	59.85
2015	8	331.65	23.90
2013	12	34.28	35.38
2012	9	495.24	27.56
2011	12	852.52	36.75
2010	7	913.91	56.70
	Mean	445.57	44.80
	Median	69.07	39.11

Source: Bloomberg

In arriving at an appropriate control premium to apply we note that observed control premiums can vary due to the:

Nature and magnitude of non-operating assets;
Nature and magnitude of discretionary expenses;
Perceived quality of existing management;
Nature and magnitude of business opportunities not currently being exploited;
Ability to integrate the acquiree into the acquirer’s business;
Level of pre-announcement speculation of the transaction;
Level of liquidity in the trade of the acquiree’s securities.

When performing our control premium analysis, we considered completed transactions where the acquirer held a controlling interest pre transaction or proceeded to hold a controlling interest post transaction in the target company.

The table above indicates that the long term average of completed control premiums paid by acquirers of energy companies on the ASX is approximately 45%. However, in assessing the sample of transactions included in the table, we noted transactions that appear to be extreme outliers. These outliers included 9 transactions in which the announced premium was in excess of 70%. In a sample where there are extreme outliers, the median often represents a superior measure of central tendency compared to the mean. We note that the median completed control premium over the review period was approximately 39%.

In determining the control premium most appropriate for BCB, we considered a number of factors. The main one being that all of BCB’s projects consist of exploration assets and that the Company has only

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recently been established through the acquisition of CCO in 2017. In addition BCB’s projects are relatively small and at a relatively early stage of development.

Based on the above analysis, we consider an appropriate premium for control is between 25% and 35%, with a midpoint of 30%.

Quoted market price including control premium

Applying a control premium to BCB’s quoted market share price results in the following quoted market price value including a premium for control:

	Low	Midpoint	High
	$	$	$
Quoted market price value	0.016	0.0175	0.019
Control premium	25%	30%	35%
Quoted market price valuation including a premium for control	$0.020	$0.023	$0.026

Source: BDO analysis

Therefore, our valuation of a BCB share based on the quoted market price method and including a premium for control is between $0.020 and $0.026, with a midpoint value of $0.023.

10.3 Assessment of BCB Value

The results of the valuations performed are summarised in the table below:

BCB	Low	Midpoint	High
Valuation Summary	$	$	$
NAV of BCB	0.0135	0.0178	0.0214
QMP methodology	0.0200	0.0230	0.0260

Source: BDO analysis

We note whilst there is a significant overlap, the value obtained under the QMP methodology is higher than the value obtained from the NAV methodology. The difference in values may be explained by the following:

our NAV valuation includes an independent valuation of BCB’s mineral assets performed by Salva. Salva have adopted a combination of valuation methodologies and depending on the assumptions used, investors may yield a higher value than that derived from Salva’s assessment;
exploration companies may trade at a premium to their intrinsic value because typically investors in mining exploration companies anticipate some potential upside of ‘blue sky’ prospects for the company, which are factored into the share price in advance of any such value being realised; and
the QMP value reflects investors’ perception of the future prospects of BCB’s mineral assets, and as such, may reflect a more positive sentiment towards future commodity prices.

Ultimately, the value of a share in a company is equal to the price at which a knowledgeable and willing, but not anxious, buyer, transacts with a knowledgeable and willing, but not anxious seller, acting at arm’s length. In the case of a listed company, this price is reflected in the company’s share price or QMP. However, in order for the QMP methodology to be considered appropriate for the purposes of a valuation,

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the market for the company’s shares should be liquid, active and fully informed on the company’s activities. On the basis of the level of trading in BCB’s shares over the months since readmission to the ASX, the shares are liquid which suggests that the QMP methodology may be appropriate for the purposes of the valuation.

We note that the QMP methodology broadly supports the valuation range derived from the NAV methodology.

Based on our discussion above, we consider the value of a BCB share prior to the Proposed Transaction is in the range from $0.0135 to $0.0214 with a preferred value of $0.0178.

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11 Valuation of Bowen Coking Coal Limited following the Proposed Transaction

11.1 Net Asset Valuation of BCB

As discussed in section 9, we have relied on the NAV methodology in determining the value of a BCB share following approval of the Proposed Transaction.

Our valuation of BCB following the Proposed Transaction is summarised below.

Statement of Financial Position		Reviewed as at	Low	Preferred	High
	Notes	31-Dec-17	valuation	valuation	valuation
		$	$	$	$
CURRENT ASSETS
Cash and cash equivalents	a	3,116,954	2,447,263	2,447,263	2,447,263
Trade and other receivables		91,669	91,669	91,669	91,669
Other assets		77,657	77,657	77,657	77,657
TOTAL CURRENT ASSETS		3,286,280	2,616,589	2,616,589	2,616,589
NON-CURRENT ASSETS
Exploration assets	b	4,317,980	4,800,000	7,100,000	9,100,000
TOTAL NON-CURRENT ASSETS		4,317,980	4,800,000	7,100,000	9,100,000
TOTAL ASSETS		7,604,260	7,416,589	9,716,589	11,716,589
CURRENT LIABILITIES
Trade and other payables		415,348	415,348	415,348	415,348
TOTAL CURRENT LIABILITIES		415,348	415,348	415,348	415,348
TOTAL LIABILITES		415,348	415,348	415,348	415,348
NET ASSETS		7,188,912	7,001,241	9,301,241	11,301,241
Shares on issue (number)	c	469,486,810	499,486,810	499,486,810	499,486,810
Value per share ($) - controlling basis			$0.0140	$0.0186	$0.0226
Minority Discount			26%	23%	20%
Value per share ($) - minority basis			$0.0104	$0.0143	$0.0181

Source : BDO analysis

The table above indicates the net asset value of a BCB share following the Proposed Transaction on a minority basis is between $0.0104 and $0 0181 with a preferred value of $0.0143. The following adjustments were made to the net assets of BCB as at 31 December 2017 in arriving at our valuation of the Company following the Proposed Transaction.

Note a: Cash and cash equivalents and loan liability

Cash and cash equivalents following the Proposed Transaction are shown in the table below:

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BCB
Post Proposed Transaction Cash Balance	$'000s
Cash and cash equivalents balance as at 31 December 2017	3,116,954
Adjustments (operational expenditure for the two months to 28 February 2018)	(619,691)
Cash and cash equivalents balance as at 28 February 2018	2,497,263
Cash reimbursement of legal expenses (maximum)	(50,000)
Notional cash and cash equivalents balance after adjustment	2,447,263

Cash and cash equivalents at 28 February 2018, was $2,497,263 compared to $3,116,954 at 31 December 2017. The decrease was primarily the result of expenditure on exploration assets and administration and employee benefits expenses.

Further the Proposed Transaction includes the reimbursement of legal expenses up to a maximum amount of $50,000. We have included the maximum cash reimbursement adjustment.

Note b: Exploration and evaluation expenditure

Valuation of the Australian Mineral Assets

As stated in section 10.1 of our Report, we instructed Salva to provide an independent market valuation of the Australian mineral assets including the Hillalong East Project. The market valuation

The range of values for 100% of each of BCB’s exploration assets as assessed by Salva is set out below:

BCB	Low value Preferred value High value
Mineral Asset Valuation	$ million $ million $ million
Cooroorah Comet Ridge Lilyvale Hillalong Mackenzie Isaac River	2.3 3.4 4.5 0.9 1.3 1.6 0.0 0.1 0.1 0.6 0.9 1.1 0.1 0.1 0.1 0.2 0.3 0.4
Value of existing Projects	4.1 6.1 7.8
Hillalong East Project	0.7 1.0 1.3
Value of existing Projects and Hillalong East	4.8 7.1 9.1

Source : Salva

The table above indicates a range of values between $4.8 million and $9.1 million, with a preferred value of $7.1 million.

Note c: Number of shares on issue

In determining a valuation per share for BCB following the Proposed Transaction, we adjusted the number of shares on issue to reflect the shares to be issued to Cape Coal as part of the Proposed Transaction. The

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number of fully paid ordinary BCB shares that will be on issue following the Proposed Transaction will be 499,486,810.

BCB
Post Proposed Transaction Shareholding
Number of shares as at date of our Report	469,486,810
Shares issued in the Proposed Transaction	30,000,000
Total number of BCB shares following the Proposed Transaction	499,486,810

Source: BDO analysis

Consideration of dilution from exercise of options and performance rights

As for the value of a BCB prior to the Proposed Transaction, we have also addressed the impact on the valuation by considering the possible exercise of all options (and performance shares) currently on issue.

We note that the exercise price of the listed options and the unlisted options is above the top of our range for the value of a BCB share and therefore we have not calculated a diluted price. Similarly, the performance rights only convert achievement of JORC related milestones which would have the effect of increasing the value of BCB as a whole, so we have not calculated a hypothetical diluted price.

Note d: Minority Discount

As outlined in section 9 of our Report, in assessing fairness we have compared the value of a BCB share prior to the Proposed Transaction on a control basis to the value of a BCB share following the Proposed Transaction on a minority interest basis.

A minority interest discount is the inverse of a premium for control and is calculated using the formula 1- (1÷ (1 + control premium)). As discussed in section 10.2, we consider an appropriate control premium for BCB to be in the range of 25% to 35%, giving a minority interest discount in the range of 20% to 26%.

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12 Is the Proposed Transaction fair?

The value of a BCB share prior to the Proposed Transaction on a control basis compares to the value of a BCB share following the Proposed Transaction on a minority interest basis, as detailed below:

		Low	Preferred	High
	Ref
		$	$	$
Value of a BCB share prior to Proposed Transaction on a control basis	10	$0.0135	$0.0178	$0.0214
Value of a BCB share following Proposed Transaction on a minority basis	11	$0.0104	$0.0143	$0.0181

We note from the table above that overall the value prior to the Proposed Transaction on a control basis is higher than the value following the Proposed Transaction on a minority basis. Therefore, we consider that the Proposed Transaction is not fair.

The above value ranges are graphically presented below:

	Valuation Summary
Value of BCB share prior to the
Proposed Transaction on a
control basis
Value of BCB share following the
Proposed Transaction on a
minority basis
0.010	0.015	0.020	0.025
		Value ($)

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13 Is the Proposed Transaction reasonable?

13.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the Shareholders of BCB a premium over the value ascribed to, or resulting from, the Proposed Transaction.

13.2 Practical Level of Control

If the Proposed Transaction is approved, then Cape Coal and associates will hold an interest of approximately 20.29% in BCB.

When shareholders are required to approve an issue that relates to a company there are two types of approval levels. These are general resolutions and special resolutions. A general resolution requires more than 50% of shares to be voted in favour to approve a matter and a special resolution required at least 75% of shares on issue to be voted in favour to approve a matter. If the Proposed Transaction is approved, although Cape Coal will hold a greater than 20% interest in BCB it will not have sufficient interest to be able to block special resolutions.

13.3 Consequences of not Approving the Proposed Transaction

Consequences

If the Proposed Transaction is not approved, then BCB will continue to develop its existing coal projects in the Bowen Basin without the Hillalong East Project.

Impact on BCB’s share price

We have analysed movements in BCB’s share price since the Proposed Transaction was announced. A graph of BCB’s share price since the announcement is set out below.

BCB share price and trading volume history

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----- Start of picture text -----

0.025 16.0
Announcement date
14.0
0.020
12.0
0.015 10.0
8.0
0.010 6.0
4.0
0.005
2.0
0.000 -
Volume Closing share price
Share Price ($)
Volume (millions)
----- End of picture text -----

Source: Bloomberg

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Based on the above analysis, it appears that the market is neutral to the Proposed Transaction. Therefore, we do not consider it likely that the approval or rejection of the Proposed Transaction would have a material impact on the Company’s share price.

13.4 Advantages of Approving the Proposed Transaction

We have considered the following advantages when assessing whether the Proposed Transaction is reasonable.

Advantage	Description
Acquisition of Hillalong East Project is	The acquisition of the Hillalong East Project complements the
complementary to BCB’s existing Bowen Basin	Company’s existing project portfolio and provides the Company
coal projects	with an opportunity to increase its holdings in Queensland coking
	coal. In pursuing the acquisition of the Hillalong East Project, the
	Company can pursue the opportunity to create growth in the value
	of the Company’s shares.
Operational synergies from proximity of	The acquisition of the Hillalong East Project (EPC 2141 and EPC
Hillalong East Project to BCB’s existing	1860) may create operational synergies through the proximity to
Hillalong Project	BCB’s existing Hillalong tenement. In addition, the proximity to
	Rio Tinto’s existing Hail Creek Mining Lease which hosts rail
	infrastructure, may reduce the complexity of negotiating for
	access to infrastructure.
Longer term benefits to shareholders from Rio	Potential for longer term benefits if Rio Tinto exercises its right to
Tinto participation	re—participate in the Hillalong East Project as a joint venture
	partner. Rio Tinto’s status as a major resource company means
	that it has the ability to choose the most promising projects to
	pursue implying that the Hillalong East Project would then be a
	good prospect.

13.5 Disadvantages of Approving the Proposed Transaction

If the Proposed Transaction is approved, in our opinion, the potential disadvantages to Shareholders include those listed in the table below:

Disadvantage	Description
Dilution of interests	Dilution of existing shareholders’ interests from shares issued to Cape Coal as part
	of the Proposed Transaction.
Royalty to be paid to Rio	Our fairness assessment has not included a valuation of the impact of the royalty
Tinto	payable to Rio Tinto. The value ascribed to the Hillalong East Project by Salva takes
	no account of a future royalty to Rio Tinto. However if the royalty becomes payable
	in the future then it would only be on the basis of the Hillalong East Project

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Disadvantage	Description
	developing to the stage of being a producing mine. The increase in the value of the
	Company as a result of this would be to the benefit of Shareholders.
Future dilution to Rio Tinto	Rio Tinto has the option to become a 51% participant in a future joint venture,
	diluting existing shareholder interests. However such participation by Rio Tinto
	would indicate successful development of the Hillalong East Project to reach that
	stage

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14 Conclusion

However, we consider the Proposed Transaction to be reasonable because the advantages of the Proposed Transaction to Shareholders are greater than the disadvantages. In particular:

The acquisition of the Hillalong East Project is complementary to BCB’s existing Queensland coal projects in the Bowen Basin;
Operational synergies from proximity of Hillalong East Project and the existing Hillalong Project; and
Possibility of future involvement of Rio Tinto in realising the full value of its projects.

15 Sources of information

This report has been based on the following information:

Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
Audited financial statements of BCB for the year ended 30 June 2017;
Reviewed half year accounts of BCB for the period ended 31 December 2017;
Management accounts of BCB to 28 February 2018;
Independent Valuation Report on BCB’s mineral assets dated 20 March 2018 performed by Salva Mining Consultants;
Sale and Purchase Agreement between Rio Tinto Exploration Pty Ltd and Cape Coal dated 21 December 2017;
Royalty Deed between Rio Tinto Exploration Pty Ltd and Cape Coal dated 21 December 2017;
Royalty Mortgage Deed between Rio Tinto Exploration Pty Ltd and Cape Coal dated 21 December 2017;
Deed of Variation to Sale and Purchase Agreement;
Deed of Assignment and Assumption;
Share registry information;
Information in the public domain:
ASX announcements;
IBISWorld Report;
Reserve Bank of Australia monthly statement;
Consensus Economics publication;

Bloomberg data.; and

Discussions with Directors and Management of BCB.

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16 Independence

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $28,000 (excluding GST and reimbursement of out of pocket expenses). Our fee is not contingent on the conclusion, content or future use of this Report. Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by BCB in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the BCB, including the non-provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement, BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to BCB and Cape Coal and any of their respective associates with reference to ASIC Regulatory Guide 112 ‘Independence of Experts’. In BDO Corporate Finance (WA) Pty Ltd’s opinion it is independent of BCB and Cape Coal and their respective associates.

Within the past two years, neither the two signatories to this report nor BDO Corporate Finance (WA) Pty Ltd have had any professional relationship with BCB or its associates, other than in connection with the preparation of this report.

A draft of this report was provided to BCB` and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).

17 Qualifications

BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Fellow of Chartered Accountants Australia & New Zealand. He has over 30 years’ experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 300 public company independent expert’s reports under the Corporations Act or ASX Listing Rules and is a CA BV Specialist. These experts’ reports cover a wide range of industries in Australia with a focus on companies in the natural resources sector. Sherif Andrawes is the Chairman of BDO in

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Western Australia, Corporate Finance Practice Group Leader of BDO in Western Australia and the Natural Resources Leader for BDO in Australia.

Adam Myers is a member of the Chartered Accountants Australia & New Zealand. Adam’s career spans 20 years in the Audit and Assurance and Corporate Finance areas. Adam is a CA BV Specialist and has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors.

18 Disclaimers and consents

This report has been prepared at the request of Bowen Coking Coal Limited for inclusion in the Explanatory Memorandum and Notice of Meeting which will be sent to all BCB Shareholders. BCB engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the Proposed Transaction to acquire the Hillalong East Project from Cape Coal. You will be provided with a copy of our report as a retail client because you are a shareholder of BCB.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the Explanatory Memorandum and Notice of Meeting. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Explanatory Memorandum and Notice of Meeting other than this report.

We have no reason to believe that any of the information or explanations supplied to us are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence in relation to Cape Coal. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time.

With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Proposed Transaction, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of BCB, or any other party.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations of mineral assets held by BCB.

The valuer engaged for the mineral asset valuation, Salva Mining Consultants, possess the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and assumptions made in arriving at their valuation is appropriate for this report. We have received consent from the valuer for the use of their valuation report in the preparation of this report and to append a copy of their report to this report.

The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

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The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd is required to provide a supplementary report if we become aware of a significant change affecting the information in this report arising between the date of this report and prior to the date of the meeting or during the offer period.

Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD

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Sherif Andrawes

Director

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Adam Myers Director

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A endix 1 – Glossar of Terms pp y

Reference	Definition
APES 225	Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
BCB	Bowen Coking Coal Limited
BDO	BDO Corporate Finance (WA) Pty Ltd
Cape Coal	Cape Coal Pty Ltd
CBS	Cabral Resources Limited
CCO	Coking Coal One Pty Ltd (formerly known as Bowen Coking Coal Pty Ltd)
Comet Ridge	Comet Ridge Coking Coal Project
Cooroorah	Cooroorah Coking Coal Project
The Company	Bowen Coking Coal Limited
Corporations Act	The Corporations Act 2001 Cth
DCF	Discounted Future Cash Flows
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
FME	Future Maintainable Earnings
FOS	Financial Ombudsman Service
Hillalong	Hillalong Coking Coal Project
Hillalong East Project	Hillalong East Coking Coal Project
Isaac River	Isaac River Coking Coal Project
JORC Code	The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition)
Lilyvale	Lilyvale Joint Venture
Listing Rule	ASX Listing Rule
Mackenzie	Mackenzie Joint Venture
NAV	Net Asset Value
Proposed Transaction	BCB’s proposed acquisition of the Hillalong East Project from Cape Coal
QMP	Quoted market price
RBA	Reserve Bank of Australia
Regulations	Corporations Act Regulations 2001 (Cth)
Our Report	This Independent Expert’s Report prepared by BDO
RG 74	Acquisitions approved by Members (December 2011)

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Reference	Definition
RG 111	Content of expert reports (March 2011)
RG 112	Independence of experts (March 2011)
RTX	Rio Tinto Exploration Pty Ltd
Salva	Salva Mining Consultants
Section 611	Section 611 of the Corporations Act
Shareholders	Shareholders of BCB not associated with Cape Coal
Sum-of-Parts	A combination of different methodologies used together to determine an overall value where separate assets and liabilities are valued using different methodologies
Valmin Code	Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (2015 Edition)
	An Engagement or Assignment to perform a Valuation and provide a Valuation Report
	where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and
Valuation Engagement	Valuation Procedures that a reasonable and informed third party would perform
	taking into consideration all the specific facts and circumstances of the Engagement
	or Assignment available to the Valuer at that time.
VWAP	Volume Weighted Average Price
WACC	Weighted Average Cost of Capital

Copyright © 2018 BDO Corporate Finance (WA) Pty Ltd

All rights reserved. No part of this publication may be reproduced, published, distributed, displayed, copied or stored for public or private use in any information retrieval system, or transmitted in any form by any mechanical, photographic or electronic process, including electronically or digitally on the Internet or World Wide Web, or over any network, or local area network, without written permission of the author. No part of this publication may be modified, changed or exploited in any way used for derivative work or offered for sale without the express written permission of the author.

For permission requests, write to BDO Corporate Finance (WA) Pty Ltd, at the address below:

The Directors

BDO Corporate Finance (WA) Pty Ltd

38 Station Street SUBIACO, WA 6008 Australia

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A endix 2 – Valuation Methodolo ies pp g

Methodologies commonly used for valuing assets and businesses are as follows:

1 Net asset value (‘NAV’)

Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when an entity is not making an adequate return on its assets, a significant proportion of the entity’s assets are liquid or for asset holding companies.

2 Quoted Market Price Basis (‘QMP’) A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a liquid and active market in that security.

3 Capitalisation of future maintainable earnings (‘FME’) This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

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The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (‘ EBIT ’) or earnings before interest, tax, depreciation and amortisation (‘ EBITDA ’). The capitalisation rate or ‘earnings multiple’ is adjusted to reflect which base is being used for FME.

4 Discounted future cash flows (‘DCF’)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start-up phase, or experience irregular cash flows.

5 Market Based Assessment

The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation.

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Appendix 3 – Independent Technical Ex ert Re ort - Salva Minin Consultants p p g

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Independent Mineral Asset Valuation Report

Cape Coal’s Hillalong East Project and Bowen Coking Coal Ltd Assets

BDO Corporate Finance (WA) Pty Ltd.

March 2018

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BDO Corporate Finance (WA) Pty Limited

Independent Mineral Asset Valuation Report for Cape Coal’s Hillalong East Project and Bowen Coking Coal Ltd. Assets

Salva Mining Pty Ltd (Salva Mining)

300 Adelaide Street, Brisbane, QLD 4000, Australia Website: www.salvamining.com.au Phone: +61 (0) 7 3349 7484

20 March 2018

Corresponding Author

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Manish Garg, Director - Advisory BEng (Minerals Engg), Master of Applied Finance MAusIMM, GAICD Salva Mining Pty Ltd.

Other Contributing Authors

Sonik Suri, Principal Consultant - Geology Sachin Sudhanshu, Senior Consultant - Evaluation

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Executive	Executive	Summary ............................................................................................... 9
1	Introduction ................................................................................................. 13
	1.1	Compliance with JORC and VALMIN Code .................................................... 13
	1.2	Competent Person ......................................................................................... 13
	1.3	Data Sources ................................................................................................. 14
	1.4	Site Visit ........................................................................................................ 14
	1.5	Tenement Status Verification ......................................................................... 14
	1.6	Independence ................................................................................................ 14
	1.7	Disclaimer and Warranty ................................................................................ 15
2	Projects ....................................................................................................... 16
	2.1	Bowen Coking Coal Projects .......................................................................... 16
	2.2	Cape Coal Project .......................................................................................... 17
3	Cooroorah – MDL 453 ................................................................................. 18
	3.1	Geological Setting .......................................................................................... 18
	3.2	Geological Structure ...................................................................................... 18
	3.3	Stratigraphy ................................................................................................... 19
	3.4	Historic Exploration ........................................................................................ 19
	3.5	Recent Exploration......................................................................................... 20
	3.6	Coal Quality ................................................................................................... 20
	3.7	Coal Resource ............................................................................................... 21
4	Comet Ridge – EPC 1230 ............................................................................ 22
	4.1	Geological Setting .......................................................................................... 22
	4.2	Stratigraphy ................................................................................................... 23
		4.2.1 Coal Seam Targets .............................................................................. 23
	4.3	Recent Exploration......................................................................................... 24
	4.4	Coal Quality ................................................................................................... 25
	4.5	Coal Resource ............................................................................................... 26
	4.6	Mining Lease Application ............................................................................... 26
5	Lilyvale (EPC 2157 & EPC 1687) ................................................................ 28
	5.1	Location ......................................................................................................... 28

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

iii

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	5.2	Geological Setting .......................................................................................... 28
	5.3	Geological Structure ...................................................................................... 28
		5.3.1 Stratigraphy ......................................................................................... 28
	5.4	Historic Exploration ........................................................................................ 29
	5.5	Coal Quality ................................................................................................... 29
	5.6	Mineral Resource ........................................................................................... 30
6	Mt Hillalong (EPC1824) ............................................................................... 31
	6.1	Location ......................................................................................................... 31
	6.2	Geological Setting .......................................................................................... 31
	6.3	Geological Structure ...................................................................................... 31
	6.4	Stratigraphy ................................................................................................... 32
	6.5	Historic Exploration ........................................................................................ 34
	6.6	Recent Exploration......................................................................................... 35
	6.7	Drilling ........................................................................................................... 37
	6.8	Coal Quality ................................................................................................... 38
	6.9	Exploration/Resource Potential ...................................................................... 38
7	Mackenzie – EPC 2081 ................................................................................ 39
	7.1	Geological Setting .......................................................................................... 39
	7.2	Geological Structure ...................................................................................... 39
	7.3	Stratigraphy ................................................................................................... 39
	7.4	Historic Exploration ........................................................................................ 41
	7.5	Recent Exploration......................................................................................... 41
	7.6	Coal Quality ................................................................................................... 42
	7.7	Exploration Potential ...................................................................................... 43
8	Isaac River (EPC 830 & MDL 444) .............................................................. 44
	8.1	Location ......................................................................................................... 44
	8.2	Geological Setting .......................................................................................... 45
	8.3	Stratigraphy ................................................................................................... 45
	8.4	Recent Exploration......................................................................................... 45
	8.5	Seams Intercepted ......................................................................................... 47
	8.6	Coal Quality ................................................................................................... 47

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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9	Hillalong East (EPC 2141 & EPC 1860) ...................................................... 48	Hillalong East (EPC 2141 & EPC 1860) ...................................................... 48
	9.1	Location and Access ...................................................................................... 48
	9.2	Geological Setting .......................................................................................... 49
	9.3	Stratigraphy ................................................................................................... 49
	9.4	Recent Exploration......................................................................................... 50
	9.5	Seismic and Magnetics Survey ...................................................................... 51
	9.6	Seams Intercepted ......................................................................................... 51
	9.7	Coal Quality ................................................................................................... 52
10	Valuation...................................................................................................... 53
	10.1	Valuation Approaches .................................................................................... 53
	10.2	Comparative Market Transaction Method ....................................................... 54
		10.2.1 Projects considered Outliers ................................................................. 57
		10.2.2 Market Based Valuation of Cooroorah Project ...................................... 57
		10.2.3 Market Based Valuation of Comet Ridge Project .................................. 58
		10.2.4 Market Based Valuation of Lilyvale Project ........................................... 59
	10.3	Market Based Valuation of Projects with No Coal Resource ........................... 59
	10.4	Valuation based on Geo-Scientific Rating Method .......................................... 62
	10.5	Valuation Summary - BCB Projects ................................................................ 64
	10.6	Previous Valuations ....................................................................................... 65
11	Valuation of Cape Coal’s Hillalong East Project ....................................... 66
		11.1.1 Market Based Valuation of Hillalong East Project ................................. 66
		11.1.2 Valuation of Hillalong East Project using Geoscientific Rating Method .. 66
	11.2	Valuation Summary - Cape Coal’s Hillalong East Project ................................ 67
	11.3	Previous Valuations ....................................................................................... 67
12	Project Risks ............................................................................................... 68
	12.1	Resources & Reserve Risk ............................................................................ 68
	12.2	Commodity Price Risk .................................................................................... 68
	12.3	Coal Marketing Risk ....................................................................................... 68
	12.4	Mine Infrastructure Associated Risk ............................................................... 68
	12.5	Mining Approvals, Tenure, and Permits .......................................................... 68
	12.6	Environmental and Social Risks ..................................................................... 69

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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12.7 Geotechnical Risk .......................................................................................... 69
13 References .................................................................................................. 70
Appendix A – Qualifications ................................................................................ 71
Appendix B – Valuation Approaches and Methods ........................................... 74

List of Figures	List of Figures
Figure 2:1	Location of BCB Projects .................................................................... 16
Figure 3:1	Cooroorah Geological Map .................................................................. 18
Figure 4:1	EPC 1230 Geological Map ................................................................... 22
Figure 4:2	Comet Ridge Generalised Stratigraphy ............................................. 24
Figure 4:3	Mining Lease Application Area ............................................................. 27
Figure 5:1	EPC 1687 & 2157 Geological Map ....................................................... 28
Figure 5:2	Lilyvale Generalised Stratigraphic Column ........................................... 29
Figure 5:3	Lilyvale - JORC Resource Area ........................................................... 30
Figure 6:1	EPC1824 Geological Map .................................................................... 32
Figure 6:2	Mt Hillalong Generalised Stratigraphic Column .................................... 33
Figure 6:3	Seismic Line Locations ........................................................................ 34
Figure 6:4	Seismic Line BE08-01A (Yellow - Elphinstone Reflector) ..................... 35
Figure 6:5	Seismic Line BE08-03A (Yellow - Elphinstone Reflector) .................. 35
Figure 6:6	Seismic and Drilling Activities on EPC 2141 & EPC 1824 .................... 36
Figure 6:7	Seismic Profiles Lines 1 & 2 ................................................................. 37
Figure 7:1	Mackenzie Geological Map .................................................................. 39
Figure 7:2	Mackenzie Generalised Stratigraphy ................................................... 41
Figure 7:3	Location of Mackenzie River Drilling .................................................... 42
Figure 7:4	EPC 2081 Deposit Zones..................................................................... 43
Figure 8:1	Location of Isaac River Project............................................................. 44
Figure 8:2	Drill Hole Location Plan, Isaac River .................................................... 46
Figure 9:1	Location and Access, Hillalong East .................................................... 48
Figure 9:2	Geological Settings, Hillalong East Project .......................................... 49
Figure 9:3	Location of Drill holes on Hillalong East Project ................................... 51

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Figure 10:1 Coking Coal Price Movement ............................................................ 55

List of Tables

Table	2:1 BCB Tenement Licence Schedule ....................................................... 17
Table	2:2 BCB Projects with JORC 2012 Resources ........................................... 17
Table	2:3 Mt Hillalong East - Tenement Status .................................................... 17
Table	3:1 Seam Raw Coal Quality Statistics ........................................................ 20
Table	3:2 Coal Resource - Cooroorah ................................................................. 21
Table	4:1 Average Raw Quality Ply Data for the Fair Hill and Triumph Seams .... 25
Table	4:2 Coal Resource - Comet Ridge ............................................................ 26
Table	5:1 Coal Resource - Lilyvale Project .......................................................... 30
Table	8:1 Location of Drill Hole, Isaac River ........................................................ 45
Table	8:2 Raw Coal Quality from 5 cored holes within Isaac River Project .......... 47
Table	9:1 Drilling on Hillalong East Project .......................................................... 50
Table	9:2 Seam Intersections, Hillalong East ....................................................... 52
Table	9:3 Coal Quality - Hillalong East ................................................................ 52
Table	10:1 Typical Valuation Methods ................................................................ 53
Table	10:2 Comparable Market Transactions ..................................................... 56
Table	10:3 Market Based Valuation - Cooroorah Project .................................... 58
Table	10:4 Market Based Valuation – Comet Ridge Project ............................... 59
Table	10:5 Market Based Valuation – Lilyvale Project ........................................ 59
Table	10:6 Market Comparable Transactions - Early Stage Exploration Projects 60
Table	10:7 Market Based Valuation - BCB Exploration Tenements (100% Basis)62
Table	10:8 Geo-Scientific Rating Criteria ............................................................ 63
Table	10:9 Valuation Geo-Scientific Method, BCB Projects - 100% Basis .......... 64
Table	10:10 Valuation – Bowen Coking Coal Projects (100% Basis) .................... 65
Table	10:11 Valuation – Bowen Coking Coal Projects (Equity Basis) ................... 65
Table	10:12 Previous Valuation of Cooroorah and Mt Hillalong Projects .............. 65
Table	11:1 Market Based Valuation of Hillalong East Project ............................. 66
Table	11:2 Valuation Geo-Scientific Method, Hillalong East Project ................... 66
Table	11:3 Valuation Summary - Hillalong East Project ...................................... 67

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Key Abbreviations

$ or AUD
AS
AusIMM
BCB
BDO
Cape Coal
h
ha
JORC
k
kg
km
km2
Kt
M
m
m3
Mt
Mineral or Coal
Resource
Mtpa
Salva Mining
t
tpa
Xenith

Australian Dollar
Australian Standards
Australasian Institute of Mining and Metallurgy
Bowen Coking Coal Ltd
BDO Corporate Finance (WA) Pty Ltd
Cape Coal Pty Ltd
Hour
Hectare(s)
2012 Edition of the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves, Australasian Institute of Mining and
Metallurgy, Australian Institute of Geoscientists, and Mineral Council of
Australia
Thousand
Kilogram
Kilometres(s)
Square kilometre(s)
Kilo tonne (one thousand tonne)
Million
Meter
cubic metre
Millions of tonnes
A ‘Mineral Resource’ is a concentration or occurrence of solid material of
economic interest in or on the Earth’s crust in such form, quality, and quantity
that there are reasonable prospects for eventual economic extraction. The
location, quantity, quality, continuity, and other geological characteristics of a
Mineral Resource are known, estimated, or interpreted from specific geological
evidence and knowledge, including sampling. Mineral Resources are sub-
divided, in order of increasing geological confidence, into Inferred, Indicated,
and Measured categories.
Millions of tonnes per annum
Salva Mining Pty Ltd.
Tonne
Tonnes per annum
Xenith Consulting Pty Ltd

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

viii

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Executive Summary

In February 2018, Bowen Coking Coal Ltd (BCB or Company) entered into Heads of Agreement with Cape Coal Pty Ltd (Cape Coal) which incorporate the following:

Acquisition of the Hillalong East Coking Coal Project (Hillalong East) – Cape Coal has agreed to assign to BCB all its rights in terms of the Sale and Purchase Agreement in exchange for the issue to Cape Coal of 30,000,000 fully paid ordinary shares in BCB (to be escrowed for 12 months) and reimbursement of direct legal expenses (to a maximum of $50,000) at completion.

Salva Mining Pty Limited (Salva Mining) was instructed by BDO Corporate Finance (WA) Pty Limited (BDO) to prepare an Independent Mineral Asset Valuation Report (MAVR or Report) for the mineral assets of the Hillalong East Project along with the BCB existing assets.

Bowen Coking Coal – Existing Projects

The MAVR includes assessment and determination of valuation of the following six projects in which BCB has interest, located within the Bowen Basin of Queensland.

Cooroorah;
Comet Ridge;
Lilyvale;
Mackenzie;
Mt Hillalong and
Isaac River.

Out of these six projects, Cooroorah, Comet Ridge and Lilyvale have been explored in detail and reported Coal Resources in accordance with the JORC Code 2012 while the other three projects are in the early stage of exploration with no delineated coal resources. Bowen Coking Coal (BCB) has a 100% interest in the Mt Hillalong, Isaac River, Comet Ridge and Cooroorah Projects while it has a 15% interest in the Lilyvale Project and 5% interest in the Mackenzie Project

Cooroorah Project

The Cooroorah Project (MDL463) is located about 15km NE of Blackwater in Central Bowen Basin between the Curragh and Jellinbah Mines (both operating). The area is structurally complex, dominated by compressional fold-and-thrust style features with the Jellinbah Fault being a major reverse fault that dips steeply to the east and is up-thrown to the east. Maximum displacement is up to 600m. coal seams present in the tenement are within the Rangal Coal Measures, Burngrove Formation, and Fair Hill Formation. The coal resources are located at more than 300 m deep making it amenable to be exploited by underground mining method. In terms of coal quality, the main targeted seam in the MDL is within Rangal Coal Measures which is predominantly known for its PCI and Semi Soft Coking coal.

A Coal Resource was reported (JORC Code 2012) in July 2013 for the Cooroorah Project. All seams within the Rangal Coal Measures, Burngrove Formation, and Fair Hill Formation were

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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modelled. The project was estimated to contain a total resource of 125Mt, comprising 70 Mt of the Indicated and 55 Mt of the Inferred Resource categories.

Comet Ridge

Comet Ridge is an open pit project targeting coal shallower than 50 m. BCB is targeting the Fair Hill Seam and the stratigraphically lower Triumph Seam to produce a coking coal with secondary thermal coal product.

Previous exploration work has resulted in a total 223 holes suitable for modelling the deposit. All holes have been geophysically corrected and the coal seams and plies correlated for the Fair Hill and Triumph seams. In 2015 a total of 5 holes were drilled consisting of non-core and partial core holes with four holes targeting the Fair Hill Seam and one targeting the Triumph Seam.

Average raw quality data for the Fair Hill Seam indicates a high ash, low moisture and high sulphur coal (1%). The Triumph Seam records overall lower density and ash as compared to the Fair Hill Seam, however the total sulphur is very high (3%).

A Coal Resource was reported (JORC Code 2012) in July 2014 for the Comet Ridge Project. Total Coal Resource of 57 Mt were estimated including 17 Mt within the Measured plus Indicated Resource categories and 40 Mt in the Inferred Resource category.

Lilyvale

The Lilyvale Project is located 25km north east of Emerald in the Bowen basin and is in close proximity to BHP Mitsubishi Alliance’s Gregory Crinum Mine and bordering Rio Tinto’s Kestrel Mine. The Lilyvale Project is 15% owned by BCB while the remaining 85% is held by Stanmore Coal.

Exploration within the tenement includes 9 holes drilled so far on it. Out of these 9 holes, 2 intersected coal seams. A Coal Resource of 33Mt in the Inferred Resource category was estimated and reported in accordance to JORC Code 2012 by Xenith in February 2014. The coal quality results for holes C2059 and C2172 showed that there were excellent yields at low ashes with moderate sulphur, very low phosphorus and high specific energy (SE). The coal is at the lower end of the rank range for coking coals but it showed reasonable CSN values and fluidity. It has the potential to be a blended coking coal.

Mackenzie

BCB has a 5% interest in the Mackenzie Project, located between the Ensham and Curragh Mines (operating) and is adjacent to the Washpool Project in the Bowen Basin of Queensland.

Stanmore Coal completed a total of 102 drill holes (8546m) in 2011. The work consisted of 47 partial core (4C size) drill holes and 55 open “chip” drill holes. The coal sequence comprises two main coal seams being the Leo and Aquarius seams within the Burngrove formation. Variability in yield occurs across the deposit and between the various seams with yields ranging from 11% to 71%. Further work is under way to address beneficiation and

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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metallurgical issues identified with the aim of improving the yield. No Coal Resources have been reported for the Mackenzie Project.

Mount Hillalong

Mount Hillalong (EPC 1824) is located in the northern Bowen Basin approximately 105 km west-southwest of Mackay. The tenement comprises 15 sub-blocks (approximately 48km2) located to the west of the Mount Hillalong Anticline and is approximately 16 km northwest of Rio Tinto’s Hail Creek Mine.

The tenement contains the Rangal Coal Measures and Fort Cooper Coal Measures at depths commencing at 150 meters below the surface. Two economic coal seams, Elphinstone and Hynds (Leichardt and Vermont equivalents) within the Rangal measures are currently being mined at mines in the vicinity. The seams sub-crop in the adjacent lease to the east and steeply dip to the west at the limb of the Hillalong anticline. Within EPC1824, the strata are interpreted to flatten out at depth. Past work has shown isolated drill hole intercepts within the tenement and geophysical surveys that defined good drilling targets as the basis for further exploration by BCB.

Valuation of BCB’s Assets

In Salva Mining’s opinion, BCB’s projects are early to advanced stage exploration projects and as such, market comparative and cost-based methods are generally used to value such type of projects. Therefore, Salva Mining has preferred to apply a combination of two methods to value the projects due to the uncertainties attached to their progress. The valuation methods applied include the Market based Comparable Transactions Method and Cost based GeoScientific Rating (Kilburn) method.

Based on Market Comparable and Geoscientific rating methods, the valuation of the Bowen Coking Coal Projects has been determined as $4.2M to $7.8M with a preferred value of $6.0M.

Valuation – Bowen Coking Coal Projects

Project		Valuation($M)
	Lower	Preferred	Higher
Cooroorah, 100%	2.3	3.4	4.5
Comet Ridge, 100%	0.9	1.3	1.6
Lilyvale, 15%	0.0	0.1	0.1
Mt Hillalong, 100%	0.6	0.9	1.1
Mackenzie, 5%	0.1	0.1	0.1
Isaac River,100%	0.2	0.3	0.4
Total - BCB	4.2	6.0	7.8

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Cape Coal’s Hillalong East Project

Hillalong East

The Hillalong East Project is located in the northern Bowen Basin, in central Queensland immediately east to the Mount Hillalong Project owned by BCB. The coal bearing formations of interest within Hillalong East are held within the Blackwater Group, an upper Permian package of generally uniform sandstones, mud and siltstones, tuffaceous lithotypes and coal seams ranging in thickness. The Blackwater Group contains the Moranbah Coal Measures (MCM), Fort Cooper Coal Measures (FCCM) and the Rangal Coal Measures (RCM). Seams of particular interest in this EPC are the Elphinstone seam, in the RCM and the Hynds seam, which straddles the RCM and FCCM and the Goonyella Middle and Lower seams of the MCM.

A number of holes have been drilled within Hillalong East. 9 holes within the bounds of the lease have had samples obtained for detailed coal laboratory testing and analysis. Coal qualities observed in areas which are not affected by intrusions demonstrate good coking coal qualities.

Valuation of Hillalong East

In Salva Mining’s opinion, Hillalong East can be categorised as an early stage exploration project. In consonance with the projects owned by Bowen Coking Coal, Salva Mining has opted to value Hillalong East by a combination of two methods, the comparable market transactions and Geoscientific rating methods.

Based on Market Comparable and Geoscientific rating methods, the valuation of 100% of the Hillalong East Project has been determined as $0.7M to $1.3M with a preferred value of $1.0M. A valuation summary for the Hillalong East Project is shown in table below.

Valuation Summary of Hillalong East Project

Method		Valuation($M)
	Lower	Preferred	Higher
Market Comparable Method	0.8	1.1	1.4
Geoscientific Ratings Method	0.7	1.0	1.3
Valuation – Hillalong East(100%)	0.7	1.0	1.3

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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1 Introduction

In February 2018, Bowen Coking Coal Ltd (BCB or Company) entered into Heads of Agreement with Cape Coal Pty Ltd (Cape Coal) which incorporate the following:

Acquisition of the Hillalong East Coking Coal Project (Hillalong East) – Cape Coal has agreed to assign to BCB all its rights in terms of the Sale and Purchase Agreement in exchange for the issue to Cape Coal of 30,000,000 fully paid ordinary shares in BCB (to be escrowed for 12 months) and reimbursement of direct legal expenses (to a maximum of $50,000) at completion. BCB will assume the rights and obligations of Cape Coal under the Sale and Purchase Agreement.

The Report is complete up to and including 20 March 2018. A draft of the technical component of the report was provided to BCB, along with a written request to identify any material errors or omissions prior to lodgement.

1.1 Compliance with JORC and VALMIN Code

This report has been prepared in accordance with the Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports 2015 Edition (“The VALMIN Code”) and the Australasian Code for Reporting of Exploration Results, Mineral Resources, and Ore Reserves 2012 Edition (The JORC Code).

The authors have taken due note of the rules and guidelines issued by such bodies as the Australian Securities and Investments Commission (ASIC) and Australian Securities Exchange (ASX), including ASIC Regulatory Guide 111 – Content of Expert Reports, and ASIC Regulatory Guide 112 – Independence of Experts, which pertain to the Independent Expert’s Report.

1.2 Competent Person

Salva Mining’s consultants involved in the preparation of this report are Independent Specialists as defined by the VALMIN Code. They are also members of either the Australasian Institute of Mining and Metallurgy (“AusIMM”) or the Australian Institute of Geoscientists (“AIG”), for whom compliance with the JORC and VALMIN Codes is mandatory. Salva Mining’s Competent Persons involved in the preparation of this report are members in good standing with one or more of these professional institutions and have the required qualifications and experience as defined in the JORC and VALMIN Codes to conduct this technical assessment and valuation.

Salva Mining is an independent advisory company. Its consultants have extensive experience in preparing competent person, mineral specialist, independent geologist and valuation reports for mineral exploration and production companies. The authors of this report are qualified to express their professional opinions on the values of the mineral assets described.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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1.3 Data Sources

Salva Mining has based its review of the projects on information made available to the principal author by BCB along with technical reports prepared by consultants, government agencies and previous tenements holders, and other relevant published and unpublished data. Salva Mining has relied upon discussions with BCB’s management as well as previously published reports for information contained within this Report.

BCB was provided a technical section of this Report and requested to identify any material errors or omissions prior to its lodgement.

1.4 Site Visit

The Valuation Specialist did not conduct a specific site visit associated with this review. However, the Valuation Specialist has undertaken extensive technical evaluation work of coal assets in Queensland, he has a good understanding of the assets and has no reasons to question the validity of the technical information supplied. Salva Mining is satisfied that BCB has provided sufficient information for Salva Mining’s informed appraisal to be made without such visits.

1.5 Tenement Status Verification

The status of the tenements has been verified based on a recent independent inquiry of the Department of Natural Resources, Mines and Energy, Queensland, Mineral Titles online database (https://minesonlinemaps.buisness.qld.gov.au) as of 3 March 2018 by Salva Mining, pursuant to section 7.2 of the VALMIN Code, 2015.

The tenements are believed to be in good standing based on this inquiry. All licenses are understood to have met or exceeded their expenditure commitments and are on track to do so again in this current year. However, it should be noted that Salva Mining makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so.

The report has been prepared on the assumption that the tenements are, or will prove to be, lawfully accessible for evaluation and that any exploration licenses applied for will ultimately be granted.

1.6 Independence

This Report was commissioned by BDO on a fee-for-service basis according to Salva Mining’s schedule of rates depending on the Consultant’s skills and experience. Salva Mining’s fee is not contingent on the outcome of its valuation or the success or failure for the transaction for which the report was prepared.

The Valuation Specialist has no interest whatsoever in the mining assets reviewed. Neither Salva Mining, nor the authors of this Report, has or has had previously, any material interest in BCB, or the mineral properties in which BCB propose to acquire an interest. Further, neither Salva Mining nor the authors of this Report has previously valued these mineral assets.

Salva Mining’s relationship with BCB is solely one of professional association between client and independent consultant.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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1.7 Disclaimer and Warranty

The statements and opinions contained in this report are given in good faith and in the belief that they are not false or misleading. The conclusions are based on the reference date of the 20 March 2018 and could alter over time depending on exploration results, mineral prices, and other relevant market factors.

This Report was commissioned to BCB on a fee-for-service basis on prescribed schedule of rates. The fee for the preparation of this report is estimated to be between $20,000 and $30,000.

Salva Mining’s fee is not contingent on the outcome of its Statement or the success or failure for the purpose for which the report was prepared.

A draft section of the report containing the technical and project description was provided to BCB for comment in respect of omissions and factual accuracy. As recommended in Section 39 of the VALMIN Code, BCB has provided Salva Mining with an indemnity under which Salva Mining is to be compensated for any liability and/or any additional work or expenditure, which:

Results from Salva Mining’s reliance on information provided by BCB and/or Independent consultants that is materially inaccurate or incomplete, or
Relates to any consequential extension of workload through queries, questions or public hearings arising from this report.

The conclusions expressed in this report are appropriate as at 20 March 2018. The report is only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results.

All monetary values outlined in this report are expressed in Australian dollars ($) unless otherwise stated. Salva Mining’s services exclude any commentary on the fairness or reasonableness of any consideration associated with this project

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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2 Projects

2.1 Bowen Coking Coal Projects

Bowen Coking Coal (BCB) has 100% interest in Mt Hillalong, Isaac River, Comet Ridge and Cooroorah Projects while it has 15% interest in Lilyvale and 5% interest in Mackenzie Projects. All these projects are located in Queensland, Australia (Figure 2:1).

Figure 2:1 Location of BCB Projects

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Source: BCB Prospectus, Aug 2017

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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The complete list of BCB tenements is shown in Table 2:1.

Table 2:1 BCB Tenement Licence Schedule

Treatment ID	Project Name	Project Name	Ownership	Ownership	Granted	Expiry	Expiry	Interest	Area (Sq.km)
MDL 453	Cooroorah		Coking Coal One Pty Ltd		22/1/2014	31/1/2019		100%	16.24
EPC 1230	Comet Ridge		Coking Coal One Pty Ltd		10/9/2008	9/9/2018		100%	97.17
EPC 2157	Lilyvale		Stanmore Coal Ltd		21/5/2013	20/5/2018		15%	6.29
EPC 1687					28/7/2011	27/7/2021			6.29
EPC 2081	Mackenzie		Mackenzie Coal Pty Ltd		15/10/2010	14/10/2020		5%	351.81
EPC 1824	Mt Hillalong		Coking Coal One Pty Ltd		31/3/2011	30/3/2021		100%	47.85
EPC 830	Isaac River		Aquila Coal Pty Ltd		7/9/2003	7/8/2019		100%	22.21
MDL 444					19/2/2012	31/1/2022		100%	4.30
Salva Mining has no reason to believe that these permits won’t be renewed/granted in due course. Three of these projects (Cooroorah, Comet Ridge & Lilyvale) have defined Coal Resource reported in accordance with the JORC Code 2012. Table 2:2 BCB Projects with JORC 2012 Resources
Project Name		Measured Resource (Mt)		Indicated Resource (Mt)	Inferred Resource (Mt)	Coal Resource (Mt)	BCB Share %		Coal Resource (BCB Share)
Cooroorah				70	55	125	100%		125
Comet Ridge		8		9	40	57	100%		57
Lilyvale					33	33	15%		5
Total		8		79	128	215			187

Salva Mining has no reason to believe that these permits won’t be renewed/granted in due course.

Three of these projects (Cooroorah, Comet Ridge & Lilyvale) have defined Coal Resource reported in accordance with the JORC Code 2012.

2.2 Cape Coal Project

Bowen Coking Coal is acquiring 100% interest in the Mt Hillalong East Project from Cape Coal. Status of the tenement holding is shown in Table 2:3.

Table 2:3 Mt Hillalong East - Tenement Status

Treatment ID	Project Name	Ownership	Granted	Expiry	Interest	Area (Sq.km)
EPC 1860	Mt Hillalong East	Rio Tinto Exploration Pty Ltd	20/8/2012	19/8/2022	100%	6.37
EPC 2141			2/12/2013	2/11/2023		51.04

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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3 Cooroorah – MDL 453

3.1 Geological Setting

Three Permo-Triassic units occur within the MDL 453 (Cooroorah Project) (Figure 3:1). These are, in descending stratigraphic order, the Triassic Rewan Group, the Late Permian Rangal Coal Measures (RCM) and the Late Permian Burngrove Formation, an upper unit of Blackwater Group. The RCM provide high quality hard coking coal, but dominantly supply semi-hard to semi-soft coking, high quality PCI and thermal coal for export, and lower quality thermal coal for domestic power generation. The Burngrove Formation contains several thick, high ash; heavily tuff banded coal seams, which until now have not had any commercial potential because of their very low yields at high ashes. However, because of their excellent coking properties, seams of the Burngrove Formation are actively being explored by several companies in the area between Curragh and Ensham, to the west of Cooroorah.

Figure 3:1 Cooroorah Geological Map

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Source: BCB Prospectus, Aug 2017

3.2 Geological Structure

Regionally, Cooroorah lies on the eastern flank of the Comet Ridge; a broad anticlinal structure that lies between the Denison Trough and the Mimosa Syncline, in the Bowen Basin. The area is structurally complex, dominated by compressional fold-and-thrust style features.

The most prominent structural feature within the Cooroorah is the Jellinbah Fault, a major reverse fault that dips steeply to the east and is up-thrown to the east. Maximum displacement is up to 600m, but the amount of dislocation varies according to the intensity of folding on the up-thrust side

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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of the fault. The strata have a north-north-westerly strike and regional dip of 3° to 5° to the northeast. This dip continues only as far east as the Jellinbah Fault. Immediately beyond this major break, the dip is up to 15° in drilling further to the east and the strata are folded to varying degrees of intensity within this folded zone.

3.3 Stratigraphy

The Rangal Coal Measures (RCM) contains several coal seams of variable thickness and quality. Four potentially economic seams are present: these being the Aries, Castor, Pollux, and Pisces seams.

Three of the seams (the Castor, Pollux, and Pisces) have suitable thickness to host underground coal resources in parts of the Cooroorah Project. The Aries seam is generally too thin to potentially support this, however in places the interburden between the Aries and Castor is very thin, perhaps offering some potential for joint removal.

Aries Seam: The uppermost seam, the Aries seam is the thinnest seam, typically 0.6m to 1.5m thick. The seam thickens towards the north; however, data is insufficient and limited.
Castor Seam: The Castor seam is located generally less than 10m below the Aries seam. The Castor seam maintains a relatively consistent thickness of 2.5m to 3m through the southern part of the MDL but thins to less than 1m through the central part of the Cooroorah before thickening to between 2m and 3m in the north-west corner of the Cooroorah.
Pollux Seam: The Pollux seam is located around 50m to 60m below the Castor seam over the southern half of the Cooroorah, but the interburden thins to less than 30m in the north portion of the Cooroorah. The Pollux seam maintains a consistent thickness of 2m to 2.5m through the southern part of the MDL but thins to less than 1m through the central part of the MDL before thickening to between 3m and 4m in the north-west corner of the MDL.
Pisces Seam: Sitting some 20m to 30m below the Pollux seam, the Pisces seam is typically 2m to 3m thick in holes drilled in the south of the MDL, the seam thins to less than 1m near the north-western corner of the MDL.

3.4 Historic Exploration

Eight deep stratigraphic holes were drilled in or adjacent to the Cooroorah Project by the Geological Survey of Qld (GSQ) in the 1970s as part of the Department’s regional stratigraphic drilling program. These holes intersected seams of the RCM at depths ranging from approximately 200m to in excess of 400m.

Fourteen shallow holes (NC9704-NC9707, NC9710-NC9713, and NC9901-NC9906,) were drilled in or adjacent to the MDL between 1997 and 1999 to depths ranging from 27m to 72m, in an unsuccessful attempt to find shallow RCM in up-thrown fault blocks. Eight holes drilled in the south, and NC9901, intersected sediments of the Rewan Group below unconsolidated Tertiary cover. The remaining five holes intersected mainly tuffaceous, banded seams of the Burngrove Formation.

Although not intersecting coal seams of any economic interest, holes NC9901 to NC9906 have been useful in refining the location of the Jellinbah Fault through the central part of the MDL.

During the period through 2009 to 2010, BOW CSG Pty Ltd drilled one HQ core hole (BW1) and four open holes (BW33 to BW36) in the southern part of the MDL while conducting exploration for coal seam gas in EPP 1025, which overlies Cooroorah.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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In addition to providing the hole summary data, BOW also provided access to the down hole geophysics of the holes and to the coal seam gas results from BW1. The down hole geophysics indicate that the thicker intersections of the Aries seam in BW33 and BW35 result from minor reverse faulting rather than genuine seam thickening.

3.5 Recent Exploration

AQC conducted 5 drill hole program (DDH series holes) during 2012. Five coal quality holes were drilled within the tenement and the coal quality information was added to the data obtained from historic drilling tenement. This was used to prepare a Coal Resource Estimate in 2013.

Subsequently, BCB has drilled two cored holes in December 2017. Drilling intercepted the targeted seams but the laboratory assay and washability results are awaited at present.

3.6 Coal Quality

13 coal quality holes exist for the Cooroorah Project. Float Sink analysis has also been performed on the core samples, and F1.45 has been identified as the cut-off for a washed product. A summary of composite raw coal qualities by seam are given below in Table 3:1. The coal quality data available continues to indicate a coal with PCI characteristics, and potential in some places for a semi-soft coking product.

Table 3:1 Seam Raw Coal Quality Statistics

Seam	Category	IM ad%	ASH ad%	VM ad%	FC ad%	RD ad g/cc	CSN ad	SE MJ/Kg	TS ad%	Phos ad%	HGI ad
Aries	Valid Rows	6	6	6	6	3	5	6	6	6	3
	Min	0.8	10.4	17.7	52.8	1.42	2.5	24.68	0.39	0.04	97
	Max	1.5	28.0	21.1	70.4	1.57	8.0	31.29	0.64	0.08	98
	Mean	1.12	15.9	18.8	64	1.50	5.5	29.06	0.51	0.06	97
Castor	Valid Rows	6	6	6	6	5	6	6	6	6	5
	Min	0.8	9.5	16.1	65.4	1.39	1.0	29.29	0.38	0.06	87
	Max	1.8	15.9	18.8	72.4	1.48	4.5	32.63	0.50	0.14	92
	Mean	1.17	12.7	17.3	68.9	1.44	2.0	30.73	0.44	0.07	90
Pollux	Valid Rows	8	8	8	8	5	8	8	8	7	5
	Min	0.87	11.9	13.4	57.4	1.42	1.5	25.20	0.38	0.05	83
	Max	1.4	27.9	17.6	70.5	1.56	5.0	31.36	0.56	0.19	89
	Mean	1.21	16.6	16	66.19	1.49	2.5	29.50	0.43	0.13	87
Pisces	Valid Rows	8	8	8	8	5	7	7	7	7	5
	Min	0.85	12.5	15.2	60.34	1.45	1.0	26.98	0.30	0.05	83
	Max	1.9	22.2	17.4	70.5	1.49	3.5	31.30	0.39	0.09	86
	Mean	1.32	16.0	16.5	66.19	1.46	2.5	29.62	0.36	0.06	85
Pisces Lower	Valid Rows	2	2	2	2	2	2	2	2	2	1
	Min	1.2	20.2	16.6	43.7	1.48	1.0	19.79	0.22		92
	Max	1.2	38.5	16.9	61.7	1.74	5.0	27.92	0.35		92
	Mean	1.2	29.4	16.8	52.7	1.61	3.0	23.85	0.28		92

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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All seams exhibit a low to moderate ash, with a generally high yield. Sulphur ranges between 0.4% and 0.6% (adb), with Phosphorus between 0.06% and 0.08% (adb). Ash ranges between 10% and 19% (adb) and Volatile Matter between 14% and 18% (adb). Specific Energy falls between 25 and 32 MJ/kg. While the CSN values are generally low, between 1 and 3, values in the lower parts of both the Pisces and Pollux seam rise significantly in places.

3.7 Coal Resource

Mr. Craig Williams of HDR Pty Ltd (HDR) prepared and reported a Coal Resource in July 2013 for the Cooroorah Project. All seams within the Rangal Coal Measures, Burngrove Formation, and Fair Hill Formation (from the Cancer Seam to the Fair Hill Seam) were modelled. The project is being estimated to contain a total resource of 125Mt, comprising 70 Mt of the Indicated and 55 Mt of the Inferred resource (Table 3:2).

Table 3:2 Coal Resource - Cooroorah

Resource Classifica tion	Seam	Mass (Mt)	Thickness (m)	Raw Basis	Raw Basis	Raw Basis	Raw Basis	Raw Basis	Raw Basis	Raw Basis	Product Basis Ash Yield	Product Basis Ash Yield
				Ash %	CSN	VM %	IM %	RD g/cc	SE MJ/Kg	TS %	(f1.45) %	(f1.45) %
Indicated	AR	0.6	1.0	22	7	20.5	0.9	1.51	28.5	0.53	8.2	74.3
	CT	27.2	3.1	12.8	3	17.5	1.0	1.43	29.3	0.54	8.3	84.3
	PO	17.5	2.2	16.5	2	15.7	1.2	1.45	30.5	0.36	8.2	83.4
	PI	24.3	2.6	16	3	16.4	1.1	1.48	29.5	0.38	9.7	77.2
Indicated Resource		69.6
Inferred	AR	7	1.4	17.6	5	21	0.9	1.47	28.5	0.53	8.2	73.3
	CT	7.9	1.9	12.9	2	17.4	1.1	1.43	29.3	0.54	8.4	85.2
	PO	10.4	1.9	16	2	15.8	1.2	1.45	29.2	0.39	8.2	83.5
	PI	29.9	2.7	16.1	3	16.3	1.4	1.5	29.5	0.38	9.7	77.4
Inferred Resource		55.3
Total Resource		124.9

Resources have been reported on an air-dried basis, and the tonnages estimated without converting the relative density to in-situ moisture.

Seams less than 1m in thickness and over 40% raw ash was excluded from Coal Resource estimate. The Aries seam does not reach 1m thickness in any hole within the tenement boundary. It is questionable whether any indicated resource is justified for this seam given the uncertainty related to the thickness. However, the thin interburden between the Aries and Castor could mean that these seams could be mined together. As such, there is a potential for increasing the resource where the parting is sufficiently thin.

The Castor and Pollux seams have reasonable coverage in the South area and show moderate variability in seam thicknesses. The Pisces seam is very uniform in thickness within the focus area.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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4 Comet Ridge – EPC 1230

4.1 Geological Setting

EPC 1230 is located at the southern end of the Comet Ridge Anticline on the stable basement block known as the Comet Platform. The block is bound to the east by the Taroom Trough and to the west by the Denison Trough (Dyson, 2014).

The Comet Ridge tenement contains sediments from Crocker and Macmillan formations broadly grouped in the Back Creek Group of sediments, and sediments from the Fair Hill and Burngrove Formations which are interpreted to be a part of the Blackwater Group. The limbs of the Comet Ridge Anticline dip shallowly to the east and west at an average of 2-4º and the axis of the Comet Ridge Anticline traces through north eastern corner of the EPC (Figure 4:1).

Figure 4:1 EPC 1230 Geological Map

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Source: BCB Prospectus, Aug 2017

The Back Creek Group sediments as elsewhere in the Bowen Basin are dominated by marine facies; these are conformably overlain by the Blackwater Group sediments that are dominated in the most part by fluvial/deltaic sedimentation with common marine transgressions. Rangal

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Coal Measures sub-crop to the south west of the tenement and are currently covered by the Togara North Mining Lease and MDL 317.

4.2 Stratigraphy

The stratigraphy of the Blackwater Group and Back Creek Group in the area around EPC 1230 comprises in descending stratigraphic order;

Rewan Formation (youngest);
Rangal Coal Measures;
Burngrove Formation;
Fair Hill Formation;
Macmillan Formation;
Crocker Formation; and
Ingelara Formation (oldest).

A generalised stratigraphy with lithological descriptions of the formations is detailed in Figure 4:2. The Ingelara formation is represented in the area in the core of the Comet Ridge Anticline. The Ingelara, Croker and Macmillan formations are grouped into the Back Creek Group with the overlying Fair Hill, Burngrove and Rangal Coal Measures grouped into the Blackwater Group.

4.2.1 Coal Seam Targets

Four main seams in descending order have been recognised within the Fair Hill Formation and are identified as:

Hercules (youngest);
Canis;
Lepus;
Fai Hill and
Triumph (oldest).

Acacia Coal is targeting the Fair Hill Seam and the stratigraphically lower Triumph Seam which was discovered during subsequent exploration, for mining. The Fair Hill Seam is typically (for Fair Hill Formation coals) predominantly dull coal and highly interbedded with carbonaceous siltstones and tuffaceous claystone. Thin bands of bright vitrinite occur throughout the coal. The Fair Hill seam can vary between 9-14m in thickness and is broken down into 20 individual coal plies named A to M.

The Triumph Seam lies approximately 25m below the Fair Hill Seam and is generally less banded and up to 2m in thickness. The Triumph Seam is sub-divided into 4 plies named T1 to T4.

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Figure 4:2 Comet Ridge Generalised Stratigraphy

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Source: BCB Prospectus, Aug 2017

4.3 Recent Exploration

Since the granting of EPC 1230 in 2008 over 200 holes have been drilled by Acacia Coal. Recent exploration work has resulted in a database of 223 holes suitable for modelling the deposit. All holes have been geophysically corrected and the coal seams and plies correlated for the Fair Hill and Triumph seams.

In 2015, a total of 5 holes were drilled consisting of non-core and partial core holes with four holes targeting the Fair Hill Seam and one targeting the Triumph Seam. In conjunction with the 2015 drilling Acacia Coal management oversaw the extraction of a bulk sample from the Triumph Seam within EPC1230. The Triumph Seam was intersected at a depth approximately 10m from surface and was in fresh rock directly below the base of weathering.

The bulk sample pit dimensions at surface were approximately 20m by 20m (400m2) while the excavated pit at Triumph Seam level was 3.7m long by 1.6m wide by 2.5m deep. Coal and interseam stone partings comprising a total of 23 tonnes were excavated using a 30-tonne excavator with a 1.5 cubic metres bucket. The bulk sample was hauled to a quarry at Springsure for trial processing and dry screening to separate coal and claystone. The test procedure was designed as an up sized version of the drop shatter and screening tests conducted on bore cores from past exploration programs. A total spend of $7.55M has been recorded on undertaking the exploration

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and technical studies on the project since 2011. The recent phases of exploration have facilitated the definition of the characteristics of the resource and subsequently 3 shallow pit areas have been identified in the deposit.

4.4 Coal Quality

The Fair Hill Seams of the Fair Hill Formation typically have high raw ash values exceeding 70%. Through studies conducted by Acacia Coal Limited 9 plies (A, C1, D2, D3, E, F, H2, and M1 & M2) from the Fair Hill Seam and 4 from the Triumph Seam (T1-T4) have been identified as a coal resource. Average Raw coal quality for each ply was derived from up to 10 core holes for the Fair Hill and Triumph Seam and average raw coal qualities for each ply is detailed in Table 4:1.

Table 4:1 Average Raw Quality Ply Data for the Fair Hill and Triumph Seams

Ply	Length (m)	RD (ad) g/cc	Moisture ad%	Ash ad%	Volatile Matter ad%	Fixed Carbon ad%	Total Sulphur ad%	Calorific Value ad% Mj/kg
A	0.8	1.74	3.1	44.1	21.9	30.3	1	16.8
C1	0.43	1.93	2.1	61.4	17.1	19.5	0.95	11.4
D2	0.34	1.82	2.1	53.2	19.8	25.1	1.28	14.5
D3	0.22	1.82	1.6	54.3	19.4	24.7	0.88	14.4
E	0.18	1.87	1.5	58.9	16.6	23.1	0.55	12.8
F	0.55	1.77	2.3	49.2	20.7	28	0.56	15.7
H2	0.32	1.8	1.9	52.8	18.3	27.2	0.37	14.9
M1	0.36	1.63	1.5	36.2	26.4	36	3.14	20.7
M2	0.25	1.78	1.7	52.5	17.9	28.1	0.96	15.4
Average	0.38	1.80	2.0	51.4	19.8	26.9	1.08	15.2
T1	0.4	1.42	2.1	14.7	29.5	53.7	3.02	-
T2	0.28	1.55	2.2	30.2	23.3	42.3	3.33	-
T3	0.48	1.78	2.6	50.3	19.2	27.9	2.68	-
T4	0.37	1.7	2.2	39.8	23.2	34.8	3.67	-
Average	0.38	1.61	2.3	33.8	23.8	39.7	3.18

Average raw quality data for the Fair Hill Seam indicates a high density, high ash, low moisture and high sulphur coal, the Triumph Seam records overall lower density and ash than the Fair Hill Seam however the total sulphur is very high.

Based on the washability data available, the high inherent ash coking yields are low (10-30%). CSNs for the Fair Hill Seam and Triumph Seam typically report at 7+ and 8+ respectively. A secondary thermal product yield is dependent on the target coking product ash specifications.

Product coal is intended to be marketed as a low ash, coking coal along with a high ash thermal by-product. Laboratory work indicates that the target coal seams can be optimised in-pit and up to 45-65% of stone can be removed prior to washing.

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4.5 Coal Resource

Mr. Rob Dyson of McElroy Bryan Geological Services Pty Ltd (MBGS) prepared and reported an Updated Resource Report in July 2014. The project was estimated to contain a total coal resource of 57Mt, comprising of 8Mt of the Measured, 9Mt of Indicated and 40Mt of the Inferred resource (Table 4:2).

Table 4:2 Coal Resource - Comet Ridge

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Source: BCB Prospectus, Aug 2017

Total Coal Resources was estimated as 57 Million tonnes (Mt) with 17Mt in the Measured plus Indicated category while 40 Mt was in the inferred category.

The Fair Hill Seam (up to 12m thick) and the Triumph Seam (up to 2m thick), both contain numerous carbonaceous/tuffaceous claystone bands and partings interbedded with high-ash coal plies containing very thin, bright (vitrinite) coal bands. To liberate coal from both seams the mining method will incorporate dry separation techniques prior to washing.

Following extraction of the proposed mining sections in both seams, it is planned that ROM coal will pass through a rotary trammel located at the pit to generate a coal concentrate with most of the stone removed. Additional separation techniques may be carried out with FGX dry separation or x- ray coal sorting methods.

Using the above in-pit dry separation techniques and subsequent beneficiation by wash plant a coking fraction and high-ash thermal product could be produced.

4.6 Mining Lease Application

An application for a mining lease (MLA 700005) was submitted to the Queensland Department of Natural Resources and Mines in March 2015. BCB has advised that exploration expenditure on the tenements has been higher than the minimum expenditure commitment and has no reason to believe that these permits won’t be renewed/granted in the due course.

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An Environmental Impact Management Report (EIMR) was submitted concurrently with the mining lease application (Figure 4:3).

Figure 4:3 Mining Lease Application Area

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Source: BCB Prospectus, Aug 2017

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5 Lilyvale (EPC 2157 & EPC 1687)

5.1 Location

EPC 2157 and EPC 1687 are located within the central Bowen Basin, south west of the Kestrel Extension tenement and in close proximity to the Kestrel Mine.

5.2 Geological Setting

This portion of the Bowen Basin contains two coal bearing formations of economic significance, the Rangal Coal Measures (RCM) and the German Creek Formation (GCF) which contains the German Creek seam. The GCF is typically located approximately 400m vertically below the RCM. The German Creek seam supplies most of the high quality, export hard coking coal from Oaky Creek, Gregory/Crinum and Kestrel mines.

Figure 5:1 EPC 1687 & 2157 Geological Map

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Source: BCB Prospectus, Aug 2017

5.3 Geological Structure

The controlling structural features of the area are the Comet Ridge to the east and the broad gently plunging syncline which trends southwest across the area. Strata gently dip at low angles, from 3º8º to the east and southeast. Based on the drill hole data that is available there is no significant geological structures noted.

5.3.1 Stratigraphy

The stratigraphy of the Blackwater Group and Back Creek Group in the area around Ensham comprises in descending stratigraphic order:

Rangal Coal Measures (youngest);
Burngrove Formation;
Fair Hill Formation;
MacMillan Formation; and
German Creak Formation (oldest).

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In the relinquishment report (Ensham Resources, 1997) no RCM has been identified and only the GCF is present.

Figure 5:2 Lilyvale Generalised Stratigraphic Column

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Source: BCB Prospectus, Aug 2017

5.4 Historic Exploration

There are six historic boreholes that were drilled to target the German Creek Seam including three drilled in the 1970’s by the Department of Mines, two by Ensham (1980’s) and one by Oil Company Australia (2001). Only two of these drillholes were within Lilyvale tenement boundary.

Ensham Resources drilled two deep core holes, C2059 and C2172. C2059 intersected 2.4m of the German Creek seam at 336m. C2172 intersected 2.5m of the German Creek seam at 397m.

5.5 Coal Quality

Detailed metallurgical testing was undertaken for the two Idemitsu holes. The coal quality results for holes C2059 and C2172 showed that there were excellent yields at low ashes with moderate sulphur, very low phosphorus and high specific energy (SE). The coal is at the lower end of the rank range for coking coals but it showed reasonable CSN values and fluidity. It has the potential to be a blended coking coal.

M Resources reviewed the available product quality data and made observations that this quality compares to neighbouring mines. Experience from other Bowen Basin operations suggests the coal will require washing into a saleable product. Potential washing yields was estimated to be in the 70-80% range.

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5.6 Mineral Resource

A JORC resource of 33Mt in the Inferred category was estimated in February 2014 by Xenith, on behalf of Stanmore Coal (Table 5:1). Limits were placed on the JORC Resource Estimate with cutoff at 1.5 m thickness for all coal seams, with the minimum parting thickness of 0.3 m to be considered within the seam. Stone bands greater than 0.3 m are not included within the seam, so modelling of the seam split occurs.

The target German Creek coal seam extends approximately 2.0 km along strike and approximately 4.0 km perpendicular to strike with an average thickness of 2.3 m within the inferred resource polygon. The current resource extent covers approximately 9.75 km[2] of the tenement. The depth of the modelled German Creek seam ranges from 335 m in the northwest corner of the tenement area to 425 m in the southeast, outside of the tenement.

Table 5:1 Coal Resource - Lilyvale Project

Coal Resource - Lilyvale	Coal Resource - Lilyvale	Project		Quality - Raw	Quality - Raw	Air Dried Basis(adb)	Air Dried Basis(adb)	Air Dried Basis(adb)
Resource Category	Seam	Mass (Mt)	IM %	ASH %	VM %	FC %	RD (g/cc)	In Situ Moisture (%)
Inferred	German Creek	33	2.5	15.7	33.4	49.4	1.41	5.6
Total		33	2.5	15.7	33.4	49.4	1.41	5.6

BCB holds 15% of the Lilyvale Project; therefore, BCB controls 4.95 Mt of the inferred resource.

Figure 5:3 Lilyvale - JORC Resource Area

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Source: BCB Prospectus, Aug 2017

The deposit would be conducive to underground mining methods, most likely longwall given the seam depth and thickness. The shared boundary with the Rio Tinto Kestrel mine may be beneficial in developing the panels and mains.

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6 Mt Hillalong (EPC1824)

6.1 Location

EPC 1824 is located 100 km south west of Mackay in central Queensland. The tenement is 10 km by road, Southeast of Glenden and approximately 65 km by road Northwest of Nebo. Access is via the sealed Suttor Development and Collinsville-Elphinstone Roads and then via unsealed access roads through pastoral properties.

There are a number of exploration and mining projects within the region. The major projects within closest proximity include Burton Coal Mine and New Lenton to the West, and Hail Creek and Walker Creek Mines towards the south-east. All target the Rangal and to a lesser degree the upper Fort Cooper Coal Measures.

6.2 Geological Setting

EPC 1824 “Mt Hillalong” is located in the north-eastern margin of the Bowen Basin, bounded by basement rocks of the “Connors Arch” and is situated within the structural domain of the Nebo Synclinorium. The synclinorium is characterised by a number of northwest-southeast striking folds, thrusting and high angle faulting. The synclinorium is filled with Late Permian to Early Triassic sediments.

Permian sediments include the Lizzie Creek Volcanics, considered to be the basal sequence of the Bowen Basin, the overlying marine-dominated Back Creek Group sediments through to the coal bearing Moranbah Coal Measures, Fort Cooper Coal Measures and the Rangal Coal Measures of the Black Water Group.

Triassic sediments include the Rewan Formation and the overlying Clematis Sandstone that forms the dominant topography in the local region. Numerous significant Cretaceous age igneous intrusions including sills, dykes and plugs penetrate the Permian and Triassic sediments.

The tenement contains the Rangal Coal Measures at depths of at least 150m. The seams subcrop in the adjacent lease to the east (EPC 2141) and steeply dip to the West on the western limb of the Hillalong anticline. Within the EPC 1824 the strata are interpreted to flatten out at depth. The shallowest coal is believed to occur in the far north and south of the tenement. Intruded coal seams are known to be common in the surrounding area.

6.3 Geological Structure

EPC 1824 is dominated structurally by the Hillalong Anticline which is situated to the immediate east of the tenement (Figure 6:1). The western limb of the anticline contains Rangal sediments that dip to the west and continue underneath EPC 1824 and are interpreted to flatten out at depth. A number of thrusts and steep faults penetrate the Hillalong anticline and strike in a general northsouth direction and have been interpreted to continue through to the north of EPC 1824.

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Figure 6:1 EPC1824 Geological Map

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Source: BCB Prospectus, Aug 2017

6.4 Stratigraphy

In descending order of age, the geological sequences can be summarised as follows:

Clematis Group (youngest);
Rewan Formation;
Rangal Coal Measures (RCM);
Fort Cooper Coal Measures (FCCM);
Moranbah Coal Measures (MCM);
Exmoor Formation;
Blenheim Formation;
Gebbie Formation;
Tiverton Formation; and
Lizzie Creek Volcanics (oldest).

The Lizzie Creek Volcanics form the basal sequence of the Bowen Basin in the region and are overlain by the mostly marine transgressive sequences of the Back Creek Group which contains

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the Tiverton, Gebbie, Blenheim and Exmoor Formations. Overlying the Back Creek Group sediments are those of the Late Permian Blackwater Group which includes the Moranbah Coal Measures, Fort Cooper Coal Measures and the Rangal Coal Measures and are interpreted as fluvial/deltaic sediments with common marine transgressions. The Triassic is represented by the Rewan Formation and the Clematis Group which the latter comprises the nearby topographic high of the Redcliffe Tableland.

The main target of exploration activities is the Elphinstone and Hynds seams (Leichardt and Vermont equivalents) within the Rangal Coal Measures which are extracted at the nearby Hail Creek Mine. Figure 6:2 provides a generalised stratigraphic column and lithological description of depositional units in the region.

Figure 6:2 Mt Hillalong Generalised Stratigraphic Column

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Source: BCB Prospectus, Aug 2017

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6.5 Historic Exploration

Limited historic exploration has been undertaken in the immediate bounds of EPC 1824 however CRA Coal Group identified outcropping coal in the north of the tenement and historic seismic surveys conducted by MGC Resources Australia Pty Ltd (survey name: Northern Bowen Basin 90) during the 1990‟s identified potential deep coal reflectors (Line MGC90-1B), however these surveys are of limited value due to poor quality processing.

Blue Energy shot a series of seismic lines in October 2008 as part of their BE08 Glenden Seismic Survey for ATP 814P (company report: 60432, Figure 6:3).

Figure 6:3 Seismic Line Locations

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Source: BCB Prospectus, Aug 2017

Lines BE08-01A and BE08-03A cross the northern part of EPC 1824 and confirms Rangal Coal Seams are interpreted to dip steeply west from the Hillalong Anticline underneath EPC 1824 and flatten out at a depth of approximately 500m, (Figure 6:4 and Figure 6:5).

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Figure 6:4 Seismic Line BE08-01A (Yellow - Elphinstone Reflector)

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Figure 6:5 Seismic Line BE08-03A (Yellow - Elphinstone Reflector)

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Source: BCB Prospectus, Aug 2017

6.6 Recent Exploration

As part of the Mt Hillalong Joint Venture between Area Coal Pty Ltd and Rio Tinto, Rio Tinto undertook an in-depth desktop study to compile open file data relating to the tenements within the Hillalong orbit area which are in close proximity to Rio Tinto’s operating Hail Creek Mine. Based on this work Rio Tinto conducted its first exploration program on EPC 2141 in 2012/13.

Exploration drilling was carried out in 2012/2013 with 6 holes drilled in the EPC and 3 seismic lines were shot along with a ground magnetics survey (Figure 6:6). Seismic sections for lines 1 & 2 (Figure 6:7) re-affirm previous seismic with coal reflectors steeply dipping under Mt Hillalong.

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Figure 6:6 Seismic and Drilling Activities on EPC 2141 & EPC 1824

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Source: BCB Prospectus, Aug 2017

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Figure 6:7 Seismic Profiles Lines 1 & 2

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Source: BCB Prospectus, Aug 2017

6.7 Drilling

As part of the initial results from the 2013 exploration Rio Tinto provided the following report on two drill holes:

HILL0002 intersected 12m net coal between 320m and 460m depth from the Leichardt, Vermont and Girrah Seams; and
HILL0003 intersected 11m net coal between 155m and 185m depth from the Leichardt and Vermont seams.

Rio Tinto subsequently terminated their exploration, Option and Joint Venture Agreement with Area Coal Pty Ltd.’s parent company, Australia Pacific Coal (AQC) and transferred the Mt Hillalong tenement from Rio Tinto Exploration Pty Ltd back to AQC’s 100% owned subsidiary, Area Coal Pty Ltd.

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6.8 Coal Quality

Coal quality data is not available for the immediate area and historic exploration has highlighted the detrimental effects on coal quality resulting from the numerous intrusions in the area and this has been confirmed through drilling in EPC 2141. However, a drill hole in the North of the tenement (MH_2) displays some very positive coking coal properties with a rank of 0.94, and 100 ddm fluidity.

Further work would be required to evaluate the coal quality parameters along the strike length of the deposit.

6.9 Exploration/Resource Potential

Two economic coal seams, Elphinstone and Hynds (Leichardt and Vermont equivalents) within the RCM are currently being mined within the Mining Leases that surround the EPC’s. These two seams coalesce in some areas where they are termed the “Main Seam”. The Rangal Coal measures have historically been the primary target for exploration in the northern part of the basin.

Xenith noted in its IGR that “notwithstanding there may be potential to find pods of coal relatively “untouched” by igneous intrusives”. Given the depth the most likely mining method would be by underground methods.

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7 Mackenzie – EPC 2081

7.1 Geological Setting

The Mackenzie Project area lies within the Central Bowen Basin, and is contained within the structural zone known as the Comet Platform. The Comet platform contains both Triassic and Permian sediments, which have been mildly deformed both during and post deposition to form the Comet Anticline. The anticline has multiple closures, one of which is located immediately South of ‐ the township of Comet. The anticline axis plunges to the South, and to the North it is cut off by other regional structures close to the Gregory ‐ Crinum mine. The Comet Anticline trends North South and runs approximately through the centre of EPC 2081, such that rocks of the Burngrove, Fair Hill, Macmillan and Crocker Formation occur at outcrop, dipping both eastward and westward with a closure in the south of their outcrop zones. Dips anticipated over much of this area are in the order of 2 ‐ 4º.

Figure 7:1 Mackenzie Geological Map

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Source: BCB Prospectus, Aug 2017

7.2 Geological Structure

EPC 2081 is located over the northern closure of the Comet Ridge Anticline with the lease straddling sediments from the Fair Hill Formation, Burngrove Formation and Rangal Coal Measures in the west of the lease, and the eastern portion enclosing sediments from Crocker, Macmillan and Fair Hill Formations. Other than the weak folding of strata no major faulting or structures have been identified.

7.3 Stratigraphy

The stratigraphic units in the project area were most extensively mapped and described by Prouza within numerous bodies of work in the 1970’s. Prouza’s work was aimed at mapping the German Creek Coal Measures within the Comet region.

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Operational coal mines in the area are currently exploiting coal seams found in either the Rangal Coal Measures or the German Creek Formation. Recent coal exploration in the region has also begun to target the Burngrove or Fair Hill Formations, the Burngrove Formation being the principal target formation within the western Mackenzie River project area.

The German Creek Formation is not present within the tenure area; rather the marine influenced Crocker Formation. The Crocker Formation correlates as an equivalent time unit to the "upper part of the German Creek Coal Measures". The unit is noted as dominantly arenaceous, with mudstone and siltstone averaging 10 to 15 per cent and locally up to 30 per cent within the region. Prouza also notes that cyclicity is not as distinct as in the corresponding part of the German Creek Formation and that environment of deposition was partly deltaic, fluviatile and transitional, with occasional marine incursions. Elsewhere the German Creek Coal Measures are dominated by shallow marine sediments.

The Macmillan Formation conformably overlies the Crocker Formation, and is a marine influenced sedimentary sequence devoid of any coal seam development.

The Fair Hill Formation conformably overlies the Macmillan Formation, and consists predominantly of arenaceous rocks, with thick coal bearing cyclothems interbedded with finely interbedded mudstone siltstone. Coal seams occur at the top of the cyclothems and are usually thick, (up to 16m) but of generally inferior quality, featuring numerous mudstone and tuffaceous mudstone bands. The sequence of Fair Hill seams (top to base) is Hercules, Canis, Lepus and Fair Hill.

The overlying Burngrove Formation also contains coal bearing cyclothems, with coal seams tending towards the top of the formation. In the Burngrove Formation, the Pisces Lower coal seam is located below the Yarrabee Tuff Bed and represents the uppermost horizon. Other regional seams in descending order are the Virgo, Libra, Leo, Aquarius, Scorpio and Centaur (Pattison, ‐ 2009). Fine to medium grained sandstones, with subordinate cross grains, regularly occur between the seams. Burngrove seams are generally thick and banded with high ash values.

The Rangal Coal Measures overlie the Burngrove Formation conformably and consist of sub ‐ labile arenite with minor lithic labile arenite, siltstone mudstone and coal seams (Aries, Castor, Pollux, Orion and Pisces Upper). The seams are extracted at numerous mines in the Blackwater area, and commonly coalesce and split from each other, these relationships being controlled structurally by differential subsidence in different areas during deposition (LeBlang 1997). Although mapped as occurring inside the western margin of EPC 2081, Stanmore concludes that the tenement does not ‐ contain any Rangal Coal Measures, with the sub crop of Rangal Coal Measure seams occurring to the near west (i.e. Ensham Mine) and also further east (i.e. Blackwater & Curragh Mines).

Within EPC 2081, Stanmore Coal focused its exploration efforts on the Burngrove Formation. Three Burngrove Formation coal seams exist within the within the immediate area of EPC 2081 and in descending stratigraphic order they are: the Virgo, Leo and Aquarius seams. Stanmore has drilled the Leo and Aquarius seams as the principal targets. The Burngrove coal bearing sequence was ‐ deposited in sub aerial delta environment, in which minor sea level changes produced alternating peat swamp and clastic deposition. Pyroclastic activity was intense throughout the depositional period.

The Burngrove Formation coal bearing unit subcrops in the western part of the project area, with the main coal seams within the drilled-out area of the EPC occurring at depths of between 10 and 110 metres. The seams strike in a general North South direction over an approximate 27km strike

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length, and dip towards the west at approximately 2 degrees. The Aquarius seam has been more extensively drilled as it is the thickest seam and has the greatest areal extent within the lease.

Figure 7:2 Mackenzie Generalised Stratigraphy

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Source: BCB Prospectus, Aug 2017

7.4 Historic Exploration

Within the boundaries (and immediate surrounds) of EPC 2081 itself, there have been 16 historic coal exploration drill holes completed by previous explorers.

7.5 Recent Exploration

Stanmore Coal completed a total of 102 drill holes (8546.41m) in 2011. The work consisted of 47 partial core (4C size) drill holes and 55 open “chip” drill holes (Figure 7:3).

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Figure 7:3 Location of Mackenzie River Drilling

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Source: BCB Prospectus, Aug 2017

7.6 Coal Quality

The results show the raw ash for the coal plies in the Leo Seam has a range of 35% to 44% adb. The raw ash for the Aquarius Seam resource has a more variable range of 26% to 49% adb. Inherent moisture values for all the coal plies are found to average 3.2% adb.

Generally, drill holes in the northern part of the area do show higher coal ply ash results and, in some cases, greater than 50% adb. Much lower raw coal ash results are observed in the far southern area of the deposit with some results in the 20% to 30% adb range.

Raw Crucible Swelling Number (CSN) has an average range of 1 - 3 across the coal deposit, however some ply CSN results of up 7 have been observed.

Washability testing was conducted on 21 holes in 2011 with the aim to achieve a product ash of 15% adb. The modelled washability simulation results for the individual plies are variable with a

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yield range from 9% to 57%, when excluding fines, and 11% to 62% when including fines material. Product CSN results were rounded to the nearest 0.5.

Yields are higher when including the fines material, but the process struggles to achieve the targeted product ash of 15% adb.

7.7 Exploration Potential

Further work is required within the north eastern, central and southern zones to confirm a coal resource for the Mackenzie project (Figure 7:4).

Figure 7:4 EPC 2081 Deposit Zones

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Source: BCB Prospectus, Aug 2017

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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8 Isaac River (EPC 830 & MDL 444)

8.1 Location

The Project covers an area of 14 km[2 ] and is located in the Bowen Basin in Central Queensland, approximately 30 km west of Moranbah and 130 km southwest of Mackay. The Project is well located relative to regional infrastructure with the Peak Downs Highway located 12km north and the Goonyella rail system within 3km of the Project.

The Project consists of Mineral Development License 444 (“MDL 444”) and Exploration Permit for Coal 830 (“EPC 830”). BHP Mitsubishi Alliance (BMA) Daunia Mine is located to the immediate west, and Peabody’s Moorvale West Project is located to the immediate north of the project. EPC 830 is located south of MDL 444 and north of the Olive Downs North Project.

The project area is currently used for livestock grazing. BHP Mitsubishi Alliance’s Daunia Mine overlaps significant part of EPC 830.

Figure 8:1 Location of Isaac River Project

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Source: ASX announcement 4 Dec 2017, BCB

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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8.2 Geological Setting

The Isaac River area is located in the northern part of the Permo-Triassic Bowen Basin containing principally fluvial and some marine sediments. The Bowen Basin is part of a connected group of Permo- Triassic basins in eastern Australia which includes the Sydney and Gunnedah Basins. The Basins axis orientation is NNW-SSE roughly parallel to the Palaeozoic continental margin. Tectonically, the basin can be divided into NNW-SSE trending platforms or shelves separated by sedimentary troughs. The units from west to east are the Springsure Shelf, Denison Trough, Collinsville Shelf/Comet Platform, Taroom Trough, Connors and Auburn Arches (interrupted by the Gogango Over-folded Zone) and the Marlborough Trough.

Development of the basin in the Early Permian was in the form of a half graben which subsequently became areas of regional crustal sag. Variations in depositional patterns and deformation styles occur along strike suggesting the possibility of NE trending deep seated crustal transfer faults, evidence for such occurs at the neighbouring Isaac Plains Mine.

8.3 Stratigraphy

The target seam is the Leichardt Seam (Rangal Coal Measures) with an average thickness of approximately 4.5m. The seam has not been sub-divided based on plys as with current methods in nearby mines.

8.4 Recent Exploration

A number of historic holes have been drilled within the Isaac River Project. There are 40 holes in database (5 core, 35 chip), out of which approximately 30 holes are within Isaac River. The coordinates for these drill holes have been indicated in Table 8:1 while plan view of drill holes has been shown in Figure 8:2.

Table 8:1 Location of Drill Hole, Isaac River

Hole	MGA Easting	MGA Northing	MGA RL	Grid/Zone	Total Depth (m)
E830001	635614.5	7560179	226.85	MGA_55S	209
E830002	636111.5	7560179	225.84	MGA_55S	167
E830003	636613.1	7560182	227.89	MGA_55S	87
E830004	635612.6	7560679	224.67	MGA_55S	179
E830005	636113.5	7560683	225.84	MGA_55S	166
E830006	636607.3	7560693	225.13	MGA_55S	171
E830007	636612.2	7561186	218.68	MGA_55S	178
E830008	636108	7561181	218.59	MGA_55S	177
E830009	635613.6	7561180	219.33	MGA_55S	177
E830010	635109.9	7561178	222.49	MGA_55S	171
E830011	635165.2	7560676	227.58	MGA_55S	187
E830012	636605.9	7559677	228.09	MGA_55S	175
E830013	636115	7559681	220.89	MGA_55S	153
E830014	635615.8	7559183	215.99	MGA_55S	123
E830015	635612.9	7559682	223.48	MGA_55S	135
E830016	635614.8	7560177	226.79	MGA_55S	51

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Hole	MGA Easting	MGA Northing	MGA RL	Grid/Zone	Total Depth (m)
E830017	633113.9	7551684	188.61	MGA_55S	171
E830018	631720.3	7552913	191.75	MGA_55S	135
E830019	635165.6	7560677	227.5	MGA_55S	107
E830020	636109.3	7560179	225.83	MGA_55S	71
E830021	636113.8	7559684	221.02	MGA_55S	42
E830022	636111.6	7559678	220.9	MGA_55S	59
E830023	635735	7559732	0	MGA_55S	155
E830024	636319.7	7560155	228.93	MGA_55S	101
E830025	635903.2	7559666	219.52	MGA_55S	90
E830026	636359.4	7561177	220.16	MGA_55S	192
E830027	636359.9	7560929	223.51	MGA_55S	204
E830028	636360.5	7560683	227.11	MGA_55S	217
E830029	636361	7560429	229.65	MGA_55S	88
E830030	635864.9	7560679	222.99	MGA_55S	210
E830031	635862.1	7560424	226.5	MGA_55S	175
E830032	635864.7	7560183	224.99	MGA_55S	121
E830033	636360.1	7559676	225.6	MGA_55S	73
E830034	635858.1	7559427	217.06	MGA_55S	79
E830035	636499	7552251	190	MGA_55S	209
E830036	636125	7552692	193	MGA_55S	203
E830037	637256	7555743	227	MGA_55S	191
E830038	637069	7556843	221	MGA_55S	191
E830039	635951	7556901	204	MGA_55S	173
E830040	633113	7556245	202	MGA_55S	149.3
E830041C	635505.2	7560498	227.34	MGA_55S	120.23

Figure 8:2 Drill Hole Location Plan, Isaac River

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Source: ASX announcement 4 Dec 2017, BCB

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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8.5 Seams Intercepted

The Project targets coal from the Leichardt seam in the Rangal Coal Measures. The Leichardt seam is the main target seam and is extensively mined in the area by numerous operating mines. The target seam was intersected in several drill holes at Isaac River between 35m and 142m deep with seam thicknesses varying between 2m and 5.5m. The Vermont seam was also encountered in several drill holes but is not a priority target due to lower quality.

8.6 Coal Quality

Five (5) drill holes within the Isaac River were cored to collect coal quality information.

Raw coal quality of the Leichardt seam from 5 cored holes within Isaac River have been presented in Table 8:2. No coal quality information is available for southern portion of EPC 830.

Table 8:2 Raw Coal Quality from 5 cored holes within Isaac River Project

HOLE	FROM	TO	Thickness (m)	Moisture %	Ash %	Volatile Matter %	Total Sulphur %	Insitu RD	Fixed Carbon %	Calorific Value (Kcal/kg)
E830016	35.0	40.2	5.2	1.6	15.3	20.5	0.42	1.43	62.6	6,876
E830019	90.2	95.4	5.2	1.0	21.3	20.2	0.32	1.50	57.5	6,223
E830020	55.1	59.1	4.1	1.6	17.5	18.9	0.4	1.45	61.9	6,750
E830022	42.3	46.5	4.2	1.0	16.2	19	0.34	1.43	63.7	6,904
E830041C	102.0	106.2	4.2	2.1	15.5	19.2	0.22	1.42	63.3	6,956

Indicative coal quality and washability analysis have been conducted on hole E830041C only by A&B Mylec Pty Ltd, which indicated the potential for an 8.9% ash semi-soft coking coal product with a secondary thermal coal product (6900 kcal air dried) at a combined total simulated yield of 87%.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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9 Hillalong East (EPC 2141 & EPC 1860)

Cape Coal has agreed to assign to BCB all its rights in terms of the Sale and Purchase Agreement in exchange for the issue to Cape Coal of 30,000,000 fully paid ordinary shares in BCB (to be escrowed for 12 months) and reimbursement of direct legal expenses (up to a maximum of $50,000) at completion. BCB will assume the rights and obligations of Cape Coal under the Sale and Purchase Agreement.

9.1 Location and Access

The Hillalong East Project is located in the northern Bowen Basin, in central Queensland approximately 100km west-south-west of Mackay and 5km east of Glenden (Figure 9:1). Locally significant coal mines include Hail Creek, operated by Rio Tinto, Newlands operated by Glencore, and the Burton Mine operated by Peabody.

Access to the project is by road from Moranbah via Nebo, along the Peak Downs Highway, Suttor Developmental Rd and Collinsville Elphinstone Rd. An alternate route from Moranbah, North West along Red Hill Rd, cuts through the back of the Goonyella Mine.

Figure 9:1 Location and Access, Hillalong East

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Source: ASX announcement 15 Feb 2018, BCB

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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9.2 Geological Setting

EPC2141 lies in the northern Bowen Basin and sits atop Permian, Triassic and Cretaceous lithology groups and structures. The main regional structural features in the area include Triassic age northwest-southeast fold structures, including the Hillalong Anticline and Nebo Synclinorium, with possible north-south zones of thrust faulting on the EPC (Figure 9:2). The Synclinorium houses low-angle thrust faults, some with offsets of up to 1000m (Michaelson et al. 2000)

Figure 9:2 Geological Settings, Hillalong East Project

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Source: Tenement Annual Report, 2017

9.3 Stratigraphy

The coal bearing formations of interest within EPC2141 are held within the Blackwater Group, an upper Permian package of generally uniform sandstones, mud and siltstones, tuffaceous lithotypes and coal seams ranging in thickness. The Blackwater Group contains the Moranbah Coal

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Measures (MCM), Fort Cooper Coal Measures (FCCM) and the Rangal Coal Measures (RCM). Seams of particular interest in this EPC are the Elphinstone seam, in the RCM and the Hynds seam, which straddles the RCM and FCCM and the Goonyella Middle and Lower seams of the MCM.

The MCM are the oldest unit of the Blackwater Group. They were deposited in a subsiding retroarc foreland basin (Michaelson and Henderson, 2000). Compressive deformation and volcanism during deposition has resulted in abundant volcanoclastic sediment bands throughout the MCM (Michaelson and Henderson, 2000). The Goonyella Middle and Lower seams, also known as the Harrow Creek and Dysart seams are typically targeted as a prime hard coking coal.

Although the FCCM are coal bearing, the coal is extensively interbedded with tuffaceous claystones. The seams are thin, banded and have little economic value. Tuffaceous bands with in the FCCM are laterally extensive and were deposited in a calm environment of coal swamps and marine mudstones (Anderson, 1985). The FCCM comprise of a variety of lithotypes including green lithic sandstone, conglomerate, mudstone, carbonaceous shale, coal and thin beds of grey cherty tuff (Jensen, 1968).

The boundary of the FCCM and the RCM is distinguished by the Yarrabee Tuff (Matheson, 1990). A laterally extensive, high gamma tuffaceous band that can be traced across the Bowen Basin, the bed is recognised as the top of the FCCM, and the boundary between the FCCM and the RCM (Anderson, 1985). Local geology shows the Yarrabee Tuff occurring within the Hynds seam, resulting in the boundary between the FCCM and the RCM being within the Hynds seam.

9.4 Recent Exploration

A number of holes have been drilled within EPC 2141. 9 holes (HILL001 – HILL009 within the bounds of the lease (Table 9:1) and have had samples obtained for detailed coal laboratory testing and analysis. A strict process of data collection was followed for each of the exploration campaign conducted. All partially cored drill holes were geophysically logged to assist with the drill hole validation process. Figure 9:3 shows the location of the drill holes.

Table 9:1 Drilling on Hillalong East Project

Hole ID	Latitude (GDA94)	Longitude (GDA94)	EAST MGA94_z55	NORTH MGA94_z55	RL	TD	Dip
HILL0001	148.1828	-21.3393	622626.51	7639822.01	363.5	318.3	-90
HILL0002	148.1828	-21.3393	622626.92	7639826.37	363.4	510.2	-90
HILL0003	148.1869	-21.4161	622987.61	7631345.24	401.3	280.2	-90
HILL0004	148.2109	-21.3683	625541.15	7636608.52	386.8	477.0	-90
HILL0005	148.2065	-21.3068	625140.08	7643417.55	364.6	183.6	-90
HILL0006	148.2109	-21.3683	625544.99	7636608.93	386.7	80.5	-90
HILL0007	148.2069	-21.3598	625131.12	7637551.75	378.6	434.6	-90
HILL0008	148.1964	-21.3143	624082.88	7642596.23	396.9	162.4	-90
HILL0009	148.2062	-21.3522	625064.56	7638391.39	362.9	434.3	-90

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Figure 9:3 Location of Drill holes on Hillalong East Project

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Source: ASX Announcement 15 Feb 2018, BCB

9.5 Seismic and Magnetics Survey

RTX shot approximately 17km 2D seismic in three lines across EPC 2141 and EPC 1824 in 2013. A ground mag survey was conducted along the same 3 seismic lines post seismic survey in 2013.

9.6 Seams Intercepted

The priority target seams for the Project are the Elphinstone and Hynds Seams (Leichardt and Vermont equivalents) from the Rangal Coal Measures. Four of the drill holes (out of Nine) interested the Elphinstone and Hynds Seams.

Exploration by RTX has also intersected seams from the Moranbah Measures from 28m deep and is regarded as a secondary target due to low coking qualities observed in the initial analysis.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Table 9:2 Seam Intersections, Hillalong East

Hole	Tenement	Seam intersection	FROM	TO	Thickness (m)
HILL005	EPC 2141	Elphinstone	21.50	25.25	3.75
		Hynds	102.76	107.36	4.60
HILL008	EPC 2141	Elphinstone	24.73	28.70	3.97
		Hynds	86.27	89.40	3.13
HILL002	EPC 1824	Elphinstone	319.28	323.85	4.57
HILL003	EPC 1824	Elphinstone	157.35	163.05	5.70
		Hynds	172.43	174.90	2.47
		Hynds	182.03	185.70	3.67

Intruded coal seams are known to be common in the area. Zones of North – South thrust faulting has been identified by RTX following seismic surveys across the project.

9.7 Coal Quality

Drill-hole HILL 008 is the only hole where coal quality tests have been performed on the Rangal Coal Measures by RTX.Coal testing was conducted at Bureau Veritas Lab.

Table 9:3 details qualities for certain plies in the Elphinstone and Hynds seams from exploration by RTX in 2014 (Hole HILL 008 is the only hole where quality tests have been performed on the Rangal Coal Measures by RTX).

Table 9:3 Coal Quality - Hillalong East

HOLE	FROM	TO	Thickness (m)	Moisture %	Ash %	Volatile Matter %	Total Sulphur %	Crucible Swelling Number (CSN)	Maximum Fluidity (ddm)	Calorific Value (MJ/kg)
HILL008	26.96	28.7	1.74	2.8	10.6	27.9	0.44	6.5	150	30.5
HILL008	86.27	89.4	3.13	2.5	9.8	26.6	0.34	5.5	150	30.93

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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10 Valuation

10.1 Valuation Approaches

There are several recognised methods used in valuing mineral assets. The applicability of these methods depends on several project-specific factors including the level of maturity of the mineral assets and the availability and reliability of the information about the project.

In determining the appropriate method(s) to be used for valuation of these assets, Salva Mining has taken into consideration the classification of these assets as defined in the VALMIN Code and the different methodologies that are generally accepted as industry practice for each classification. Generally, there are three broad methods of valuation that are used for valuing mineral assets. These are:

i) the cost approach, ii) the income approach, and iii) the market approaches.

with each being suitable for the relevant status of the exploration or mining project from grass roots exploration through to operating mine, respectively.

The asset classifications that may be applied to a project are set out in Table 10:1.

Table 10:1 Typical Valuation Methods

Classification	General Description	Valuation Methods
Exploration Areas	Properties where mineralisation may or may not have been identified, but a Resource has not been identified.	Rule of Thumb, Geo- scientific method, Comparable Transactions
Advanced Exploration Areas	Properties where considerable exploration has been undertaken and specific targets identified. Resource estimation may or may not have been made. Good understanding of mineralisation present.	Geo-scientific method, Appraised Value Method, Comparable Transactions
Pre- development Projects	Properties where mineral resources have been identified but decision to proceed with development has not been made. Includes properties held on retention titles.	The above methods and DCF/NPV valuation

A summary of each of these methodologies is outlined in Appendix B of this Report.

The valuation approaches that are generally adopted for exploration areas are broadly defined as inferential methods that rely on comparative or subjective inputs such as the rule of thumb or appraised value methods. These include the estimated mineral content and a value of the

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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mineral derived from recent transactions. Typically, such a method values the property in $ per unit area or $ per tonne resource. The value would be discounted by any specific site factors as well as the status of the resource classification.

An understanding of the geology of the mineral deposit, structure and defined resources places the mineral area in the Advanced Exploration or Pre-Development classification phase. A large range of valuation methods are recognised for this status with some requiring a degree of subjective estimation. All have been used by valuation practitioners and usually a combination of methods is used as a cross check to the reasonableness of the input assumptions.

Valuation based on income or discounted cash flow method was not applied for any of these projects as no Coal Reserve has been defined at any of these projects.

Therefore, in accordance with Section 8.3 of the VALMIN 2015 code, Salva Mining has used two approaches “Market Comparable” and “Cost based Geoscientific Rating”, to derive the Reasonable Value of the Mineral Assets included under the scope of this Report. The selection of these two approaches is based on factors such as:

development status of the Mineral Assets; and
extent and reliability of available information.

In Salva Mining’s opinion, both BCB and Cape Coal projects are early stage exploration projects and as discussed above, market comparative and cost-based methods are generally used to value such type of projects. Therefore, Salva Mining has preferred to apply a combination of two methods to value the project due to the uncertainties attached to its progress. The valuation methods applied include Market based Comparable Transactions Method and Cost based Geo-Scientific Rating (Kilburn) method.

10.2 Comparative Market Transaction Method

To determine the fair market value for the Projects owned by BCB, Salva Mining has reviewed recent market transactions for exploration assets involving sale and purchase of tenements with:

Coal tenements with delineated Coal Resource; and
Coal tenements without any delineated Coal Resource.

To determine implied value relevant to the current time and circumstances, Salva Mining has considered only those transactions which occurred within the last four years (January 2014 onwards). Salva Mining has identified 11 transactions relating to coking coal projects with Coal Resources in Australia which can be considered relevant in assessing the fair market value of the projects owned by BCB. These market transactions are listed in Table 10:2.

Furthermore, considering the recent volatility in the commodity market, Salva Mining has opted to normalise the calculated implied value ($/t) based on the prevailing coking coal price in AUD/t at the day of transaction to the current coking coal price. The coking coal price movement is shown in Figure 10:1.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

Figure 10:1 Coking Coal Price Movement

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Source: Resources and Energy Quarterly, December 2017

As shown in Figure 10:1, Metallurgical coal prices have increased significantly since August 2016 due to strong demand and supply constraints. The price has surged by 33% since the start of November to a seven-month high of $US236/t in December 2017 before dropping to US$196/t in February 2018.

In assessing a valuation for Coal Resources, Salva Mining analysed these transactions and compared the project with project owned by Bowen Coking Coal. The transactions were analysed in terms of the implied purchase price and the Mineral Resource at the time of the transaction. Share prices at the time of the announcement of the transactions was considered where shares formed a part of the consideration and the timing of payments, as set out in the initial agreements, was also taken into consideration.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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	0.02	0.06	0.01	0.02	0.03	0.03	0.25	0.13	0.59	0.36	0.50	0.08	0.03	0.02	0.08
Normalised Value $/t Resource**

	$278	$238	$241	$241	$210	$145	$127	$107	$118	$122	$151	Average*	Median*	Quartile 1*	Quartile 3*
Prevailing Coking Coal Price (A$/t)

	0.03	0.06	0.01	0.02	0.02	0.02	0.13	0.05	0.28	0.18	0.31
Implied Value ($/t Resource)

Resources (Mt)	1224	13	124.9	57	2614	781	937.3	734	14.5	87	255
Value $M (100%)	31.5	0.8	1.3	0.7	60.5	13.1	120.0	40.0	4.0	15.3	77.8
Interest	100%	50%	100%	100%	100%	40%	100%	100%	100%	20%	90%
Seller	Caledon	Northern Energy	Australian Pacific Coal	Acacia Coal	Queensland Coal Investment Holdings	Cuesta Coal	Peabody & Citic	New Emerald Coal	Peabody	Tiaro Coal	Peabody
Buyer	Bounty Mining	Laneway Resources	Bowen Coking Coal	Bowen Coking Coal	Gateway Mining	Beijing Guoli Energy	Pembroke Resources	Pan Asia	Stanmore	AceA Resources	Wesfarmers
Project	Cook Colliery & Minyango	Ashford	Cooroorah & Hillalong	Comet Ridge	Wilton & Fairhill Projects	Cuesta Coal	Olive Downs & Willunga	Teresa, Pentland & Dalby	Wotonga	Tiaro Coal	MDL 162
Year	Nov-17	Oct-17	Sep-17	Sep-17	Mar-17	Aug-16	May-16	Dec-15	Jul-15	Jul-14	Jan-14

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10.2.1 Projects considered Outliers

In forming of the fair market valuation of BCB Projects, Salva Mining has analysed the recent market transactions. In Salva Mining’s opinion, Olive Downs, Wotonga and MDL 162 are significantly advanced project as compared to the BCB projects on account of following reasons

The Olive Downs project is located south of the Peabody’s operating Moorvale Mine and comprised of LV PCI and Semi Hard Coking Coal. Pembroke has reported that this project contains 955 Mt of Coal Resources and 315 Mt of Coal Reserves predominantly within the Leichardt and Vermont seams. Shallow coal seams were also identified at Olive Downs North offering a near term opportunity to develop an open-pit mine of 1.5 – 2.5 Mtpa. Pembroke expects that the Olive Downs Complex is likely to produce 14 Mtpa of coal at full capacity predominantly by underground mining method. The project is well connected with the existing infrastructure and located close to the Goonyella Rail System.
Wotonga Project is located approximately 10 km east of Moranbah and is adjacent to the Peak Downs Highway and immediately to the south of the Goonyella rail branch which connects the project to the Dalrymple Bay Coal Terminal (DBCT). Significant historical drilling has been completed on the tenement and a JORC Code 2012 resource estimate of 14.5 Mt open cut Indicated Resource to a 90-metre depth cut-off within the Leichardt seam has been reported. In terms of coal quality, the project can produce a medium volatile coking coal product. Although, Wotonga as a standalone project, may not be very attractive however, this has been valued at higher rate since it is possibly considered a strategic acquisition by Stanmore as the project is located to the near south of Stanmore’s Isaac Plains Mine and may facilitate a potential extension of mine life at Isaac Plains.
Similarly, MDL 162 was located between and adjacent to Wesfarmers existing Curragh and Curragh North mining leases and contained a Coal Reserve of 67 Mt (JORC Code 2012) within a total Coal Resources of 255Mt. Coal quality from MDL 162 was considered similar to coking coal being mined at the existing Curragh Mine. The acquisition of MDL 162 by Wesfarmers at relatively high valuation was a strategic move with a view of long term exploitation of coal resources by joining two Curragh mining leases.

Therefore, based on the reasons elucidated above, in Salva Mining’s opinion, these three projects can be considered outliers and hence were not considered for further assessment. After removing these outliers, the average of implied value of the rest of the projects has been determined as 0.08/t of Coal Resource while median implied value was $0.03/t of Coal Resource. The quartile 1 and quartile 3 of the implied value stood at $0.02/t and $0.08/t respectively.

10.2.2 Market Based Valuation of Cooroorah Project

In forming the fair market valuation of Cooroorah Project, Salva Mining has analysed the recent market transactions.

Considering the location, geological factors and other micro and macro-economic parameters which could affect the project economics, in Salva Mining’s opinion the implied value of the Cooroorah Project should be between quartile 1 to median value of the comparable transaction data set, between ¢1.5/t to ¢3/t with a preferred value of ¢2/t of resources on account of following reasons.

The area is structurally complex, dominated by compressional fold-and-thrust style features with Jellinbah Fault being a major reverse fault that dips steeply to the east and is

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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up-thrown to the east. Maximum displacement is up to 600m. The coal resources are located at more than 300 m deep which means that it is amenable to be exploited by underground mining method. The structural intrusion may pose a significant problem in mining.

In terms of coal quality, the main targeted seam in the MDL is within Rangal coal measure which is predominantly known for its PCI coal. PCI coal is generally traded at a significant discount to Hard coking coal.
The Aries seam present in the region has thickness less than 1m in majority of the tenement and possess a challenging condition for its exploitation as standalone coal seam.

Therefore, based on market based comparable transaction method, the valuation of the Cooroorah Project has been assigned in the range of $2.50M to $4.38M with a preferred value of $3.44M. This valuation range can be considered appropriate for the project at its this stage of development. A summary of Salva Mining’ market-based valuation for the Cooroorah Project is presented in Table 10:3.

Table 10:3 Market Based Valuation - Cooroorah Project

Project	Resource Mt	Market Value (¢/t)	Market Value (¢/t)	Market Value (¢/t)	Valuation ($M)	Valuation ($M)	Valuation ($M)
		Lower	Preferred	Higher	Lower	Preferred	Higher
Cooroorah	125	2.0	2.75	3.5	2.50	3.44	4.38
Market Based Valuation –		Cooroorah Project(100%)			2.50	3.44	4.38

10.2.3 Market Based Valuation of Comet Ridge Project

As discussed in the preceding sections of the report, delineated coal seams present within the Comet Ridge resources are within the two formations the Fair Hill formation and the Triumph formation. Total coal resources within the Comet Ridge Project are 57 Mt with 17Mt in the Measured and Indicated categories and 40 Mt in the inferred category.

Out of these 57Mt, 12.3 Mt is within the Triumph formation containing average total sulphur at 3.0%. Also, the Fair Hill formation has sulphur content of more than 1% limiting its marketability to certain countries. The acceptability of high sulphur coal from the Triumph seam, in most of the end-user industry is unlikely, as such marketability of this coal type is limited. At Comet Ridge, product coal is intended to be marketed as a low ash, coking coal along with a high ash thermal by-product. Laboratory work indicates that the target coal seams can be optimised in-pit and up to 45-65% of stone can be removed prior to washing. In Salva Mining’s opinion, an opportunity does exist to sell this coal as a blending coal to the market where domestic coal is low in sulphur.

In comparison to the Cooroorah Project, in Salva Mining’s opinion, the Comet Ridge is an inferior project predominately because of its inferior coal quality and lesser exploration activity conducted on the tenement and hence should be valued at lesser rate. Therefore, A valuation range of ¢1.5/t to ¢2.5/t with a preferred value of ¢2.0/t have been assigned to the Comet Ridge Project (Table 10:4).

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Table 10:4 Market Based Valuation – Comet Ridge Project

Project	Resource Mt	Market Value(¢/t)	Market Value(¢/t)	Market Value(¢/t)	Valuation($M)	Valuation($M)	Valuation($M)
		Lower	Preferred	Higher	Lower	Preferred	Higher
Comet Ridge	57	1.5	2.0	2.5	0.86	1.14	1.43
Market Based Valuation – Comet Ridge Project(100%)					0.86	1.14	1.43

Therefore, based on market based comparable transaction method, the valuation of the Comet Ridge Project has been assigned in the range of $0.86M to $1.43M with a preferred value of $1.14M. This valuation range can be considered appropriate for the project at its this stage of development.

10.2.4 Market Based Valuation of Lilyvale Project

As discussed in relevant section of the Report, the presence of German Creek coal seam has been confirmed by drilling in the Lilyvale Project occurring at a depth of more than 350m. There is no recent exploration conducted on the tenement and the data available from the previous exploration is very limited. The existing Coal Resource estimate is based on the data from 3 drill holes only.

The coal quality results for drill hole showed that the coal is at the lower end of the rank range for coking coals but it showed reasonable CSN values and fluidity. It has the potential to produce a blended coking coal.

In Salva mining opinion, Lilyvale project is an early stage exploration project and it is inferior to the Comet Ridge and should be valued at a lower rate. Therefore, A valuation range of ¢1/t to ¢2.0/t with a preferred value of ¢1.5/t have been assigned to the Lilyvale Project (Table 10:5).

Table 10:5 Market Based Valuation – Lilyvale Project

Project	Resources Mt	Market Value(¢/t)	Market Value(¢/t)	Market Value(¢/t)	Valuation($M)	Valuation($M)	Valuation($M)
		Lower	Preferred	Higher	Lower	Preferred	Higher
Lilyvale	33	1.0	1.5	2.0	0.33	0.50	0.66
Market Based Valuation		– Lilyvale Project(100%)			0.33	0.50	0.66

Therefore, based on market based comparable transaction method, valuation of the Lilyvale Project (100% basis) has been assigned in the range of $0.33M to $0.66M with a preferred value of $0.50M. This valuation range can be considered appropriate for the project at its this stage of development.

10.3 Market Based Valuation of Projects with No Coal Resource

To form its opinion on fair market value for the early stage exploration project owned by BCB, Salva Mining considered transactions involving coal assets with no delineated Coal Resources. Unfortunately, transactions involving coal tenements without Coal Resource has been limited in past four years. Therefore, to increase the number of observations, Salva Mining has included transactions occurring since August 2011.These transactions have been presented in Table 10:6.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Implied Value $/km2	14,286	10,227	114	14,167	11,312	14,723	13,043	600	8,246	183	90,625	1,051	5,722	4,352	45,778
Coal Type	CC	TC/CC	Thermal	Coking	Coking	Coking & Thermal	Thermal & Semi Soft	Thermal	PCI/Thermal	Thermal	Coking	Thermal & Semi Soft	Thermal	Thermal & Semi Soft	Coking
Area km2	14	1100	14182	30	13	2585	130	500	214	10000	72	402	1028	440	214.16
	0.2	11.25	1.62	0.43	0.15	38.06	1.7	0.3	1.76	1.83	6.53	0.42	5.88	1.92	9.8
Value $M 100%

Stake	100%	40%	68%	100%	85%	100%	46%	100%	51%	100%	100%	71%	51%	100%	51%
Seller	Aquila	Stanmore	Civil Mining Resources	Rio Tinto	Australian Pacific Coal	Camvill	Coal Face Resources	Profit Achieve Holdings	Allegiance Coal	Xls Exploration	Fairway Coal Pty	Coal Face Resources	Cuesta Coal	Unknown	International Coal
Buyer	Bowen Coking Coal	JOGMEC	ASF Group	Mozambi Coal	Stanmore	East Energy Resources	International Coal	Omnitech Holdings	Square Resources	Fox Resources	Stanmore	International Coal	QCI	Legacy Iron ore	QCI
Project	Isaac River	Clifford Project	4 EPC & 22 EPCA	EPC 1768 &EPC 2098	EPC 2157	Indalia Coal	EPC 2286 (Don Juan)	EPC 1506 & EPC 1539	EPC 1631 & EPC 1820	16 EPCs	EPC 1186	Consuelo Project (EPC 2332, EPC 2318)	EPCA 2079 & EPCA 2080	EPC 2303 & EPC 2304	Bundaberg (EPC 2194, 2195,2196 and EPCA 2631)
Date	Dec-17	Dec-13	Dec-13	Nov-13	Jun-13	May-13	Oct-13	Mar-13	Jan-13	Dec-12	Oct-12	Nov-12	Sep-12	Aug-12	Jun-12

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Implied Value $/km2	2,095	21,399	8,994	37,323	19,444	16,184	10,770	3,788	15,904
Coal Type	Thermal	Thermal/PCI	Thermal	Coking & Thermal	Coking & Thermal	Average	Median	Quartile 1	Quartile 3
Area km2	4774	37	654	80.38	48
	10	0.79	5.88	3	0.93
Value $M 100%

Stake	20%	51%	51%	100%	75%
Seller	Orion Mining Pty	Resco Project	Tiaro	Australian Pacific Coal	Australian Pacific Coal
Buyer	Guildford	Guildford	QCI	Rio Tinto Exploration	Rio Tinto Exploration
Project	EPCs 1890, 1892, 1893, 1962, 1963 and 1964	EPC 1664 (Springsure)	EPC 1262	EPC 1773, EPCA 1867 , EPCA 1645, and EPC 1824	EPC 1824
Date	Apr-12	Apr-12	Apr-12	Aug-11	Aug-11

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As shown in Table 10:6, the average implied value of the exploration projects has been calculated as 16,184/km[2] of tenement area while median implied value was $10,770/km[2] of tenement area. The quartile 1 and quartile 3 of the implied value stood at $3,788/km[2] and $15,904/km[2] respectively.

Salva Mining notes that implied value for Clifford Project, EPC 1768 & EPC 2098 (Mozambi Coal) and EPC 2157 (Stanmore) represents the benchmark transactions to value Mt Hillalong and Isaac River Exploration Project as these projects are located in the Bowen Basin in proximity to established coking coal mine/advanced project and presence of coking coal were confirmed by the exploratory drilling.

In Salva Mining’s opinion the Mackenzie project, although larger in size, is significantly inferior to the Isaac River and Mt Hillalong Projects because of its relatively remote location, inferior coal quality and lower level of exploration activity.

Based on comparable market transactions, Salva Mining’s opinion of the market-based valuation for the BCB’s early stage exploration projects is shown in Table 10:7.

Table 10:7 Market Based Valuation - BCB Exploration Tenements (100% Basis)

Project	Area km2	Market Based Value	Market Based Value	($/km2)		Valuation($M)	Valuation($M)
		Lower	Preferred	Higher	Lower	Preferred	Higher
Mt Hillalong	47.9	13,000	18,000	23,000	0.62	0.86	1.10
Mackenzie	351.8	4,000	5,000	6,000	1.41	1.76	2.11
Isaac River	14.0*	16,000	21,000	26,000	0.22	0.29	0.36

** Isaac River area excluding overlapping BHP MLs.

10.4 Valuation based on Geo-Scientific Rating Method

Geo-Scientific rating (or Kilburn method), is used to value early stage exploration assets. This method is an attempt by the valuation expert to quantify the various technical aspects of a property through the use of multipliers which are applied to a base or intrinsic value (Goulevitch J & Eupene G S, 1994 and Kilburn,1990). This intrinsic value is known as the base holding cost (BHC) which represents “the average cost to identify, apply for and retain a base unit of area of title”.

To derive value for each property, the valuation expert considers four key attributes which either enhance or downgrade the BHC of each property. The technical factors considered are:

the Off-property factor – nearby properties containing physical indications of favourable mining conditions such as old workings and/or mines;
the On-property factor – the property being assessed hosts favourable mining indications such as historic workings or mines. Importantly any mineralisation capable of supporting a Mineral Resource estimate, compliant according to the guidelines of the JORC Code, will be assessed using other valuation methods;
the Anomaly factor – assesses the degree of exploration completed over the property and the number of resultant mineralised targets identified; and
the Geological factor – assesses the area covered by and degree of exposure of favourable rock types and/or structures (if this is related to the mineralisation style being assessed) within the property.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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These attributes are given incremental, fractional or integer ratings to arrive at a series of multiplier factors. These multipliers are then applied sequentially to the BHC to estimate the Technical Value of each mineral property. This is adjusted for local market conditions to determine the Fair Market Value of the project as at the effective valuation date. The strength of the geo-scientific method is that it makes an attempt to implement a systematic system. Whilst it does require a subjective assessment of the various multipliers, it also demands a degree of detached rigor to account for the key factors that can be reasonably considered to impact on the exploration potential of a property. Salva Mining’s multipliers or ratings and the criteria for rating selection are summarised in Table 10:8.

Table 10:8 Geo-Scientific Rating Criteria

Rating	Off property Factor	On Property Factor	Anomaly Factor	Geological Factor
0.1			No anomaly identified	Unfavourable geological setting
0.5	Unfavourable district/basin	Unknown area	Extensive previous exploration provided poor results	Poor geological setting/ extensive cover
0.9			Poor results to date	Generally favourable geological setting, under cover or complexly deformed
1	No known mineralisation in district	No known mineralisation on lease	No targets outlined	Generally favourable geological setting
1.5	Minor workings	Minor workings or mineralised zones exposed	Target identified, initial indications positive
2	Several old workings in district	Several old workings or exploration targets identified	Several well defined targets supported by limited drill data	Multiple exploration models being applied simultaneously
2.5			Several well defined targets with encouraging drill results	Well defined exploration model applied to new areas
3	Mine or abundant workings with significant previous production	Mine or abundant workings with previous production		Significant mineralised zones exposed in prospective host rocks
3.5			Significant grade intercepts evident but not linked on cross or long section
4	Along strike from a major deposit	Major mine with significant historical production	Several sub-economic grade intercepts on adjacent sections	Well understood exploration model, with valid targets in structurally complex area, or under cover
5	Along strike of world class deposit		Marginal economic targets of significant size	Well understood exploration model, with valid targets in well understood stratigraphy
6			Several significant ore grade correlateable intersections	Advanced exploration model constrained by known and well understood mineralisation
10		World class mine

(modified by Salva Mining)

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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To determine fair market value for the project owned by Bowen Coking Coal, based on the cost approach, Salva Mining has assumed a Base Holding Cost (BHC) of A$500/km[2] . Appropriate multiplying factors have been chosen for each of the tenements and value for each tenement has been calculated. The result has been presented in Table 10:9.

Table 10:9 Valuation Geo-Scientific Method, BCB Projects - 100% Basis

Project	Range	Area (km2)	BHC ($/km2)	Off Property Factors	On Property Factors	Anomaly Factors	Geological Factors	Value ($M)
Cooroorah	Low	16.2	500	4	2	6	5	2.0
	High	16.2	500	4.5	3	7	6	4.6
	Preferred							3.3
Comet Ridge	Low	97.2	500	2.5	2	2	2	1.0
	High	97.2	500	3	2.5	2	2.5	1.8
	Preferred							1.4
Lilyvale	Low	12.6	500	3	2.5	2.5	2.5	0.3
	High	12.6	500	3.5	3	3.5	3.5	0.8
	Preferred							0.6
Mt Hillalong	Low	47.9	500	3	2	1.5	3	0.7
	High	47.9	500	3	2.5	2	3	1.1
	Preferred							0.9
Mackenzie	Low	351.8	500	1.5	1.5	1.5	1.5	0.9
	High	351.8	500	2	2	2	2	2.8
	Preferred							1.9
Isaac River	Low	14	500	3	2	2	2.5	0.2
	High	14	500	3.5	2.5	2.5	3	0.5
	Preferred							0.3

Anomaly and Geological factor assigned for the Cooroorah Project are significantly higher than the other BCB Projects to account for size of the target, its quality and seam thickness and maturity.

Salva Mining considers those modifying factors (low & high) to be appropriate for BCB’s Projects based on the maturity of the project.

10.5 Valuation Summary - BCB Projects

In forming its opinion of the reasonable value of the BCB projects, Salva Mining has taken guidance from the comparable market transactions method and Geo-Scientific (Kilburn) method. Salva Mining has considered the current market, locality, and technical and strategic factors which Salva Mining has assessed to have an impact on the development of the Project.

Valuation based on both approaches were within the valuation range for the projects at this stage of development. Salva Mining has applied an equal weighting to both valuation methods. Based on equal weighting for both Market Comparable and Geoscientific rating methods, the valuation of 100% of the each of the Bowen Coking Coal Projects is shown in Table 10:10.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Table 10:10 Valuation – Bowen Coking Coal Projects (100% Basis)

Project	Market Based Valuation ($M)	Market Based Valuation ($M)	Market Based Valuation ($M)	Cost Based Valuation ($M)	Cost Based Valuation ($M)	Cost Based Valuation ($M)		Valuation
		($M)			($M)			($M)
	Lower	Preferred	Higher	Lower	Preferred	Higher	Lower	Preferred	Higher
Cooroorah	2.5	3.4	4.4	2.0	3.3	4.6	2.3	3.4	4.5
Comet Ridge	0.9	1.1	1.4	1.0	1.4	1.8	0.9	1.3	1.6
Lilyvale	0.3	0.5	0.7	0.3	0.6	0.8	0.3	0.5	0.7
Mt Hillalong	0.6	0.9	1.1	0.7	0.9	1.1	0.6	0.9	1.1
Mackenzie	1.4	1.8	2.1	0.9	1.9	2.8	1.2	1.8	2.5
Isaac River	0.2	0.3	0.4	0.2	0.3	0.5	0.2	0.3	0.4

Based on BCB’s equity in each project, valuation of BCB’s interest was calculated as shown in Table 10:11. The valuation of Bowen Coking Coal’s interest in these projects is determined to be in between $4.2M to $7.8M with a preferred value of $6.0M.

Table 10:11 Valuation – Bowen Coking Coal Projects (Equity Basis)

Project	Lower	Valuation($M)
		Preferred	Higher
Cooroorah, 100%	2.3	3.4	4.5
Comet Ridge, 100%	0.9	1.3	1.6
Lilyvale, 15%	0.0	0.1	0.1
Mt Hillalong, 100%	0.6	0.9	1.1
Mackenzie, 5%	0.1	0.1	0.1
Isaac River, 100%	0.2	0.3	0.4
Total - BCB	4.2	6.0	7.8

10.6 Previous Valuations

Salva Mining is not aware of any previous valuation of BCB apart from valuation of 2 projects. Xenith carried out valuation of Cooroorah and Mount Hillalong Project as a part of Australian Pacific Coal Ltd (APC) valuation in February 2017. These projects were part of the non-core assets for APC while acquiring Dartbrook Mine and formed a small portion of that valuation report. Table 10:11 shows the previous and current valuation.

Additional drilling at the Cooroorah Project during 2017 has confirmed the present of thicker main seams.

Table 10:12 Previous Valuation of Cooroorah and Mt Hillalong Projects

Project	Salva Mining March-18	Xenith Feb-17
Cooroorah(MDL 453)	3.4	1.3
HillalongProject	0.9	1.1

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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11 Valuation of Cape Coal’s Hillalong East Project

As detailed in Hillalong East Section of this report, Cape Coal’s Hillalong East has been subject of historical exploration but with no delineated Coal Resource. Therefore, in Salva Mining’s opinion, Hillalong East can be categorised as an early stage exploration project. In consonance with the projects owned by BCB, Salva Mining has opted to value Hillalong East by combination of two methods, comparable market transactions and Geoscientific rating method.

11.1.1 Market Based Valuation of Hillalong East Project

To determine the value of the Hillalong East Project, Salva Mining has used the recent transaction data set involving early stage coal projects as outlined in Table 10:6 previously.

Salva Mining notes that coal market fundamentals have improved during the recent times with higher coking coal prices.

Salva Mining notes that implied value for the Clifford Project, EPC 1768 & EPC 2098 (Mozambi Coal) and EPC 2157 (Stanmore) represents the benchmark transactions to value the Hillalong East Project as these projects are located in the Bowen Basin in proximity to established coking coal mine/advanced project(s) and are at similar stage of exploration as that of Hillalong East Project.

Based on recent market transactions, the valuation of Hillalong East project has been assigned as $14,000km[2] to $25,000/km[2] with a preferred value of $20,000/km[2] . Therefore, in Salva Mining’s opinion, within the current market circumstances, the valuation of Hillalong East is expected to be in the range of $0.80M to $1.38M with a preferred value of $1.09M.

Table 11:1 Market Based Valuation of Hillalong East Project

Project	Area	Market Value($/km2)	Market Value($/km2)	Market Value($/km2)	Valuation($M)	Valuation($M)	Valuation($M)
	km2	Lower	Preferred	Higher	Lower	Preferred	Higher
HillalongEast	57.41	14,000	19,000	24,000	0.80	1.09	1.38
Market Based Valuation – HillalongEast Project					0.80	1.09	1.38

11.1.2 Valuation of Hillalong East Project using Geoscientific Rating Method

To determine fair value for the Hillalong East Project based on the cost approach, Salva Mining has assumed a Base Holding Cost (BHC) of A$500/km[2] .

Appropriate multiplying factors have been chosen and technical value for the tenement is calculated. The result has been presented in Table 11:2.

Table 11:2 Valuation Geo-Scientific Method, Hillalong East Project

Hillalong East		BHC	Off	On	Anomaly	Geological	Value ($M)
	Area
	(km2)	($/km2)	Property Ft	Property Ft	Factors	Factors
			acors	acors
Low	57.41	500	3	1.5	2	2.5	0.65
High		500	3	2	2.5	3	1.29
Valuation							0.97

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Salva Mining considers those modifying factors to be appropriate for the maturity of the project. Therefore, based on Geoscientific Rating, the valuation of Hillalong East has been assigned as $0.65M to $1.29M with a preferred value of $0.97M.

11.2 Valuation Summary - Cape Coal’s Hillalong East Project

In forming its opinion of the reasonable value of the Cape Coal’s Hillalong East Project, Salva Mining has taken guidance from the comparable market transactions method and Geo-Scientific (Kilburn) method. Salva Mining has considered the current market, locality, and technical and strategic factors which Salva Mining has assessed to have an impact on the development of the Project.

Valuation based on both approaches were within the valuation range for the Hillalong East Project at this stage of development. Salva Mining has applied an equal weighting to both valuation methods.

The valuation of 100% of the Cape Coal’s Hillalong East Project has been determined as $0.7M to $1.3M with a preferred value of $1.0M. Salva Mining’s Valuation Summary for the Hillalong East Project is shown in Table 11:3.

Table 11:3 Valuation Summary - Hillalong East Project

Method		Valuation($M)
	Lower	Preferred	Higher
Market Comparable Method	0.8	1.1	1.4
Geoscientific Ratings Method	0.7	1.0	1.3
Valuation – Hillalong East(100%)	0.7	1.0	1.3

11.3 Previous Valuations

Salva Mining is not aware of any previous valuation carried out for the Hillalong East Project.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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12 Project Risks

Salva Mining has identified a range of risk elements or risk factor which may affect the future operations and financial performance of the projects included in the Report. Some of the risk factors are completely external, which is beyond the control of management. However, the project specific risk can be mitigated by taking proper measure in advance. Key Project risks that have been identified are discussed below.

12.1 Resources & Reserve Risk

No Coal Resource was reported for four of the BCB’ projects or for the Hillalong East Project. Moving forward it may be possible that further exploration and geological assessment may result in a reduction or an increase of Resource which would have a material impact on the technical value of the concession.

No coal Reserve has been defined at any of these projects. Moving forward it may be possible that further technical studies may not result in a development of coal Reserve which would have a material impact on the value of the project.

12.2 Commodity Price Risk

Coking coal price and its demand are cyclical in nature and subject to significant fluctuations and any significant decline in the prices of these or demand could materially and adversely affect the Company’s business and financial condition results of operations and prospects. Commodity markets are highly competitive and are affected by factors beyond the Company’s control which include but are not limited to:

Global Economic Conditions;
Government and Central Banks actions; and
Fluctuations in industries with high coal demand.

If there is a fall in long term coking coal prices, there would be a substantial reduction in the viability of the project.

12.3 Coal Marketing Risk

The Coal Resources present within the Comet Ridge Project contains more than 1% sulphur, making its marketability very limited. Moving forward it may be possible that there will not be enough appetite for this type of coal in the market which may affect the project’s viability.

12.4 Mine Infrastructure Associated Risk

Although, accessibility of the project is good with existing infrastructure, a significant mine infrastructure facility needs to be developed before commencement of mining activity.

12.5 Mining Approvals, Tenure, and Permits

During mining, many government permits and approvals may be required to ramp up the capacity and the associated infrastructure facilities. Any delays in obtaining the required approvals may

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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affect the production expansion and the mine plan. This may likely cause the project to overrun which may significantly affect project capital and operating costs.

It is also possible that delays to land access and associated interruptions may occur in the future and that this may have a material impact on the value of the concession.

12.6 Environmental and Social Risks

While environmental and social risks have been identified and management plans are in place, it is possible that failure to comply with the environmental criteria or failure to maintain good relationships with the local community will have an impact on project. Except environmental risk associated with the retreatment of tailing, these risks are not considered to be greater for these projects than any other coal project.

12.7 Geotechnical Risk

Most of the BCB projects have potential to be extracted using underground mining methods. Limited geotechnical test work and actual ground conditions from previous mining activity was available. Additional geotechnical drilling may be needed to further ascertain the roof and floor condition of the mine. Unfavourable results from further geotechnical assessments may alter the mine plan which may in turn have material impacts on the value of projects.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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13 References

Blue Energy. Oct 2009. Be08 Glenden Seismic Survey - Seismic Survey Report.

Dyson, R. M. 2014. Comet Ridge JORC Resource Update, July 2014.

Leblang, G. 1997. EPC 596 (Comet Ridge), 622 (Yamala), Final And Relinquishment Report. Pattison, C. 2009. EPC 729 Bluff; Report On Areas Relinquished In January 2009.

Prouza, V. 1977. Coal Exploration, South Central Bowen Basin, Mt Stuart-Comet Area.

Prouza, V., Park, W.J. 1973. Revision of Permian Stratigraphy of the Emerald-German CreekComet area. Queensland Government Mining Journal, LXXIV (866), 433-438.

Turner, T. 2014. Lilyvale JORC Resource Estimate, Feb 2014

Williams, C. 2013. EPC 1827 "Cooroorah" Resource Estimate Update, November 2013.

Xenith, Independent Geologist Report, July 2017.

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Appendix A – Qualifications

Manish Garg is a Director at Salva Mining Pty Ltd. Salva Mining is a mining and logistics consulting organisation with headquarter at Brisbane, Australia. Manish has extensive experience in the assessment and valuation of mineral assets.

Sept 2016 – Present

Salva Mining Pty Ltd Director

Consulting work with over 7 valuation assignments including:

New Century Zinc – Century Zinc & Kodiak Projects
• Ascot Resources – Colombian Coal Assets
Golden Energy & Resources Ltd – Valuation of 4 major operating mines for SGX Main board listing
• AMCI – Vale’s Carborough Downs Mine
Balamara Resources – Coal Assets in Poland
Mayur Resources – Gold & Copper projects in PNG
• Valor Resources – Manganese Copper project, Peru

Oct 2011 – Sept 2016

Salva Resources Pty Ltd Director – Consulting

Consulting work including over 25 valuation assignments including:

AMCI – Vale’s Carborough Downs Mine
Sinarmas – Valuation of Assets for SGX Mainboard listing
• Ascot Resources – Colombian Coal Assets • Hancock Prospecting Pty Ltd – Valuation • Chinalco Yunnan Copper Resources Ltd – Due Diligence & Valuation
• Guildford Coal Ltd – Independent technical expert report • Kangaroo Resources Ltd – Independent Valuation • Conto resources Ltd & Dateline Resources Pty Ltd – Independent Valuation
• Avocet Resources Ltd & Lion One Metals Ltd – Independent valuation
• Anglo Coal – Management Advisory • Rio Tinto – Management Advisory • Sakari Resources Ltd – Management Advisory • RSM Bird Cameron Pty Ltd – Ind Valuation • Planet Resources – Independent technical expert report • Mitchell Energy Pty Ltd – Valuation • Pilbara Commodities Pty Ltd – Independent Valuation • Queensland Coal Investment Pty Ltd – Valuation • Triveni Earthmovers Pty Ltd – Due Diligence on Iron ore asset in Mauritania
• OPG International Ventures Pty Ltd – Valuation • AMCI - Due Diligence & Valuation • Temasek Holding (Singapore) Pty Ltd – Due Diligence & Valuation
• Fitzroy Port Pty Ltd – Due Diligence

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

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Apr 2009 – Oct 2011

Xstract Mining Consultants Pty Ltd Manager & Principal Consultant – Evaluation

Consulting work including working on over 30 evaluation and valuation assignments including:

First Reserve Corporation Inc – Due Diligence & Valuation
• Temasek Holding (Singapore) Pty Ltd – Due Diligence & Valuation
KPMG – Valuation
Oman Oil – Due Diligence & Valuation
Cliff Natural Resources - Management Advisory
Rio Tinto – Due Diligence & Valuation
Anglo Coal – Due Diligence & Valuation
Mitsui – Due Diligence & Valuation
AMCI – Due Diligence & Valuation
Vale – Due Diligence & Valuation

June 2006 – Apr 2009 Rio Tinto Group Manager – Business Improvement

Internal consulting work including assignments for strategy and valuation for:

Hunter Valley Operations
Mount Thorley Warkworth Operations
Bengalla Coal Mine
Kestrel Mine
Blair Athol Mine
Hail Creek Mine
Clermont Mine
Rio Tinto Alcan Weipa Operations
Kennecott Utah Copper
Rio Tinto Pilbara Iron

June 2005 – June 2006 BHP Billiton – Illawarra Coal Manager – Business Excellence

Internal consulting work including assignments for optimisation, strategy and valuation for:

West Cliff Mine
Appin Mine
Dendrobium Mine
Port Kembla Coal Terminal

March 2004 – June 2005 Oceanagold Gold Ltd Manager – Business Strategy

Internal consulting work including assignments for optimisation, valuation, strategy and business modelling for:

Macraes Open-pit
Frasers Underground
Reefton Open-pit

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Oct 2002 – March 2004

WMC Resources Ltd (now BHP Billiton – Nickel West) Manager – Business Planning

Internal Consulting work including assignments for optimisation, evaluation of various assets, merger & acquisition strategy and valuation for:

Kalgoorlie Nickel Smelter
Mount Keith Mine
Leinster Operations
Kambalda Operations
Kwinana Nickel Refinery
Olympic Dam Operations

Mar 1992 – Oct 2002

Pasminco Ltd (now MMG Resources)

March 2000 – Oct 2002 Manager – Business Analysis March 1999 – March 2000 Manager – Market Analysis Oct 1997 – March 1999 Lead Engineer – Studies Mar 1992 – Oct 1997 Superintendent - Metallurgy

Internal Consulting work including assignments for operations, optimisation, evaluation and feasibility studies including modeling for:

Elura Mine, Cobar
Broken Hill Mine
Century Mine
Rosebery Mine
Risdon Smelter
Budel Smelter
Port Pirie Smelter

July 1988 – Feb 1992 HZL Ltd (now Vedanta PLC) Engineer – Mineral processing

Education

1997 - 2000 Master of Applied Finance Securities Institute (now Kaplan), Melbourne

1984 - 1988 Bachelor of Engineering (Minerals Engineering) (Honours) Indian School of Mines

Professional Associations

Member of the Australasian Institute of Mining and Metallurgy Member of the Australian Institute of Company Directors

Others

Workshop leader for various technical conference and workshops on valuation and project assessment.

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Appendix B – Valuation Approaches and Methods

To ensure compliance with the ASX’s listing rules and Australian Corporations Law, this Report has been prepared in accordance with the VALMIN Code. Under the VALMIN Code, mineral assets are classified according to their maturity. A mineral asset includes all property held for the purpose of near term or eventual mineral extraction, including but not limited to:

real property;
intellectual property;
concessions, plant, equipment and associated infrastructure.

Most mineral assets can be classified as outlined in table below.

Mineral asset classification

Project development stage	Criterion
Exploration areas	Mineralisation may or may not have been defined, but where a Mineral Resource has not been identified.
Advanced exploration areas	Considerable exploration has been undertaken and specific targets identified. Sufficient work has been completed on at least one prospect to provide a good geological understanding and encouragement that further work is likely to result in the determination of a Mineral Resource.
Pre-development / Resource	Mineral Resources and/or Ore Reserves have been identified estimated. A positive development decision has not been made. This includes properties where a development decision has been negative and properties are either on care and maintenance or held on retention titles.
Development	Committed to production but not yet commissioned or not initially operatingat design levels.
Operating	Mineral properties, in particular mines and processing plants, which have been fullycommissioned and are inproduction.

Source: VALMIN, 2015

Under the VALMIN Code, value is the fair market value of a mineral asset (2015). Fair market value is the amount of money or the cash equivalent that a willing buyer and seller would exchange onthe valuation date in an arm’s length transaction (VALMIN, 2015). Each party is assumed to have acted knowledgeably, and without compulsion. In essence, fair market value is comprised of:

Underlying or ‘technical value’ - a mineral asset’s future economic benefit under a set of assumptions, excluding any premium or discount for market, strategic, or other considerations;
Market component - a premium relating to market, strategic or other considerations, which can be either positive, negative, or zero.

The market value should include all material information to the asset. For projects with extensive technical detail, the valuer determines materiality of information based on whether its inclusion would result in the valuation reaching a different conclusion.

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There is no single method of valuation which is appropriate for all situations. Rather, there are several valuation methods, each of which have some merit and are more or less applicable depending on the circumstances. Mineral assets are generally valued based on approaches that assess income, cost, and the open market. As the VALMIN Code is not prescriptive in this regard, the 2008 Edition of The South African Code for the Reporting of Mineral Asset Valuation (SAMVAL) and the Canadian 2003 Edition of the Standards and Guidelines for Valuation of Mineral Properties (CIMVAL) provide insight into applicable approaches, as shown in the Table below.

Valuation approaches for different types of mineral assets

Approach		Project development stage	Project development stage
	Exploration	Resource	Development	Operating
Income	No	Rarely	Yes	Yes
Cost	Yes	Rarely	No	No
Market	Yes	Yes	Yes	Yes

Market-based approach

The market-based approach uses the transaction prices of projects in similar geographical, geopolitical, and geological environments to derive a market value using a process similar to that in the real estate industry (CIMVAL, 2003). The market-based approach may use the assumption either of joint venture terms or outright acquisitions, and can be presented in range of unitised values including on a dollar per ounce or tonne of contained metal/mineral; dollar per square kilometre; or as a percentage of the prevailing commodity price.

In the Salva Mining’ opinion, a market-based approach is well suited to establishing a likely value for mineral deposits and exploration projects, as it inherently takes into account all value drivers.

Related comparable transactions

Recent comparable transactions can be relevant to the valuation of projects and concessions. While it is acknowledged that it can be difficult to determine to what extent the properties and transactions are indeed comparable, unless the transactions involve the specific parties, projects or concessions under review, this method can provide a useful benchmark for valuation purposes. The timing of such transactions must be considered as there can be substantial change in value with time.

Salva Mining has considered whether any comparable relevant transactions have taken place in recent years which can be used as a basis for estimation of value of the mining assets assessed herein.

As no two mineral assets are the same, the Expert must be cognisant of the quality of the assets in the comparable transactions, with specific reference to:

the grade of the resource
the metallurgical qualities of the resource
the proximity to infrastructure such as an existing mill, roads, rail, power, water, skilled work force, equipment, etc.
likely operating and capital costs
the amount of pre-strip (for open pits) or development (for underground mines) necessary
the likely ore to waste ratio (for open pits)

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the size of the concession covering the mineral asset, and
the overall confidence in the resource.

Alternative offers and joint venture terms

If discussions have been held with other parties and offers have been made on the project or concessions under review, then these values are certainly relevant and worthy of consideration. Similarly, joint venture terms where one party pays to acquire an interest in a project, or spends exploration funds in order to earn an interest, provide an indication of value.

Rules of thumb or yardsticks

Certain industry ratios are commonly applied to coal mining projects to derive an approximate indication of value. The most commonly used ratios are dollars per tonne of coal in resources, dollars per tonne of coal in reserves, and dollars per tonne of annual production. The ratios used commonly cover a substantial range which is generally attributed to the ‘quality’ of the coal, the infrastructure to reach markets and the status of the tonnes estimates. Low cost of production tonnes is clearly worth more than high cost tonnes. Where a project has substantial future potential not yet reflected in the quoted resources or reserves a ratio towards the high end of the range may be justified.

Other Expert Valuations

Where other independent experts or analysts have made recent valuations of the same or comparable properties, these opinions clearly need to be reviewed and to be taken into consideration.

Cost-based Approaches

Appraised Valuation or Multiple of exploration expenditure method (MEE)

Past expenditure, or the amount spent on exploration of a concession is commonly used as a guide in determining the value of exploration concessions, and ‘deemed expenditure’ is frequently the basis of joint venture agreements. The assumption is that well directed exploration has added value to the property. This is not always the case and exploration can also downgrade a property and therefore a ‘prospectively enhancement multiplier’ (PEM), which commonly ranges from 0.5-3.0, is applied to the effective expenditure. The selection of the appropriate multiplier is a matter of experience and judgement.

To eliminate some of the subjectivity with respect to this method, Salva Mining applies a scale of PEM ranges as follows to the exploration expenditure:

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	Prospectively enhancement multipliers
PEM	Rationale
0.5 -1.0	Previous exploration indicates the area has limitedpotential.
1.0 -1.5	The existing (historical and/or current) data consists of pre-drilling exploration and the results are sufficiently encouraging to warrant further exploration.
1.5 -2.0	The prospect contains one or more defined targets warranting additional exploration.
2.0 -2.5	Theprospect has one or more targets with significant drill hole intersections.
2.5 -3.5	Exploration is well advanced and in-fill drilling is required to define a Resource.
5.0	A Resource has been defined but a (recent) pre-feasibility study has not yet been completed

(modified by Salva Mining)

Over-riding any mechanical or technical valuation method for exploration ground must be recognition of prospectivity and potential, which is the fundamental value in relation to exploration properties.

Geo-Scientific rating (or Kilburn method)

To derive value for each property, the valuation expert considers four key attributes which either enhance or downgrade the BHC of each property. The technical factors considered are:

the Off-property factor – nearby properties containing physical indications of favourable mining conditions such as old workings and/or mines;
the On-property factor – the property being assessed hosts favourable mining indications such as historic workings or mines. Importantly any mineralisation capable of supporting a Mineral Resource estimate, compliant according to the guidelines of the JORC Code, will be assessed using other valuation methods;
the Anomaly factor – assesses the degree of exploration completed over the property and the number of resultant mineralised targets identified; and
the Geological factor – assesses the area covered by and degree of exposure of favourable rock types and/or structures (if this is related to the mineralisation style being assessed) within the property.

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property. Salva Mining’ multipliers or ratings and the criteria for rating selection are summarised in Table below.

Geo-Scientific Rating Criteria

Rating	Off property Factor	On Property Factor	Anomaly Factor	Geological Factor
0.1			No anomaly identified	Unfavourable geological setting
0.5	Unfavourable district/basin	Unknown area	Extensive previous exploration provided poor results	Poor geological setting/ extensive cover
0.9			Poor results to date	Generally favourable geological setting, under cover or complexly deformed
1	No known mineralisation in district	No known mineralisation on lease	No targets outlined	Generally favourable geological setting
1.5	Minor workings	Minor workings or mineralised zones exposed	Target identified, initial indications positive
2	Several old workings in district	Several old workings or exploration targets identified	Several well defined targets supported by limited drill data	Multiple exploration models being applied simultaneously
2.5			Several well defined targets with encouraging drill results	Well defined exploration model applied to new areas
3	Mine or abundant workings with significant previous production	Mine or abundant workings with previous production		Significant mineralised zones exposed in prospective host rocks
3.5			Significant grade intercepts evident but not linked on cross or long section
4	Along strike from a major deposit	Major mine with significant historical production	Several sub-economic grade intercepts on adjacent sections	Well understood exploration model, with valid targets in structurally complex area, or under cover
5	Along strike of world class deposit		Marginal economic targets of significant size	Well understood exploration model, with valid targets in well understood stratigraphy
6			Several significant ore grade correlateable intersections	Advanced exploration model constrained by known and well understood mineralisation
10		World class mine

(modified by Salva Mining)

Salva Mining Mineral Asset Valuation – Bowen Coking Coal

AI assistant

BOWEN COKING COAL LIMITED — Proxy Solicitation & Information Statement 2018

64503_rns_2018-04-05_17e15319-4960-492f-ae31-ec1723ec8c2f.pdf

Bowen Coking Coal Limited ACN 064 874 620

Notice of General Meeting

Important

CONTENTS

NOTICE OF GENERAL MEETING

Business

Resolutions 1(a), (b), and (c) – Acquisition of Purchase Rights / Hillalong East Project

Independent Expert’s Report

Voting exclusion statements

By order of the Board

EXPLANATORY STATEMENT

Important information

Scope of disclosure

Interpretation

Voting exclusion statements

Proxies

Voting intentions of the Chair

Voting entitlements

1. PROPOSED TRANSACTION

1.1 Background

Bowen Coking Coal Limited

( Existing Projects )

Transaction Agreements

Shareholder Approvals

1.2 Sale and Purchase Agreement (including the Royalty Agreements)

Royalty Deed and Royalty Mortgage Deed

1.3 Heads of Agreement

1.4

Assignment Agreement

1.5 Hillalong East Project

( Tenements ).

1.6

Indicative timetable

1.7 Pro forma capital structure

Notes:

1.8 Pro forma statement of financial position

1.9 Independent Expert’s Report

1.10 Advantages of the Proposed Transaction

1.11 Disadvantages of the Proposed Transaction

2. REGULATORY INFORMATION

2.1 Resolution 1(a) – Item 7 of section 611 of the Corporations Act – Issue of Consideration Shares to Cape Coal

Takeover prohibition

Voting Power

Relevant Interests

Associates

Item 7 of section 611 of the Corporations Act

Prescribed information

Identity of the acquirer and its associates

Effect on the acquirers’ Voting Power

Reasons for the proposed acquisition

Timing of the proposed acquisition

Material terms of the proposed acquisition

Other relevant agreements

Acquirers’ intentions regarding the future of the Company

Directors’ interests

Independent Expert’s Report

Independent Directors’ recommendation

2.2 Resolution 1(b) – Listing Rule 10.1 – Acquisition of Purchase Rights

Related Party

Substantial asset

Classified asset

Independent Expert’s Report

Directors’ recommendation

2.3 Resolution 1(c) – Related Party Issues - Issue of Consideration Shares to Cape Coal

(a) Name of the person receiving the financial benefit

(b) Maximum number of securities to be issued

(c) Date by which the entity will issue the securities

(d)

Relationship that requires shareholder approval

(e) Issue price of the securities

(f) Cape Coal’s existing interest in the Company

(g) Dilutionary effect of the issue of the Consideration Shares to Cape Coal

(h)

Terms of the issue

(i) Intended use of funds raised

Independent Directors’ recommendation

3. ADDITIONAL INFORMATION

BOWEN COKING COAL LIMITED Proxy Solicitation & Information Statement 2018