THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about any of the contents of this Supplemental Circular or as to what action to take in relation to this Supplemental Circular, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Yanzhou Coal Mining Company Limited (the “ Company ”), you should at once hand this Supplemental Circular to the purchaser(s) or transferee(s) or to the bank, or a licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Supplemental Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Supplemental Circular.

This Supplemental Circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe any securities.

YANZHOU COAL MINING COMPANY LIMITED

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1171)

MAJOR TRANSACTION

ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL IN FELIX RESOURCES LIMITED BY WAY OF A SCHEME OF ARRANGEMENT

SUPPLEMENTAL CIRCULAR

23 March 2010

			Pages
Definition . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			4
Appendix I	–	Financial Information of Felix Group . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	–	Unaudited Pro forma Financial Information of
		the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III	–	Management Discussion and Analysis of the Results of
		the Felix Group for the Financial Years Ended
		31 December 2006, 31 December 2007 and
		31 December 2008 and Each of the
		Nine Months Ended 30 September 2008
		and 30 September 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV	–	Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1

– i –

DEFINITIONS

In this circular, unless the context requires otherwise, the following expressions have the following meaning:

“ADSs” American depositary shares, each representing ownership of 10 H Shares, which are listed on New York Stock Exchange Inc.;
“AUD” Australian dollars, the lawful currency of Australia; “A Shares” domestic shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange;
“Austar” Austar Coal Mine Pty limited, an indirect wholly-owned subsidiary of the Company;
“Board” the board of Directors; “Circular” the initial circular dated 11 September 2009 issued by the Company in respect of the Transaction;
“Company” , Yanzhou Coal Mining Company Limited, a joint stock limited company incorporated in the PRC and the H Shares, ADSs and A Shares of which are listed on the Hong Kong Stock Exchange, New York Stock Exchange Inc. and the Shanghai Stock Exchange, respectively;
“Directors” the directors of the Company; “Enlarged Group” the Group after the conclusion of the Transaction; “Felix” Felix Resources Limited, a company incorporated under the laws of Australia, and which, upon the implementation of the Scheme on 23 December 2009, became an indirect wholly-owned subsidiary of the Company;
“Felix Group” Felix and its related entities which are: (a) any Related Body Corporate of Felix; (b) any entity that is in a consolidated financial reporting group with Felix; and (c) any entity controlled by Felix;
“Felix Shares” fully paid ordinary shares in Felix; “Felix Shareholders” the shareholders of Felix immediately prior to the implementation of the Scheme on 23 December 2009;

– 1 –

DEFINITIONS

“Group” the Company and its subsidiaries from time to time; “H Shares” overseas listed foreign invested shares in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange; “Hong Kong” the Hong Kong Special Administrative Region of the PRC; “Hong Kong Listing Rules” the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange; “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited; “IMC” International Marine Corporation Group of Singapore; “Itochu” Itochu Corporation of Japan; “KORES” Korea Resource Corporation; “Latest Practicable Date” 15 March 2010, being the latest practicable date of ascertaining certain information contained in this circular prior to its publication; “PRC” or “China” the People’s Republic of China; “PwC” PricewaterhouseCoopers, the reporting accountant of the Company for the purpose of the Transaction; “Scheme” the scheme of arrangement between Felix and the Scheme Participant which became effective on 11 December 2009 and was implemented on 23 December 2009; “Scheme Implementation the agreement dated 13 August 2009 entered into Agreement” between the Company and Felix, pursuant to which, the Company agreed to acquire all the Felix Shares; “Shares” A Shares and H Shares; “Shareholder(s)” the shareholder(s) of the Company; “Sojitz” Sojitz Corporation of Japan;

“Sojitz”

– 2 –

DEFINITIONS

“Supplemental Circular” this supplemental circular issued by the Company for the purpose of providing the Shareholders with, among other things, the prescribed information under Rules 14.66 and 14.67 of the Hong Kong Listing Rules which has not been previously disclosed in the Circular;
“Transaction” the acquisition by the Company of all of the Felix Shares pursuant to the Scheme between Felix and Felix Shareholders which was completed on 23 December 2009;
“USD” The United States dollars, the lawful currency of the United States;
“Yancoal Australia” Yancoal Australia Pty Limited, a wholly-owned subsidiary of the Company;
“Yankuang Group” Yankuang Group Corporation Limited, a wholly State-owned corporation and the controlling shareholder of the Company holding approximately 52.86% of the total issued share capital of the Company;
“%” per cent.

Notes:

Unless otherwise stated, a reference to any time contained in this Supplemental Circular is a reference to that time in Hong Kong.
In this Supplemental Circular, the English names of the PRC entities are direct translation of their Chinese names and included herein for identification purpose only. In the event of any inconsistencies, the Chinese names shall prevail.

– 3 –

LETTER FROM THE BOARD

YANZHOU COAL MINING COMPANY LIMITED

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1171)

Directors: Registered office: Wang Xin 298 South Fushan Road Geng Jiahuai Zoucheng Li Weimin Shandong Province Shi Xuerang PRC Chen Changchun Postal Code: 273500 Wu Yuxiang Wang Xinkun Principal place of business in Hong Kong: Zhang Baocai Rooms 2008-12 Dong Yunqing 20/F., The Center 99 Queen’s Road Central Independent non-executive Directors: Hong Kong Pu Hongjiu Zhai Xigui Li Weian Wang Junyan

23 March 2010

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL IN FELIX RESOURCES LIMITED BY WAY OF A SCHEME OF ARRANGEMENT

SUPPLEMENTAL CIRCULAR

INTRODUCTION

Reference is made to the Circular made by the Company dated 11 September 2009 in respect of the Transaction. Unless otherwise defined herein, terms used in this Supplemental Circular shall have the same meaning as those defined in the Circular.

– 4 –

LETTER FROM THE BOARD

On 13 August 2009, the Company entered into a binding Scheme Implementation Agreement with Felix and pursuant to which, the Company agreed to acquire all of the Felix Shares, subject to the Conditions being fulfilled or waived. The Transaction was approved by the Shareholders and Felix Shareholders at their respective extraordinary general meetings held on 30 October 2009 and 8 December 2009, respectively. The Scheme was approved by the Federal Court of Australia and became effective on 11 December 2009. The Scheme Consideration was paid to Felix Shareholders on 23 December 2009 and all the Felix Shares were transferred to Austar on the same date.

The purpose of this Supplemental Circular is to provide the Shareholders with, among other things, the prescribed information under Rules 14.66 and 14.67 of the Hong Kong Listing Rules which has not been previously disclosed in the Circular.

SUPPLEMENTAL INFORMATION NOT PREVIOUSLY DISCLOSED IN THE CIRCULAR

Due to the unavailability of certain non-public information of Felix at the time of dispatch of the Circular in September 2009, the Company was unable to include in the Circular certain information relate to Felix and the Enlarged Group to strictly comply with the disclosure requirements under Chapter 14 of the Hong Kong Listing Rules. Such outstanding information, therefore, is required to be dispatched to the Shareholders by way of a supplemental circular in the manner set out in Rule 14.67A(3) of the Hong Kong Listing Rules.

To fulfill its disclosure obligations under the Hong Kong Listing Rules, the Company set out the following information in this Supplemental Circular to supplement information previously disclosed in the Circular:

(1) accountant’s report on Felix containing financial information of the Felix Group for the 9 months ended 30 September 2009 and each of the three financial years ended 31 December 2008 prepared in accordance with the International Financial Reporting Standards and accounting policies adopted by the Group; (see Appendix I to this Supplemental Circular)
Note: By virtue of Rule 4.06(1)(a) of the Hong Kong Listing Rules, the Company is required to present in this Supplemental Circular an accountants’ report of Felix for the three months ended 30 September 2009 and the three financial years ended 30 June 2009. The Hong Kong Stock Exchange has granted a waiver to the Company for presenting the accountants’ report of Felix for the 9 months ended 30 September 2009 and the three years ended 31 December 2008 in this Supplemental Circular. For details, please refer to the section headed “Waivers from the Hong Kong Stock Exchange” below.
(2) statement of indebtedness of the Enlarged Group made up to the latest practicable date for the purpose of the statement of indebtedness; (see Part 3 of Appendix IV to this Supplemental Circular)
(3) statement of sufficiency of working capital of the Enlarged Group covering a period up to twelve months since the date of this Supplemental Circular; (see Part 4 of Appendix IV to this Supplemental Circular)

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LETTER FROM THE BOARD

(4) unaudited pro forma statement of assets and liabilities of the Enlarged Group; (see Appendix II to this Supplemental Circular)
(5) statement as to the financial and trading prospects of the Felix Group and the Enlarged Group; (see Part 6 of Appendix IV to this Supplemental Circular)
(6) particulars of any litigation or claims of material importance pending or threatened against any member of the Enlarged Group; (see Part 8 of Appendix IV to this Supplemental Circular)
(7) material contracts and documents of the Enlarged Group available for inspection; (see Part 9 of Appendix IV to this Supplemental Circular)
(8) other prescribed information under Rules 14.66 and 14.67 of the Hong Kong Listing Rules which has not been previously disclosed in Circular; and
(9) material updates to the information previously disclosed in the Circular.

WAIVERS FROM THE HONG KONG STOCK EXCHANGE

1. Presentation of Historical Results of Felix in the Supplemental Circular

At the time of preparing the Circular, Felix had a financial year end on 30 June. By virtue of Rule 4.06(1)(a) of the Hong Kong Listing Rules, the Company is required to present in this Supplemental Circular an accountants’ report of Felix for the three months ended 30 September 2009 and the three financial years ended 30 June 2009.

The Directors are of the view that it will be more appropriate to present the financial information of Felix coterminous with that of the Company in this Supplemental Circular, i.e. to present the accountants’ report of Felix for the 9 months ended 30 September 2009 and the three years ended 31 December 2008 for the following reasons:

(1) The audited financial information of Felix for the three years ended 30 June 2009 and the related management discussion and analysis have already been disclosed in the Circular and it is more useful and relevant to present the financial information of Felix with the same year end as the Company to enable the Shareholders and investors to comprehend the financial effects of the Transaction on the Company on similar basis;
(2) After completion of the Transaction, Felix has changed its financial year end to 31 December and it is easier for the Shareholders and investors to compare the historical performance of the Company and Felix on a year-on-year basis based on the same financial year, and to compare the future performance of the Enlarged Group with its historical performance; and
(3) Significant time and cost will be saved if the Company is allowed to present the financial information of Felix coterminous with that of the Company.

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LETTER FROM THE BOARD

Accordingly, the Company has applied to the Hong Kong Stock Exchange and the Hong Kong Stock Exchange has granted a waiver from strict compliance with Rule 4.06(1)(a) of the Hong Kong Listing Rules to present the accountants’ report of Felix for the 9 months ended 30 September 2009 and the three years ended 31 December 2008 in this Supplemental Circular.

2. Delay in Dispatch of the Supplemental Circular

Pursuant to 14.67A(3) of the Hong Kong Listing Rules, the Company is required to despatch a supplemental circular to the Shareholders on or before 6 February 2010. However, due to a series of public holidays in China and Australia (e.g. Christmas, New Year holidays, Australia National Day and the Chinese New Year holidays) and the substantial amount of financial information and work involved, additional time is required by Felix to prepare the necessary financial information and by PwC to complete the accountant’s report of Felix and report on unaudited pro forma financial information for inclusion in this Supplemental Circular. The Company, therefore, has applied to the Hong Kong Stock Exchange and the Hong Kong Stock Exchange has granted a waiver from strict compliance with Rule 14.67A(3) of the Hong Kong Listing Rules that the despatch of this Supplemental Circular be extended to on or before 23 March 2010.

MATERIAL UPDATES SINCE THE DATE OF THE CIRCULAR

1. Financing arrangement and guarantee

On 16 October 2009, Yancoal Australia entered into a financing agreement with Bank of China, Sydney branch, China Development Bank, Hong Kong branch and China Construction Bank, Hong Kong branch. Pursuant to the financing agreement, the three banks agreed to provide a bank loan in the amount of USD2.9 billion for the purpose of financing the Transaction. The Shandong branch of each syndicate banks issued a letter of guarantee in favour of its overseas branch. The issuance of such letters of guarantee was in turn guaranteed by the Company and counter-guaranteed by Yankuang Group to the Company.

On 9 December 2009, Yancoal Australia entered into another financing agreement with Bank of China, Sydney branch. Pursuant to the financing agreement, Bank of China, Sydney branch agreed to provide a bank loan in the amount of USD140 million to supplement the financing of the Transaction. Bank of China, Shandong branch issued a letter of guarantee in favour of its overseas branch. The issuance of the letter of guarantee was in turn guaranteed by the Company and counter-guaranteed by Yankuang Group to the Company.

2. Implementation of the Transaction

On 23 December 2009, the Scheme Consideration was paid to all Felix Shareholders and all the Felix Shares were transferred to Austar. Upon completion of the transfer, Austar is the registered holder of 196,625,038 shares recorded in the register of members of Felix maintained by Computershare, representing 100% of the issued share capital of Felix.

– 7 –

LETTER FROM THE BOARD

On 24 December 2009, Felix filed an application with ASX for delisting of the Felix Shares on ASX. Felix was delisted after the close of business hours of ASX on 30 December 2009 pursuant to the relevant listing rules of ASX.

3. Company’s undertakings in respect of the Transaction

On 23 October 2009, the Treasury of the Australian government announced that the Assistant Treasurer of Australia has conditionally approved the Transaction. In order to obtain the official approval regarding the Transaction, the Company is required to undertake to:

(1) operate its Australian mines through Yancoal Australia, which is managed in Australia using a predominately Australian management and sales team;
(2) ensure Yancoal Australia, and any of its operating subsidiaries, have at least two directors whose principal place of residence is in Australia, one of whom will be independent of the Company and its related entities;
(3) ensure that the Chief Executive Officer and Chief Financial Officer of Yancoal Australia have their principal place of residence in Australia;
(4) hold the majority of Yancoal Australia’s board meetings in Australia in any calendar year;
(5) list Yancoal Australia on ASX prior to the end of 2012 and, by that time, reduce the Company’s shareholding of Yancoal Australia to no more that 70%. In addition, as several of the mines operated by Felix are owned by joint ventures with third party companies, following the listing and shareholding reduction in Yancoal Australia, the Company’s economic ownership of the underlying mining assets must stand at no more than 50%. In the event of potential non-performance by the Company as a result of economic conditions or other factors, the Company is required to seek the approval of the Assistant Treasurer of Australia for amending the aforesaid undertakings; and
(6) market all coal produced at its Australian mines on arms-length terms with reference to international benchmarks and in line with market practices.

The Company has ensured and will continue to ensure strict implementation of its undertakings set out in items (1) to (4) and (6). In respect of item (5), the Company has not yet commenced any listing-related work but will actively prepare for the same and ensure Yancoal Australia is listed on ASX by the end of 2012.

4. Status on obtaining third party consents

Felix has entered into several joint venture agreements and the completion of the Transaction has triggered the “change of control” provision contained in each of the Ashton joint venture agreement and the Minerva joint venture agreement. Accordingly, the Company

– 8 –

LETTER FROM THE BOARD

is required to obtain from the relevant parties to the agreements a consent to such change of control. Specifically, from IMC and Itochu in respect of the Ashton joint venture and from Sojitz and KORES in respect of the Minerva joint venture.

Prior to the Effective Date, Itochu and KORES have, by way of written consents, waived their respective rights under the relevant joint venture agreements to acquire all of the equity interest in the relevant joint ventures which arose as a result of the Transaction.

As both IMC and Sojitz require additional time to consider whether a consent would be issued, the Company, on 7 December 2009, waived its rights to rely on the Condition that Felix shall obtain the relevant joint venture partners’ consents in respect of the change of control. The Company is currently negotiating with IMC and Sojitz as to their respectively rights under the relevant joint venture agreements. Should there be any material progress of the negotiation, the Company will duly comply with its disclosure obligations under the Hong Kong Listing Rules and further announcement will be made in this regard.

5. Divestment of SA Coal

As confirmed by the Company’s legal adviser as to Australian law, Felix distributed the entire issued share capital in SA Coal by way of dividend to Felix Shareholders on 30 October 2009. Accordingly, the condition of divestment of SA Coal under the Scheme Implementation Arrangement has been fulfilled.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices to this Supplemental Circular.

By order of the Board Yanzhou Coal Mining Company Limited Wang Xin Chairman

– 9 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The following is the text of a report, prepared for the purpose of incorporation in this Supplemental Circular, received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the reporting accountant.

==> picture [101 x 49] intentionally omitted <==

PricewaterhouseCoopers 22/F, Prince’s Building Central, Hong Kong

23 March 2010

The Directors Yanzhou Coal Mining Company Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of Felix Resources Limited (“Felix”) and its subsidiaries (together, the “Felix Group”) set out in Sections I to III below, for inclusion in the circular of Yanzhou Coal Mining Company Limited (the “Company”) dated 23 March 2010 (the “Circular”) in connection with the acquisition of Felix by a wholly-owned subsidiary of the Company. The Financial Information comprises the consolidated statements of financial position of Felix Group as at 31 December 2006, 2007 and 2008 and 30 September 2009, the statements of financial position of Felix as at 31 December 2006, 2007 and 2008 and 30 September 2009, and the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements of Felix Group for each of the years ended 31 December 2006, 2007 and 2008 and the nine months ended 30 September 2008 and 2009 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory notes.

Felix was incorporated in Australia on 29 January 1970 with limited liability under the Corporation Act 2001.

As at the date of this report, Felix has direct and indirect interests in the subsidiaries, joint ventures, associated companies and jointly controlled entities as set out in Notes 37, 38 and 15 of Section II below.

The statutory consolidated financial statements of Felix prepared in accordance with the Australian Accounting Standards (“AAS”) for each of the financial years ended 30 June 2006, 2007, 2008 and 2009 were audited by BDO Kendalls (QLD).

For the purpose of this report, the directors of Felix have prepared the consolidated financial statements of Felix for the Relevant Periods (the “Underlying Financial Statements”) in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board. We have audited the Underlying Financial

– I-1 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Statements in accordance with International Standards on Auditing. The Financial Information has been prepared based on the Underlying Financial Statements with no adjustment made thereon.

Directors’ responsibility

The directors of Felix during the Relevant Periods are responsible for the preparation and fair presentation of the consolidated financial statements of Felix in accordance with AAS. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

For the financial information for each of the years ended 31 December 2006, 2007 and 2008 and the nine months ended 30 September 2009, the directors of Felix and the Company are responsible for the preparation and the true and fair presentation of the financial information in accordance with IFRS. This responsibility includes selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

For the financial information for the nine months ended 30 September 2008, the directors of Felix and the Company are responsible for the preparation and the presentation of the financial information in accordance with the accounting policies set out in Note 1 of Section II below which are in conformity with IFRS.

Reporting accountant’s responsibility

For the financial information for each of the years ended 31 December 2006, 2007 and 2008 and the nine months ended 30 September 2009, our responsibility is to express an opinion on the financial information based on our examination and to report our opinion to you. We examined the Underlying Financial Statements used in preparing the financial information, and carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

For the financial information for the nine months ended 30 September 2008, our responsibility is to express a conclusion on the financial information based on our review and to report our conclusion to you. We conducted our review in accordance with International Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of the financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

– I-2 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Opinion and review conclusion

In our opinion, the financial information for each of the years ended 31 December 2006, 2007 and 2008 and the nine months ended 30 September 2009, for the purpose of this report, gives a true and fair view of the state of affairs of Felix and of Felix Group as at 31 December 2006, 2007 and 2008 and 30 September 2009 and of Felix Group’s results and cash flows for the respective years and period then ended.

Based on our review, which does not constitute an audit, nothing has come to our attention that causes us to believe that the financial information for the nine months ended 30 September 2008, for the purpose of this report, is not prepared, in all material respects, in accordance with the accounting policies set out in Note 1 of Section II below which are in conformity with IFRS.

– I-3 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

I. FINANCIAL INFORMATION OF FELIX GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 250,826 270,972 670,905 459,397 496,405 (159,178) (187,009) (265,630) (185,947) (235,083) 91,648 83,963 405,275 273,450 261,322 3,261 4,846 22,777 15,044 13,559 31,438 78,283 87,703 76,950 4,434 (56,408) (64,129) (77,032) (52,971) (56,249) (12,111) (15,210) (21,758) (15,424) (25,456) (4,341) (6,996) (6,924) (6,204) (2,545) 820 (547) (11) (12) (14) 54,307 80,210 410,030 290,833 195,051 (10,715) (21,169) (116,333) (83,692) (54,945) 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 250,826 270,972 670,905 459,397 496,405 (159,178) (187,009) (265,630) (185,947) (235,083) 91,648 83,963 405,275 273,450 261,322 3,261 4,846 22,777 15,044 13,559 31,438 78,283 87,703 76,950 4,434 (56,408) (64,129) (77,032) (52,971) (56,249) (12,111) (15,210) (21,758) (15,424) (25,456) (4,341) (6,996) (6,924) (6,204) (2,545) 820 (547) (11) (12) (14) 54,307 80,210 410,030 290,833 195,051 (10,715) (21,169) (116,333) (83,692) (54,945) 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 250,826 270,972 670,905 459,397 496,405 (159,178) (187,009) (265,630) (185,947) (235,083) 91,648 83,963 405,275 273,450 261,322 3,261 4,846 22,777 15,044 13,559 31,438 78,283 87,703 76,950 4,434 (56,408) (64,129) (77,032) (52,971) (56,249) (12,111) (15,210) (21,758) (15,424) (25,456) (4,341) (6,996) (6,924) (6,204) (2,545) 820 (547) (11) (12) (14) 54,307 80,210 410,030 290,833 195,051 (10,715) (21,169) (116,333) (83,692) (54,945) 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 250,826 270,972 670,905 459,397 496,405 (159,178) (187,009) (265,630) (185,947) (235,083) 91,648 83,963 405,275 273,450 261,322 3,261 4,846 22,777 15,044 13,559 31,438 78,283 87,703 76,950 4,434 (56,408) (64,129) (77,032) (52,971) (56,249) (12,111) (15,210) (21,758) (15,424) (25,456) (4,341) (6,996) (6,924) (6,204) (2,545) 820 (547) (11) (12) (14) 54,307 80,210 410,030 290,833 195,051 (10,715) (21,169) (116,333) (83,692) (54,945) 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 250,826 270,972 670,905 459,397 496,405 (159,178) (187,009) (265,630) (185,947) (235,083) 91,648 83,963 405,275 273,450 261,322 3,261 4,846 22,777 15,044 13,559 31,438 78,283 87,703 76,950 4,434 (56,408) (64,129) (77,032) (52,971) (56,249) (12,111) (15,210) (21,758) (15,424) (25,456) (4,341) (6,996) (6,924) (6,204) (2,545) 820 (547) (11) (12) (14) 54,307 80,210 410,030 290,833 195,051 (10,715) (21,169) (116,333) (83,692) (54,945) 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572
91,648 3,261 31,438 (56,408) (12,111) (4,341) 820 54,307 (10,715) 43,592	83,963 4,846 78,283 (64,129) (15,210) (6,996) (547) 80,210 (21,169) 59,041	405,275 22,777 87,703 (77,032) (21,758) (6,924) (11) 410,030 (116,333) 293,697	273,450 15,044 76,950 (52,971) (15,424) (6,204) (12) 290,833 (83,692) 207,141	261,322 13,559 4,434 (56,249 (25,456 (2,545 (14
				195,051 (54,945
				140,106
99 – 8,717 (10,708)	– (143) 12,959 (967)	– – (34,060) 40,918	– – (21,383) (22,854)

– I-4 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 43,471 58,855 293,495 207,015 139,989 121 186 202 126 117 43,592 59,041 293,697 207,141 140,106 42,100 67,106 298,296 176,049 137,455 121 186 202 126 117 42,221 67,292 298,498 176,175 137,572 23.99 30.43 149.50 105.45 71.26 23.32 30.39 149.32 105.28 71.19	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 43,471 58,855 293,495 207,015 139,989 121 186 202 126 117 43,592 59,041 293,697 207,141 140,106 42,100 67,106 298,296 176,049 137,455 121 186 202 126 117 42,221 67,292 298,498 176,175 137,572 23.99 30.43 149.50 105.45 71.26 23.32 30.39 149.32 105.28 71.19	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 43,471 58,855 293,495 207,015 139,989 121 186 202 126 117 43,592 59,041 293,697 207,141 140,106 42,100 67,106 298,296 176,049 137,455 121 186 202 126 117 42,221 67,292 298,498 176,175 137,572 23.99 30.43 149.50 105.45 71.26 23.32 30.39 149.32 105.28 71.19	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 43,471 58,855 293,495 207,015 139,989 121 186 202 126 117 43,592 59,041 293,697 207,141 140,106 42,100 67,106 298,296 176,049 137,455 121 186 202 126 117 42,221 67,292 298,498 176,175 137,572 23.99 30.43 149.50 105.45 71.26 23.32 30.39 149.32 105.28 71.19	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 43,471 58,855 293,495 207,015 139,989 121 186 202 126 117 43,592 59,041 293,697 207,141 140,106 42,100 67,106 298,296 176,049 137,455 121 186 202 126 117 42,221 67,292 298,498 176,175 137,572 23.99 30.43 149.50 105.45 71.26 23.32 30.39 149.32 105.28 71.19
(1,371)	8,251	4,801	(30,966)	(2,534
42,221	67,292	298,498	176,175
43,471 121	58,855 186	293,495 202	207,015 126	139,989 117
43,592	59,041	293,697	207,141
42,100 121	67,106 186	298,296 202	176,049 126	137,455 117
42,221 23.99 23.32	67,292 30.43 30.39	298,498 149.50 149.32	176,175 105.45 105.28

– I-5 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 36,496 10,665 283,415 219,545 32,798 102,077 93,080 143,816 22,293 37,207 49,285 58,469 53 11,668 – 6,655 34,503 39,992 50,521 55,664	As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 36,496 10,665 283,415 219,545 32,798 102,077 93,080 143,816 22,293 37,207 49,285 58,469 53 11,668 – 6,655 34,503 39,992 50,521 55,664	As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 36,496 10,665 283,415 219,545 32,798 102,077 93,080 143,816 22,293 37,207 49,285 58,469 53 11,668 – 6,655 34,503 39,992 50,521 55,664	As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 36,496 10,665 283,415 219,545 32,798 102,077 93,080 143,816 22,293 37,207 49,285 58,469 53 11,668 – 6,655 34,503 39,992 50,521 55,664
126,143 9,131 2,657 642 45 167,839 62,371 233,126 14,656 490,467 616,610 33,323 19,963 – 82 2,422 55,790	201,609 7,609 201 – 234 196,062 47,558 213,205 16,201 481,070 682,679 32,549 25,560 – 267 750 59,126	476,301 16,008 190 – – 226,234 22,901 191,789 22,344 479,466 955,767 61,237 11,651 41,266 73,637 608 188,399	484,149
			11,621 176 – – 322,219 15,664 187,839 29,621
			567,140
			1,051,289
			193,256 16,123 9,574 75,992 566
			295,511

– I-6 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

As at 31 December 2006 2007 2008 A$’000 A$’000 A$’000 4,116 4,520 4,231 93,605 81,015 25,597 64,136 73,842 76,790 3,131 6,064 7,313 164,988 165,441 113,931 220,778 224,567 302,330 395,832 458,112 653,437	As at 31 December 2006 2007 2008 A$’000 A$’000 A$’000 4,116 4,520 4,231 93,605 81,015 25,597 64,136 73,842 76,790 3,131 6,064 7,313 164,988 165,441 113,931 220,778 224,567 302,330 395,832 458,112 653,437	As at 31 December 2006 2007 2008 A$’000 A$’000 A$’000 4,116 4,520 4,231 93,605 81,015 25,597 64,136 73,842 76,790 3,131 6,064 7,313 164,988 165,441 113,931 220,778 224,567 302,330 395,832 458,112 653,437	As at 30 September 2009 A$’000 5,616 34,630 80,197 7,293
			127,736
			423,247
			628,042

437,320 6,518 (51,255) 392,583 3,249	444,712 14,137 (4,172) 454,677 3,435	444,833 19,698 185,270 649,801 3,636	446,409 11,831 166,049
			624,289 3,753
395,832 560,820	458,112 623,553	653,437 767,368	628,042

			755,778

– I-7 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

STATEMENTS OF FINANCIAL POSITION

As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 18,223 3,161 148,441 12,691 66,289 91,536 161,417 349,260 53 11,483 – – 66 40 109 64 84,631 106,220 309,967 362,015 20,748 20,748 26,362 23,568 45 – – – 241,393 241,393 241,393 261,056 731 412 928 1,940 54,239 39,697 737 1,273 394 309 311 227 317,550 302,559 269,731 288,064 402,181 408,779 579,698 650,079 830 726 114,342 121,061 3,600 9,509 3,522 7,765 – – 72,622 76,030 4,430 10,235 190,486 204,856 2,422 2,826 2,539 2,148 13,875 10,397 6,875 – 29 3,461 709 28 16,326 16,684 10,123 2,176 20,756 26,919 200,609 207,032 381,425 381,860 379,089 443,047 437,320 444,712 444,833 446,409 5,952 13,416 5,333 – (61,847) (76,268) (71,077) (3,362) 381,425 381,860 379,089 443,047 397,751 398,544 389,212 445,223	As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 18,223 3,161 148,441 12,691 66,289 91,536 161,417 349,260 53 11,483 – – 66 40 109 64 84,631 106,220 309,967 362,015 20,748 20,748 26,362 23,568 45 – – – 241,393 241,393 241,393 261,056 731 412 928 1,940 54,239 39,697 737 1,273 394 309 311 227 317,550 302,559 269,731 288,064 402,181 408,779 579,698 650,079 830 726 114,342 121,061 3,600 9,509 3,522 7,765 – – 72,622 76,030 4,430 10,235 190,486 204,856 2,422 2,826 2,539 2,148 13,875 10,397 6,875 – 29 3,461 709 28 16,326 16,684 10,123 2,176 20,756 26,919 200,609 207,032 381,425 381,860 379,089 443,047 437,320 444,712 444,833 446,409 5,952 13,416 5,333 – (61,847) (76,268) (71,077) (3,362) 381,425 381,860 379,089 443,047 397,751 398,544 389,212 445,223	As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 18,223 3,161 148,441 12,691 66,289 91,536 161,417 349,260 53 11,483 – – 66 40 109 64 84,631 106,220 309,967 362,015 20,748 20,748 26,362 23,568 45 – – – 241,393 241,393 241,393 261,056 731 412 928 1,940 54,239 39,697 737 1,273 394 309 311 227 317,550 302,559 269,731 288,064 402,181 408,779 579,698 650,079 830 726 114,342 121,061 3,600 9,509 3,522 7,765 – – 72,622 76,030 4,430 10,235 190,486 204,856 2,422 2,826 2,539 2,148 13,875 10,397 6,875 – 29 3,461 709 28 16,326 16,684 10,123 2,176 20,756 26,919 200,609 207,032 381,425 381,860 379,089 443,047 437,320 444,712 444,833 446,409 5,952 13,416 5,333 – (61,847) (76,268) (71,077) (3,362) 381,425 381,860 379,089 443,047 397,751 398,544 389,212 445,223	As at 31 December As at 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 18,223 3,161 148,441 12,691 66,289 91,536 161,417 349,260 53 11,483 – – 66 40 109 64 84,631 106,220 309,967 362,015 20,748 20,748 26,362 23,568 45 – – – 241,393 241,393 241,393 261,056 731 412 928 1,940 54,239 39,697 737 1,273 394 309 311 227 317,550 302,559 269,731 288,064 402,181 408,779 579,698 650,079 830 726 114,342 121,061 3,600 9,509 3,522 7,765 – – 72,622 76,030 4,430 10,235 190,486 204,856 2,422 2,826 2,539 2,148 13,875 10,397 6,875 – 29 3,461 709 28 16,326 16,684 10,123 2,176 20,756 26,919 200,609 207,032 381,425 381,860 379,089 443,047 437,320 444,712 444,833 446,409 5,952 13,416 5,333 – (61,847) (76,268) (71,077) (3,362) 381,425 381,860 379,089 443,047 397,751 398,544 389,212 445,223
84,631 20,748 45 241,393 731 54,239 394 317,550	106,220 20,748 – 241,393 412 39,697 309 302,559	309,967 26,362 – 241,393 928 737 311 269,731	362,015
			23,568 – 261,056 1,940 1,273 227
			288,064
402,181	408,779	579,698
830 3,600 – 4,430 2,422 13,875 29 16,326 20,756	726 9,509 – 10,235 2,826 10,397 3,461 16,684 26,919	114,342 3,522 72,622 190,486 2,539 6,875 709 10,123 200,609	121,061 7,765 76,030
			204,856
			2,148 – 28
			2,176
			207,032
381,425	381,860	379,089
437,320 5,952 (61,847)	444,712 13,416 (76,268)	444,833 5,333 (71,077)	446,409 – (3,362
381,425 397,751	381,860 398,544	379,089 389,212

– I-8 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 358,125 395,832 458,112 458,112 653,437 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 1,341 229 880 67 528 9 6,531 – – – (7,210) (11,772) (104,053) (104,053) (163,495) 1,346 – – – – (4,514) (5,012) (103,173) (103,986) (162,967) 395,832 458,112 653,437 530,301 628,042	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 358,125 395,832 458,112 458,112 653,437 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 1,341 229 880 67 528 9 6,531 – – – (7,210) (11,772) (104,053) (104,053) (163,495) 1,346 – – – – (4,514) (5,012) (103,173) (103,986) (162,967) 395,832 458,112 653,437 530,301 628,042	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 358,125 395,832 458,112 458,112 653,437 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 1,341 229 880 67 528 9 6,531 – – – (7,210) (11,772) (104,053) (104,053) (163,495) 1,346 – – – – (4,514) (5,012) (103,173) (103,986) (162,967) 395,832 458,112 653,437 530,301 628,042	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 358,125 395,832 458,112 458,112 653,437 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 1,341 229 880 67 528 9 6,531 – – – (7,210) (11,772) (104,053) (104,053) (163,495) 1,346 – – – – (4,514) (5,012) (103,173) (103,986) (162,967) 395,832 458,112 653,437 530,301 628,042	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 358,125 395,832 458,112 458,112 653,437 43,592 59,041 293,697 207,141 140,106 99 – – – – – (143) – – – 8,717 12,959 (34,060) (21,383) (6,191) (10,708) (967) 40,918 (22,854) 2,572 521 (3,598) (2,057) 13,271 1,085 (1,371) 8,251 4,801 (30,966) (2,534) 42,221 67,292 298,498 176,175 137,572 1,341 229 880 67 528 9 6,531 – – – (7,210) (11,772) (104,053) (104,053) (163,495) 1,346 – – – – (4,514) (5,012) (103,173) (103,986) (162,967) 395,832 458,112 653,437 530,301 628,042
43,592 99 – 8,717 (10,708) 521 (1,371) 42,221 1,341 9 (7,210) 1,346 (4,514)	59,041 – (143) 12,959 (967) (3,598) 8,251 67,292 229 6,531 (11,772) – (5,012)	293,697 – – (34,060) 40,918 (2,057) 4,801 298,498 880 – (104,053) – (103,173)	207,141 – – (21,383) (22,854) 13,271 (30,966) 176,175 67 – (104,053) – (103,986)	140,106 – – (6,191 2,572 1,085
				(2,534
				137,572
				528 – (163,495 –
				(162,967
395,832	458,112	653,437	530,301

– I-9 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENTS

Notes
Cash flows from operating
activities
Receipts from customers
Payments to suppliers and
employees
Cash received/(paid) on forward
foreign exchange contracts
Cash received on coal swap
contracts
Interest received
Interest paid
Income taxes refunded/(paid)
Net cash inflow from operating
activities
39
Cash flows from investing
activities
Payments for property, plant and
equipment
Payments for intangible assets
Proceeds from sale of property,
plant and equipment
Proceeds from sale of
available-for-sale financial assets
Proceeds from sale of intangible
assets
Proceeds from sale of equity
interests in Minerva & Athena
Joint Ventures
Proceeds from sale of equity
interests in Moolarben Joint
Venture
Payments for exploration and
evaluation activities
Return of share capital from an
associate
Advances (to)/from other entities

Year ended 31 December
9 months ended
30 September
2006
2007
2008
2008
2009
A$’000
A$’000
A$’000
A$’000
A$’000
(unaudited)
271,492
328,254
691,013
481,632
596,655
(249,599)
(306,444)
(355,282)
(319,678)
(329,636)
3,386
1,499
(41,381)
21,698
(46,453)
–
–
60,440
–
–
1,679
1,975
12,383
6,017
11,583
(3,824)
(6,590)
(6,713)
(6,102)
(2,435)
3,663
–
(17,416)
(334)
(40,860)
26,797
18,694
343,044
183,233
188,854
(104,269)
(44,876)
(41,113)
(20,413)
(110,332)
(1,002)
(1,124)
(414)
–
(374)
426
472
154
32
19,882
203
1,572
–
–
–
344
–
–
–
–
31,821
9,699
–
–
–
–
20,000
157,863
157,863
–
(7,506)
(2,995)
(7,942)
(5,368)
(5,455)
2,040
1,910
–
–
–
(4,059)
(9,735)
9,201
10,741
(4,004)

– I-10 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 1,242 (2,749) (5,299) (1,266) 875 – – (1,779) (1,774) (37) – – 1,705 1,705 – – – – – (500) – – – – (100,000) (80,760) (27,826) 112,376 141,520 (199,945) 9 6,531 – – – 106,200 15,800 – – – (32,143) (20,759) (69,500) (68,625) (2,625) (4,118) (6,499) (9,117) (5,144) (4,972) 3,015 – – – – (7,210) (11,772) (104,053) (5,890) (45,182) 65,753 (16,699) (182,670) (79,659) (52,779) 11,790 (25,831) 272,750 245,094 (63,870) 24,706 36,496 10,665 10,665 283,415 36,496 10,665 283,415 255,759 219,545	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 1,242 (2,749) (5,299) (1,266) 875 – – (1,779) (1,774) (37) – – 1,705 1,705 – – – – – (500) – – – – (100,000) (80,760) (27,826) 112,376 141,520 (199,945) 9 6,531 – – – 106,200 15,800 – – – (32,143) (20,759) (69,500) (68,625) (2,625) (4,118) (6,499) (9,117) (5,144) (4,972) 3,015 – – – – (7,210) (11,772) (104,053) (5,890) (45,182) 65,753 (16,699) (182,670) (79,659) (52,779) 11,790 (25,831) 272,750 245,094 (63,870) 24,706 36,496 10,665 10,665 283,415 36,496 10,665 283,415 255,759 219,545	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 1,242 (2,749) (5,299) (1,266) 875 – – (1,779) (1,774) (37) – – 1,705 1,705 – – – – – (500) – – – – (100,000) (80,760) (27,826) 112,376 141,520 (199,945) 9 6,531 – – – 106,200 15,800 – – – (32,143) (20,759) (69,500) (68,625) (2,625) (4,118) (6,499) (9,117) (5,144) (4,972) 3,015 – – – – (7,210) (11,772) (104,053) (5,890) (45,182) 65,753 (16,699) (182,670) (79,659) (52,779) 11,790 (25,831) 272,750 245,094 (63,870) 24,706 36,496 10,665 10,665 283,415 36,496 10,665 283,415 255,759 219,545	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 1,242 (2,749) (5,299) (1,266) 875 – – (1,779) (1,774) (37) – – 1,705 1,705 – – – – – (500) – – – – (100,000) (80,760) (27,826) 112,376 141,520 (199,945) 9 6,531 – – – 106,200 15,800 – – – (32,143) (20,759) (69,500) (68,625) (2,625) (4,118) (6,499) (9,117) (5,144) (4,972) 3,015 – – – – (7,210) (11,772) (104,053) (5,890) (45,182) 65,753 (16,699) (182,670) (79,659) (52,779) 11,790 (25,831) 272,750 245,094 (63,870) 24,706 36,496 10,665 10,665 283,415 36,496 10,665 283,415 255,759 219,545	Year ended 31 December 9 months ended 30 September 2006 2007 2008 2008 2009 A$’000 A$’000 A$’000 A$’000 A$’000 (unaudited) 1,242 (2,749) (5,299) (1,266) 875 – – (1,779) (1,774) (37) – – 1,705 1,705 – – – – – (500) – – – – (100,000) (80,760) (27,826) 112,376 141,520 (199,945) 9 6,531 – – – 106,200 15,800 – – – (32,143) (20,759) (69,500) (68,625) (2,625) (4,118) (6,499) (9,117) (5,144) (4,972) 3,015 – – – – (7,210) (11,772) (104,053) (5,890) (45,182) 65,753 (16,699) (182,670) (79,659) (52,779) 11,790 (25,831) 272,750 245,094 (63,870) 24,706 36,496 10,665 10,665 283,415 36,496 10,665 283,415 255,759 219,545
(80,760) 9 106,200 (32,143) (4,118) 3,015 (7,210) 65,753 11,790 24,706	(27,826) 6,531 15,800 (20,759) (6,499) – (11,772) (16,699) (25,831) 36,496	112,376 – – (69,500) (9,117) – (104,053) (182,670) 272,750 10,665	141,520 – – (68,625) (5,144) – (5,890) (79,659) 245,094 10,665	(199,945
				– – (2,625 (4,972 – (45,182
				(52,779
				(63,870 283,415
36,496	10,665	283,415	255,759

– I-11 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

II. NOTES TO THE FINANCIAL INFORMATION

1 Summary of significant accounting policies

Felix is an Australian coal exploration and production company with high-quality assets and projects throughout Australia. Felix Group has three operating open-cut coal mines, Yarrabee and Minerva in Queensland and Ashton in New South Wales, and an underground coal mine at Ashton in New South Wales, and its current priority is the development of the Moolarben open-cut coal mine in New South Wales. Felix Group is also part of consortiums formed to build and operate future coal terminals in Newcastle and Gladstone.

Felix is a listed public company limited by shares, incorporated and domiciled in Australia.

The Financial Information has been prepared in accordance with IFRS. It is prepared on the basis of historical costs, except for derivative financial instruments and available-for-sale financial assets that have been measured at fair value. The latest IFRS applicable on or before 30 September 2009 have been adopted throughout all the periods presented. The Financial Information is presented in Australian dollars.

All values in the Financial Information are rounded to the nearest thousand dollars (A$’000) unless otherwise stated.

Felix has not early adopted the amendments, new standards and interpretations issued by the International Accounting Standards Board that have been issued but are not yet effective. Such standards are not expected to have a material impact on the Financial Information on initial application.

Felix Group has adopted IFRS 8 Operating Segments, under which segment information is presented using a ’management approach’, i.e. segment information is provided on the same basis as information used for internal reporting purposes by the chief operating decision maker to assesses performance and allocate resources. The chief operating decision maker that makes strategic decisions has been identified as the Managing Director.

The following is a summary of the material accounting policies adopted by Felix Group in the preparation of the Financial Information. The accounting policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Principles of consolidation

(i) Subsidiaries

A subsidiary is any entity controlled by Felix. Control exists where Felix has the capacity to govern the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Felix to achieve the objectives of Felix. A list of subsidiaries is contained in note 37 to the Financial Information.

All inter-company balances and transactions between entities in Felix Group, including any unrealised profits or losses, have been eliminated on consolidation.

Non-controlling interests in the equity and results of entities that are controlled are shown as a separate item in the Financial Information. Losses applicable to the non-controlling interest in a consolidated subsidiary are allocated against the majority except to the extent that the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses. If in future years the subsidiary reports profits, such profits are allocated to the majority interest until the non-controlling interest’s share of losses previously absorbed by the majority have been recovered.

Where an entity began or ceased to be controlled during the period the results for that entity are only included from the date control commenced or up to the date control ceased.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(ii) Associates

Associates are those entities over which Felix Group exercises significant influence, but not control. Investments in associates are accounted for in Felix’s balance sheet using the cost method and in the Financial Information using the equity method, after initially being recognised at cost. Under this method, Felix Group’s share of the post-acquisition profits or losses of associates is recognised in the consolidated statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investments.

When Felix Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, Felix Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

(b) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rate expected to apply when the assets are recovered or the liabilities settled, based on those tax rates which are enacted or substantively enacted in each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by Felix Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Felix and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation regime. Felix is responsible for recognising the current tax assets and liabilities for the tax consolidated group. Each entity in the tax consolidated group recognises its own deferred tax assets and liabilities, except where the deferred tax assets relate to unused tax losses and credits, in which case Felix recognises the assets. Felix Group has entered into a tax sharing agreement whereby each company in Felix Group contributes to the income tax payable in proportion to their contribution to the profit before tax of the tax consolidated group. The tax consolidated group has also entered into a tax funding agreement whereby each entity in Felix Group can recognise their balance of the current tax assets and liabilities through inter-entity accounts.

(c) Cash and cash equivalents

Cash and cash equivalents includes:

(i) cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and
(ii) other short term, highly liquid investments with maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(d) Financial assets and financial liabilities

Felix Group classifies its financial assets and liabilities into the categories listed below, with the allocation depending on the purpose the asset or liability was acquired.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Note 1(e) provides further information on loans and receivables.

(ii) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. Derivatives are classified as held for trading unless they are designated as hedges. Other financial assets are classified as held for trading if acquired principally for the purpose of selling in the short-term. Note 1(x) provides further information on derivatives.

(iii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other financial asset categories. Note 1(j) provides further information on investments classified as available-for-sale.

(iv) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss comprises ’out-of-the-money’ derivatives.

(v) Financial liabilities measured at amortised cost

Financial liabilities measured at amortised cost comprise trade and other payables, and interest bearing liabilities. Note 1(p) provides further information on interest bearing liabilities.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Details on financial risk management are disclosed in note 2.

(e) Loans and receivables

Trade receivables, loans and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Debts which are known to be uncollectible are written-off by reducing the carrying amount directly. A provision for impairment is made when there is objective evidence that the full amount is not collectible. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the impairment provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the statement of comprehensive income. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written-off against the provision account.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(f) Advances to subsidiaries

Advances by Felix to subsidiaries (refer to note 14) are principally contributions toward exploration and evaluation expenditure, research and development expenditure and mine development. The value and recoverability of these amounts is related to Felix’s policies with regards to exploration and evaluation expenditure as described in note 1(m), and research and development expenditure as described in note 1(l). Should the underlying asset values be insufficient to recover the advances the amounts are reviewed for impairment.

(g) Inventories

Coal stocks are stated at the lower of cost and net realisable value. Costs are assigned on a weighted average basis and include direct materials, direct labour and an appropriate proportion of variable and fixed overheads. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(h) Overburden in advance

Overburden in advance comprises the accumulation of expenses incurred to enable access to the coal seams, and includes direct removal costs, machinery and plant running costs. The deferred costs are then charged to the statement of comprehensive income in subsequent periods on the basis of run-of-mine (“ROM”) coal tonnes mined. This is calculated by multiplying the ROM coal tonnes mined during the period by the weighted average cost to remove a bank cubic metre (“BCM”) of waste by the stripping ratio (ratio of waste removed in BCMs to ROM coal tonnes mined). The stripping ratio is based on the Joint Ore Reserves Committee (“JORC”) reserves of each mine.

(i) Property, plant and equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and accumulated impairment losses. The carrying amount of freehold land and buildings and plant and equipment is reviewed to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis described in note 1(o).

The depreciable amount of all property, plant and equipment, including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis or units of production basis to allocate their cost, net of their residual values, over their estimated useful lives to Felix Group commencing from the time the asset is held ready for use, as follows:

Buildings	10-25 years
Mine development	Units of production
	basis In tonnes
Plant and equipment	2.5-25 years
Leased plant and equipment	2.5-18 years

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

(j) Investments

All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges associated with the investment. After initial recognition, investments in shares in listed companies classified as available-for-sale are measured at fair value. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and Felix Group has transferred substantially all the risks and rewards of ownership.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Fair value for shares in listed companies is determined by reference to the Australian Securities Exchange quoted market bid prices at the close of business on the reporting date. Gains and losses on these available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the statement of comprehensive income.

Investments in shares in unlisted companies, which do not have a quoted market price and whose fair value cannot be reliably measured, are classified as available-for-sale and are measured at cost. Gains and losses are recognised in the statement of comprehensive income when the investments are derecognised or impaired.

Investments in subsidiaries are carried in Felix’s balance sheet at the lower of cost and recoverable amount. Investments in associates are accounted for in the Financial Information as set out in note 1(a).

(k) Interests in joint ventures

Felix Group’s share using proportionate consolidation of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the Financial Information. Details of Felix Group’s interests in joint ventures are shown in note 38.

(l) Intangible assets

(i) Mining tenements

Mining tenements have a finite useful life and are carried at cost less, where applicable, any accumulated amortisation and accumulated impairment losses. The carrying values of mining tenements are reviewed to ensure they are not in excess of their recoverable amounts. The recoverable amount is assessed on the basis described in note 1(o).

Amortisation of mining tenements commences from the date when commercial production commences, or in the case of the acquisition of the Ashton Coal Project, from the date of acquisition, and is charged to the statement of comprehensive income. Mining tenements are amortised over the life of the mine on a units of production basis of JORC reserves.

Changes in the annual amortisation rate resulting from changes in the remaining JORC reserves are applied on a prospective basis from the commencement of the next financial year.

(ii) Computer software

Computer software has a finite useful life and is carried at cost less, where applicable, any accumulated amortisation and accumulated impairment losses. The carrying values of computer software are reviewed to ensure they are not in excess of their recoverable amounts. The recoverable amount is assessed on the basis described in note 1(o).

Amortisation of computer software is calculated using a straight-line basis to allocate the cost over the period of the expected benefit, which varies from 2.5 to 4 years.

(iii) Research and development

Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products for clean coal technology) are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads (including depreciation on property, plant and equipment). Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Capitalised development costs have a finite useful life and are carried at cost less, where applicable, any accumulated amortisation and accumulated impairment losses. The carrying value of capitalised development costs are reviewed to ensure they are not in excess of their recoverable amounts. The recoverable amount is assessed on the basis described in note 1(o).

Amortisation of capitalised development costs is calculated using a straight-line basis to allocate the costs over the period of the expected benefit.

(iv) Rail access rights

Rail access rights have a finite useful life and are carried at cost less, where applicable, any accumulated amortisation and accumulated impairment losses. The carrying values of rail access rights are reviewed to ensure they are not in excess of their recoverable amounts. The recoverable amount is assessed on the basis described in note 1(o).

Rail access rights are amortised over the life of the mine or agreement using a unit of production basis in tonnes for the Minerva mine. The remaining estimated economically recoverable reserves of the Minerva mine at 31 December 2006, 2007, 2008 and 30 September 2009 are 34.2 million tonnes, 30.2 million tonnes, 27.4 million tonnes and 25.5 million tonnes, respectively.

(m) Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each separately identifiable area of interest which is at individual mine level. These costs are only carried forward where the right of tenure for the area of interest is current and to the extent that they are expected to be recouped through successful development and commercial exploitation, or alternatively, sale of the area, or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

The carrying amount of exploration and evaluation assets is assessed for impairment when facts or circumstances suggest the carrying amount of the assets may exceed their recoverable amount. The recoverable amount is assessed on the basis described in note 1(o).

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated costs in relation to an abandoned area are written-off in full in the period in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

(n) Acquisition of assets and assumption of liabilities

The acquisition of group of assets, including property, plant and equipment and intangibles, that do not constitute a business, are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of consideration provided plus incidental costs directly attributable to the acquisition.

When equity instruments are issued as consideration, their market price at the date of acquisition is used as their fair value.. The consideration will be allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of acquisition. Such a transaction does not give rise to goodwill.

Where settlement of any part of cash consideration is deferred, the amounts payable are recorded at their present value, discounted at the rate applicable to Felix Group as if a similar borrowing were obtained from an independent financier under comparable terms and conditions. The unwinding of the discount is treated as a finance cost.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(o) Recoverable amount of assets and impairment

At the end of each reporting date or when there is indication that an asset may be impaired, Felix Group assesses whether there is any indication that an asset may be impaired. Where an indication of impairment exists, Felix Group makes a formal estimate of the recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. The amount of the impairment loss is recognised in the statement of comprehensive income.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where it is not possible to estimate the recoverable amount of an individual asset, Felix Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Assets other than goodwill that have suffered impairments are reviewed for possible reversal of the impairment at each reporting date.

(p) Interest bearing liabilities

Interest bearing liabilities are initially recorded at fair value, net of transaction costs. Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the statement of comprehensive income over the period of the interest bearing liabilities using the effective interest rate method.

All interest bearing liabilities are classified as current liabilities unless Felix Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

(q) Borrowing costs

Borrowing costs incurred during the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are recognised as an expense when incurred.

(r) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to ownership of the assets, but not the legal ownership, are transferred to the entities in Felix Group are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the lower of the fair value of the leased property plus transaction costs incurred or the present value of the minimum lease payments, including any guaranteed residual value. Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that Felix Group will obtain ownership of the assets or over the shorter of the asset’s useful life and the term of the lease. Lease payments are allocated between the reduction of the lease liability and lease finance charges for the year.

The net gains arising on the sale of an asset and the leasing back of the same asset using a finance lease are included as deferred income in the statement of financial position and are released to the statement of comprehensive income on a straight-line basis over the term of the lease.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight-line basis over the term of the lease.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(s) Employee benefits

(i) Annual leave, sick leave and long service leave

Benefits accruing to employees in respect of wages and salaries, annual leave and sick leave are included in trade and other payables. Related on-costs are also included in trade and other payables as other creditors. Long service leave is provided for when it is probable that settlement will be required and it is capable of being measured reliably.

Employee benefits expected to be settled within 12 months are measured using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by Felix Group in respect of services provided by employees up to the reporting date.

(ii) Retirement benefit obligations

Contributions are made by Felix Group to defined contribution superannuation funds and are charged as expenses when incurred.

(iii) Share-based payments

Felix Group provides benefits to Directors, other key management personnel and general managers of Felix Group in the form of share-based payment transactions, whereby Directors, other key management personnel and general managers render services in exchange for options to purchase shares in Felix. The cost of these share-based payment transactions is measured by reference to the fair value at the date at which they are granted. Fair values at grant date are determined using a trinomial or binomial option pricing model that takes into account the exercise price, the life of the option, the current price of the underlying instrument, the expected price volatility of the underlying instrument, the expected dividend yield, and the risk-free interest rate for the life of the option.

The assessed fair value at grant date is recognised as an expense in the statement of comprehensive income, together with a corresponding increase in equity, pro-rata over the expected life of the option from grant date to expected vesting date. Upon exercise of the options, the balance in the options reserve is transferred to contributed equity. No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition is not met. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

(t) Provision

Provisions for rehabilitation and legal claims are recognised when: Felix Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

A provision for rehabilitation is recognised when there is a present obligation to rehabilitate an area disturbed, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. An asset is created as part of the current and non-current development assets, to the extent that the development relates to future production activities, which is offset by a current and non-current provision for rehabilitation.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

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APPENDIX I FINANCIAL INFORMATION OF FELIX GROUP

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(u) Revenue

Revenue from the sale of coal is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery, usually on a Free On Board, Trimmed (FOBT) basis.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive the dividend has been established.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customer.

(v) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

The net amount of GST recoverable from or payable to the ATO is included as a current asset or liability in the statement of financial position.

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

(w) Foreign currency transactions and balances

Items included in the Financial Information of each entity of Felix Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Financial Information is presented in Australian dollars, which is Felix’s functional and presentation currency.

Foreign currency transactions during the period are translated into the functional currency at rates of exchange applicable at the dates of each transaction. Monetary assets and liabilities denominated in foreign currencies at balance sheet date are converted at rates of exchange ruling at that date.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities, whether realised or unrealised, are recognised in the statement of comprehensive income as they arise except where hedging specific anticipated transactions (see note 1(x)).

The monetary assets and liabilities of foreign subsidiaries are translated at year-end rates. The non-monetary assets and liabilities are translated at rates at the transaction date or at the date these items are revalued or written down. Generally operating results are translated at average monthly rates. All resulting exchange differences are recognised as a separate component of equity. On disposal of a foreign subsidiary, the cumulative amount of such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(x) Derivatives

Felix Group uses derivative financial instruments such as forward foreign exchange contracts, coal swap contracts, and interest rate swap contracts to hedge its risks associated with foreign currency, coal price, and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at each reporting date. The resulting gain or loss arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, is recognised in the statement of comprehensive income immediately.

The fair value of interest rate swap contracts is calculated as the present value of the estimated future cash flows.

The forward foreign exchange contracts, coal swap contracts, and interest rate swap contracts entered into by Felix Group are designated and qualify as cash flow hedges.

Felix Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. Felix Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income in the hedging reserve and transferred to profit or loss when the hedged item affects profit or loss. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

The gains or losses in respect of hedge transactions which relate to future purchases or sales are deferred and included in the measurement of the purchase or sale to which they relate when the anticipated transaction occurs. Any gains or losses on the hedge transaction after that date are included in the statement of comprehensive income.

The net amount receivable or payable as a result of a hedge transaction is included as an asset or liability in the statement of financial position from the date of inception of the hedge. The corresponding unrealised gain or loss is recognised in equity in the hedging reserve. Changes in the fair value of the forward foreign exchange contracts, coal swap contracts, or interest rate swap contracts are recognised through the hedging reserve until the anticipated underlying transaction occurs. Once the anticipated underlying transaction occurs, amounts accumulated in equity are recycled through the statement of comprehensive income or recognised as part of the cost of the asset to which it relates.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity and is recognised when the forecast transaction is ultimately recognised. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the statement of comprehensive income for the year.

(y) Issued capital

Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are not included in the cost of the acquisition as they reduce the purchase consideration.

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(z) Critical accounting estimates and other accounting judgements

The Directors evaluate estimates and judgments incorporated into the Information based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within Felix Group.

Following is a summary of the key assumptions concerning the future, and other key sources of estimation and accounting judgements at reporting date that have not been disclosed elsewhere in this Financial Information.

(i) Determination of coal resources and reserves

Felix Group estimates its coal resources and reserves based on information compiled by Competent Persons defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves of December 2004. Reserves determined in this way are used in the calculation of amortisation and impairment charges, the assessment of mine lives and for forecasting the timing of the payment of rehabilitation costs.

(ii) Amortisation

The amortisation of mine development assets, mining tenements, rail access rights, exploration and evaluation assets where the related area of interest is being or has been developed, and the expensing of overburden removal costs is based on saleable coal production over estimated economically recoverable reserves. The amount of reserves that may actually be mined in the future and Felix Group’s estimate of reserves from time to time in the future may vary from current reserve estimates.

(iii) Impairment

Felix Group assesses impairment at each reporting date by evaluating conditions specific to Felix Group that may lead to an impairment. Where an indicator of impairment exists, the recoverable amount of the asset is determined. The value-in-use calculations performed to determine the recoverable amount of the cash generating units to which these assets belong is based on actual operating results and a cash flow model based on life of mines. Coal prices used in the model are determined based on an analysis of long-term market price trends and estimated future foreign currency rates. Note 11 provides further information on Felix Group’s exposure to foreign currency risk.

No indicators of impairment have been identified in respect of mine development assets, mining tenements, rail access rights or exploration and evaluation assets where the related area of interest is being or has been developed, for the reporting period.

(iv) Rehabilitation

The calculations of the provisions for rehabilitation and where applicable the related development assets rely on estimates of the cost to rehabilitate an area which is currently disturbed, based on legislative requirements and current costs. The costs are estimated on the basis of a mine closure plan. Cost estimates take into account expectations about future events including the mine lives, the timing of rehabilitation expenditure, regulations and discount rates. When these expectations change in the future the provision and where applicable the development asset are recalculated in the period in which they change.

(v) Income taxes

Felix Group is subject to income taxes in Australia. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Felix Group estimates its tax liabilities based on Felix Group’s understanding of the tax law. Where the

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FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(aa) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the equity holders of Felix by the weighted average number of ordinary shares outstanding during the financial year/ period.

(ii) Diluted earnings per share

Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(ab) Dividend distribution

Dividend distribution to Felix’s shareholders is recognised as a liability in the Financial Information in the period in which the dividends are approved by Felix’s directors.

2 Financial risk management

Felix Group undertakes transactions in a range of financial instruments including:

(i) cash and cash equivalents;
(ii) trade & other receivables;
(iii) trade and other payables;
(iv) interest bearing liabilities, including bank loans and finance leases; and
(v) derivatives.

Felix Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.

The Board of Directors has overall responsibility for determining risk management objectives and policies and risk management is carried out by a central treasury department. The Board provides written principles for overall risk management, as well as policies covering specific areas such as, investment of excess liquidity, and the use of derivative financial instruments to mitigate foreign exchange risk, price risk, and interest rate risk. These derivative instruments create an obligation or right that effectively transfers one or more of the risks associated with an underlying financial instrument, asset or obligation. Derivatives are used exclusively for hedging purposes i.e. not as trading or other speculative instruments. Derivative transactions are entered into to hedge the risks relating to underlying physical positions arising from business activities.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible and reduce volatility on financial performance without unduly affecting competitiveness and flexibility. Further details regarding these policies are set out below.

– I-23 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(a) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates (currency risk), coal prices (price risk) or interest rates (interest rate risk).

(i) Foreign exchange risk

Felix Group operates entirely in Australia and its costs are primarily denominated in its functional currency, the Australian dollar. Export coal sales are denominated in US dollars. A strengthening of the Australian dollar against the US dollar has an adverse impact on earnings and cash flow. Some plant and equipment purchases are denominated in currencies other than the Australian dollar. A weakening of the Australian dollar against those other currencies has an adverse impact on earnings and cash flow.

Foreign exchange risk that arises from firm commitments or highly probable transactions is managed principally through the use of forward foreign currency derivatives. Felix Group hedges a proportion of these transactions (such as contracted US dollar sales and asset purchases settled in foreign currencies) in each currency in accordance with the Board’s risk management policy.

Felix Group’s exposure to foreign exchange risk at the reporting date is set out below.

As at 31 December 2006 As at 31 December 2007 USD EUR YEN GBP USD EUR YEN GBP $’000 €’000 €’000 €’000 $’000 €’000 €’000 €’000 Cash and cash equivalents 42 – – – 226 – – – Trade receivables 12,850 – – – 13,793 – – 1 Forward foreign exchange contracts: – sell foreign currency (cash flow hedges) – – – – (155,104) – – – Total 12,892 – – – (141,085) – – 1 As at 31 December 2008 USD EUR YEN GBP $’000 €’000 €’000 €’000 Cash and cash equivalents 5,472 – – – Trade receivables 54,506 – – – Forward foreign exchange contracts: – sell foreign currency (cash flow hedges) (147,595) – – – (87,617) – – – As at 30 September 2009 USD EUR YEN GBP $’000 €’000 €’000 €’000 Cash and cash equivalents 13,129 – – 1 Trade receivables 23,566 – – – Trade payables (433) – – – Forward foreign exchange contracts: – buy foreign currency (cash flow hedges) 33,517 14,271 1,227,116 – – sell foreign currency (cash flow hedges) (45,000) – – – 24,779 14,271 1,227,116 1	As at 31 December 2006 As at 31 December 2007 USD EUR YEN GBP USD EUR YEN GBP $’000 €’000 €’000 €’000 $’000 €’000 €’000 €’000 Cash and cash equivalents 42 – – – 226 – – – Trade receivables 12,850 – – – 13,793 – – 1 Forward foreign exchange contracts: – sell foreign currency (cash flow hedges) – – – – (155,104) – – – Total 12,892 – – – (141,085) – – 1 As at 31 December 2008 USD EUR YEN GBP $’000 €’000 €’000 €’000 Cash and cash equivalents 5,472 – – – Trade receivables 54,506 – – – Forward foreign exchange contracts: – sell foreign currency (cash flow hedges) (147,595) – – – (87,617) – – – As at 30 September 2009 USD EUR YEN GBP $’000 €’000 €’000 €’000 Cash and cash equivalents 13,129 – – 1 Trade receivables 23,566 – – – Trade payables (433) – – – Forward foreign exchange contracts: – buy foreign currency (cash flow hedges) 33,517 14,271 1,227,116 – – sell foreign currency (cash flow hedges) (45,000) – – – 24,779 14,271 1,227,116 1	As at 31 December 2006 As at 31 December 2007 USD EUR YEN GBP USD EUR YEN GBP $’000 €’000 €’000 €’000 $’000 €’000 €’000 €’000 Cash and cash equivalents 42 – – – 226 – – – Trade receivables 12,850 – – – 13,793 – – 1 Forward foreign exchange contracts: – sell foreign currency (cash flow hedges) – – – – (155,104) – – – Total 12,892 – – – (141,085) – – 1 As at 31 December 2008 USD EUR YEN GBP $’000 €’000 €’000 €’000 Cash and cash equivalents 5,472 – – – Trade receivables 54,506 – – – Forward foreign exchange contracts: – sell foreign currency (cash flow hedges) (147,595) – – – (87,617) – – – As at 30 September 2009 USD EUR YEN GBP $’000 €’000 €’000 €’000 Cash and cash equivalents 13,129 – – 1 Trade receivables 23,566 – – – Trade payables (433) – – – Forward foreign exchange contracts: – buy foreign currency (cash flow hedges) 33,517 14,271 1,227,116 – – sell foreign currency (cash flow hedges) (45,000) – – – 24,779 14,271 1,227,116 1
		1

		GBP €’000 – – –
		–

		GBP €’000 1 – – – –
		1

– I-24 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(ii) Price risk

Felix Group is exposed to price risk on the coal it produces and sells on the world market in US dollars. The majority of coal sales are made to major customers with the prices negotiated annually. The remainder of coal sales are sold at the spot market price, or sold under long-term fixed prices.

Price risk that arises from firm commitments or highly probable transactions is managed principally through the use of forward coal price derivatives. Felix Group hedges a proportion of these transactions (such as contracted US dollar sales) in accordance with the Board’s risk management policy. These cash flow hedges balance the exposure to changes in the market price of coal by fixing the price. The Board’s policy assumes that at the time when coal sales contracts are entered into that the contracted price will approximate to the current price of the market index that the coal swap contracts are linked to. The Board’s policy requires that an offsetting coal swap contract is entered into at the same time that the coal sales contract price is agreed to. During 2009, no additional coal price hedging was entered into due to the low coal prices.

Felix Group’s exposure to price risk is detailed in note 11.

(iii) Cash flow and fair value interest rate risk

Felix Group is subject to interest rate risk that arises from borrowings. Borrowings issued at variable rates expose Felix Group to cash flow interest rate risk. Borrowings issued at fixed rates expose Felix Group to fair value interest rate risk if they are carried at fair value. Felix Group invests surplus cash in interest bearing deposits with banks and financial institutions. Investments at variable rates expose Felix Group to cash flow interest rate risk. Investments at fixed rates expose Felix Group to fair value interest rate risk if they are carried at fair value.

Interest rate risk that arises from borrowings is managed generally by borrowing at floating interest rates. Felix Group hedges a proportion of borrowings issued at variable interest rates through the use of floating-to-fixed interest rate swap contracts when required under borrowing agreements.

Felix Group’s fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to fair value interest rate risk.

Felix Group’s exposure to cash flow interest rate risk from investments at 31 December 2006, 2007, 2008 and 30 September 2009 was A$28,172,000, A$12,370,000, A$29,208,000 and A$148,213,000 respectively. Felix Group’s exposure to cash flow interest rate risk from borrowings at 31 December 2006, 2007, 2008 and 30 September 2009 was A$62,134,000, A$67,626,000, A$1,215,000 and A$2,201,000 respectively.

– I-25 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The effective interest rates of financial assets and financial liabilities of Felix Group at the reporting date are set out below.

As at 31 December 2006 (i) Financial Assets Current Cash and cash equivalents Secured director loan – interest bearing (ii) Financial liabilities Current Bank loans Lease liabilities Non-current Bank loans Lease liabilities As at 31 December 2007 (ii) Financial Assets Current Cash and cash equivalents Loan to other entities Secured director loan – interest bearing (ii) Financial liabilities Current Bank loans Lease liabilities Non-current Bank loans Lease liabilities	Floating balance A$’000 26,467 1,705 28,172	Weighted average effective interest rate Fixed balance Floating Fixed A$’000 % % 10,029 4.75 6.60 – 9.72 N/A 10,029 1,466 8.29 6.00 8,177 N/A 9.6 13,875 7.99 6.00 19,730 N/A 9.93 43,248 Weighted average effective interest rate Fixed balance Floating Fixed A$’000 % % – 5.92 N/A 14,006 N/A 25.00 – 10.10 N/A 14,006 1,874 8.76 6.00 6,850 N/A 10.26 10,375 8.79 6.00 19,850 N/A 8.95 38,949
	2,134 – 60,000 –	1,466 8,177 13,875 19,730
	62,134 Floating balance A$’000 10,665 – 1,705 12,370
	16,836 – 50,790 –	1,874 6,850 10,375 19,850
	67,626

– I-26 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

As at 31 December 2008 (i) Financial Assets Current Cash and cash equivalents Secured director loan – interest bearing (ii) Financial liabilities Current Bank loans Lease liabilities Non-current Bank loans Lease liabilities As at 30 September 2009 (i) Financial Assets Current Cash and cash equivalents Cash-restricted Secured director loan – interest bearing (ii) Financial liabilities Current Bank loans Lease liabilities Non-current Bank loans Lease liabilities Loan from other entity	Floating balance A$’000 29,208 – 29,208	Weighted average effective interest rate Fixed balance Floating Fixed A$’000 % % 254,207 2.76 5.48 1,779 N/A 10.45 255,986 2,285 5.50 6.00 8,151 N/A 9.63 6,875 N/A 6.00 18,722 N/A 7.97 36,033 Weighted average effective interest rate Fixed balance Floating Fixed A$’000 % % 71,318 2.42 3.66 100,000 N/A 3.21 1,816 N/A 10.45 173,134 6,842 4.72 6.00 8,373 N/A 8.93 – N/A N/A 33,337 N/A 8.45 – 5.27 N/A 48,552
	1,215 – – –	2,285 8,151 6,875 18,722
	1,215 Floating balance A$’000 148,213 – – 148,213
	908 – – – 1,293	6,842 8,373 – 33,337 –
	2,201

(iv) Sensitivity analysis – interest rate risk and other price risk

The following table shows the sensitivity of Felix Group’s financial assets and financial liabilities to interest rate risk and other price risk.

– I-27 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Sensitivity for interest rate risk shows the effect there would be on post-tax profit and equity if interest rates had changed by -/+ 100 basis points (100 basis points equals 1%) from the year end rates with all other variables held constant. The carrying amounts disclosed below do not include items which have fixed interest rates.

Sensitivity for price risk shows the effect there would be on post-tax profit and equity if the coal price had weakened/strengthened by 10% with all other variables held constant, arising from coal swap contracts designated as cash flow hedges.

		Interest rate	Interest rate	Interest rate	risk	risk					Price risk	Price risk
				–100	basis		+100 basis
				points			points					–10%		+10%
	Carrying	Interest				Other			Other	Coal
31 December 2006	amount	rate		Profit		equity	Profit		equity	price		Profit	Equity	Profit	Equity
	A$’000	%	A$’000		A$’000		A$’000	A$’000		USD/t	A$’000		A$’000	A$’000	A$’000
Financial assets
Cash and cash equivalents	26,467	4.75		(265)		–	265		–	–		–	–	–	–
Secured director loan	1,705	9.72		(17)		–	17		–	–		–	–	–	–
Financial liabilities
Bank loans	3,600	8.29		36		–	(36)		–	–		–	–	–	–
Bank loans (non current)	73,875	7.99		739		–	(739)		–	–		–	–	–	–
Tax charge of 30%				(148)		–	148		–			–	–	–	–
Total increase/ (decrease)				345		–	(345)		–			–	–	–	–

		Interest rate			risk						Price risk
				–100	basis		+100 basis
				points			points					–10%		+10%
	Carrying	Interest				Other			Other	Coal
31 December 2007	amount	rate		Profit		equity	Profit		equity	price		Profit	Equity	Profit	Equity
	A$’000	%	A$’000		A$’000		A$’000	A$’000		USD/t	A$’000		A$’000	A$’000	A$’000
Financial assets
Cash and cash equivalents	10,665	5.92		(107)		–	107		–	–		–	–	–	–
Secured director loan	1,705	10.1		(17)		–	17		–	–		–	–	–	–
Financial liabilities
Bank loans (Current)	16,836	8.76		152		–	(152)		–	–		–	–	–	–
Bank loans (Non Current)	50,790	8.79		508		–	(508)		–	–		–	–	–	–
Tax charge of 30%				(161)		–	161		–			–	–	–	–
Total increase/ (decrease)				375		–	(375)		–			–	–	–	–

		Interest rate			risk						Price risk
				–100	basis		+100 basis
				points			points					–10%		+10%
	Carrying	Interest				Other			Other	Coal
31 December 2008	amount	rate		Profit		equity	Profit		equity	price		Profit	Equity	Profit	Equity
	A$’000	%	A$’000		A$’000		A$’000	A$’000		USD/t	A$’000		A$’000	A$’000	A$’000
Financial assets
Cash and cash equivalents	29,208	2.76		(292)		–	292		–	–		–	–	–	–
Secured director loan	1,779	11.75		(18)		–	18		–	–		–	–	–	–
Financial liabilities
Bank loans	1,215	5.50		–		–	–		–	–		–	–	–	–
Tax charge of 30%				93		–	(93)		–			–	–	–	–
Total (decrease)/increase				(217)		–	217		–			–	–	–	–

– I-28 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

		Interest rate risk	Interest rate risk	Interest rate risk	Interest rate risk	Interest rate risk	Interest rate risk					Price risk	Price risk	Price risk
				–100 basis				+100 basis
				points				points					–10%		+10%
30 September 2008	Carrying	Interest				Other			Other		Coal
(unaudited)	amount	rate		Profit		equity		Profit	equity		price		Profit	Equity	Profit	Equity
	$’000	%		$’000			$’000	$’000		$’000	USD/t		$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	56,901	2.53		(569)			–	569		–	–		–	–	–	–
Financial liabilities
Derivatives – cash flow hedges	–	–		–			–	–		–	131.00		–	(13,845)	–	13,845
Bank loans	1,319	8.67		13			–	(13)		–	–		–	–	–	–
Tax charge of 30%				167			–	(167)		–			–	4,154	–	(4,154)
Total (decrease)/increase				(389)			–	389		–			–	(9,691)	–	9,691

		Interest rate risk										Price risk
				–100 basis				+100 basis
				points				points					–10%		+10%
	Carrying	Interest				Other			Other		Coal
30 September 2009	amount	rate		Profit		equity		Profit	equity		price		Profit	Equity	Profit	Equity
	A$’000	%	A$’000		A$’000			A$’000	A$’000		USD/t	A$’000		A$’000	A$’000	A$’000
Financial assets
Cash and cash equivalents	148,213	2.42		(1,482)			–	1,482		–	–		–	–	–	–
Financial liabilities
Bank loans	908	4.72		9			–	(9)		–	–		–	–	–	–
Loan from other entity	1,293	5.27		13			–	(13)		–	–		–	–	–	–
Tax charge of 30%				438			–	(438)		–			–	–	–	–
Total (decrease)/increase				(1,022)			–	1,022		–			–	–	–	–

(v) Sensitivity analysis – foreign exchange risk

31 December 2006 Carrying amount Spot rate A$’000 Financial assets Cash and cash equivalents 53 0.7913 Trade receivables 16,238 0.7913 Financial liabilities Tax charge of 30% Total increase/(decrease) 31 December 2007 Carrying amount Spot rate A$’000 Financial assets Cash and cash equivalents 257 0.8816 Trade receivables 15,645 0.8816 Derivatives – cash flow hedges – 0.8816 Financial liabilities Tax charge of 30% Total increase/(decrease)	USD –5% Profit Other equity A$’000 A$’000 3 – 855 – (257) – 601 – USA$ –5% Profit Other equity A$’000 A$’000 14 – 823 – – (9,360) (251) 2,808 586 (6,552)	+5% Profit Other equity A$’000 A$’000 (3) – (773) – 233 – (543) – +5% Profit Other equity A$’000 A$’000 (12) – (745) – – 8,468 227 (2,540) (530) 5,928

– I-29 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2008 Carrying amount Spot rate A$’000 Financial assets Cash and cash equivalent 7,899 0.6928 Trade receivables 78,675 0.6928 Financial liabilities Derivatives – cash flow hedges – 0.6928 Tax charge of 30% Total increase/(decrease) USD –5% +5% –5% 30 September 2009 Carrying amount Spot rate Profit Other equity Profit Other equity Spot rate Profit Equity P A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A Financial assets Cash and cash equivalents 14,198 0.8801 785 – (710) – – – Trade receivables 26,778 0.8801 1,409 – (1,275) – – – Derivatives – cash flow hedges – 0.8801 – (2,736) – 2,475 – – Financial liabilities Derivatives – cash flow hedges – 0.8801 – 2,127 – (1,925) 0.6015 – 1,169 Tax charge of 30% (658) 183 598 (165) – (351) Total increase/ (decrease) 1,536 (426) (1,387) 385 – 818	USA$ –5% Profit Other equity A$’000 A$’000 416 − 4,141 – – (11,265) (1,367) 3,380 3,190 (7,885) Euro +5% rofit Equity Spot rate Profit $’000 A$’000 A$’000 – – – – – – – – – – (1,058) 78.82 – – 317 – – (741) –	+5% Profit Other equity A$’000 A$’000 (376) − (3,746) – – 10,192 1,237 (3,058) (2,885) 7,134 Yen –5% +5% Equity Profit Equity A$’000 A$’000 A$’000 – – – – – – – – – 549 – (529) (165) – 159 384 – (370)

(b) Credit risk

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

Credit risk arises from cash and cash equivalents, forward foreign exchange contracts, coal swap contracts and interest rate swap contracts, as well as credit exposures to customers. In respect of credit risk on derivatives, refer to note 11(b). In respect to cash deposits, Felix Group only invests with accounts that have a Standard and Poor’s credit rating of A-1+. The Commonwealth Bank of Australia (CBA) is the major counterparty for derivatives and cash and cash equivalents. CBA has an overall Standard and Poor’s credit rating of AA.

Credit risk in trade receivables is managed in the following ways:

(i) payment terms are set for individual customers;
(ii) a risk assessment process is used for all customers; and
(iii) letters of credit are required for those customers assessed as posing a higher risk.

– I-30 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The maximum exposure to credit risk on financial assets which have been recognised in the statement of financial position is their carrying amount less impairment provision as set out below.

Cash and cash equivalents Trade and other receivables Derivative financial instruments	As 2006 A$’000 36,496 41,929 98 78,523	at 31 December 2007 2008 A$’000 A$’000 10,665 283,415 109,686 109,088 11,902 – 132,253 392,503	As at 30 September 2009 A$’000 219,545 155,437 6,655
			381,637

(c) Liquidity risk

Liquidity risk includes the risk that, as a result of operational liquidity requirements, Felix Group will be impacted in the following ways:

(i) will not have sufficient funds to settle a transaction on the due date;
(ii) will be forced to sell financial assets at a value which is less than what they are worth; or
(iii) may be unable to settle or recover a financial asset at all.

Liquidity risk is managed by maintaining sufficient cash and liquid deposit balances and having readily accessible standby facilities in place in accordance with the Board’s risk management policy. Details regarding finance facilities are set out in note 26.

– I-31 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Maturities of financial liabilities

The tables below analyse Felix Group’s financial liabilities into maturity groupings based on the remaining period at the reporting date to the contractual maturity date. Refer to note 11(a) for the contractual maturity of derivatives. Refer to note 35 for the contractual maturity of finance leases. The amounts presented represent the future undiscounted principal and interest cash flows and therefore do not necessarily equate to the carrying amounts.

At 31 December 2006 Trade creditors Other creditors Bank loans Deferred payment for acquisition of equity interests in Minerva Other loans Unsecured loan – non-interest bearing Total At 31 December 2007 Trade creditors Other creditors Bank loans Deferred payment for acquisition of equity interests in Minerva Unsecured loan – non-interest bearing Total	Less than 6 months A$’000 27,848 2,975 9,651 – 8,186 1,693 50,353 Less than 6 months A$’000 27,770 953 9,523 – 1,693 39,939	6 – 12 months A$’000 – – 9,682 250 – 9,932 6 – 12 months A$’000 – – 9,814 – – 9,814	Between 1 and 3 years A$’000 – – 35,968 1,000 – 36,968 Between 1 and 3 years A$’000 – – 41,951 1,000 – 42,951	Over 3 years Total contractual cash flows A$’000 A$’000 – 27,848 – 2,975 29,025 84,326 2,750 4,000 – 8,186 1,693 31,775 129,028 Over 3 years Total contractual cash flows A$’000 A$’000 – 27,770 – 953 31,969 93,257 3,000 4,000 – 1,693 34,969 127,673	Carrying amount A$’000 27,848 2,975 77,475 – 8,186 1,693
					118,177

					Carrying amount A$’000 27,770 953 79,875 2,827 1,693
					113,118

– I-32 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

At 31 December 2008 Trade creditors Other creditors Bank loans Deferred payment for acquisition of equity interests in Minerva Unsecured loan – non-interest bearing Total	Less than 6 months A$’000 53,260 427 2,388 250 1,693 58,018	6 – 12 months A$’000 – – 2,255 250 – 2,505	Between 1 and 3 years A$’000 – – 7,328 1,000 – 8,328	Over 3 years Total contractual cash flows A$’000 A$’000 – 53,260 – 427 – 11,970 2,500 4,000 – 1,693 2,500 71,350	Carrying amount A$’000 53,260 427 10,375 3,038 1,693
					68,793

At 30 September 2009 Trade creditors Other creditors Bank loans Deferred payment for acquisition of equity interests in Minerva Unsecured loan – non-interest bearing Loan from other entity Total	Less than 6 months A$’000 57,707 557 2,228 250 1,693 35 62,470	6 – 12 months A$’000 – – 6,214 250 – 41 6,505	Between 1 and 3 years A$’000 – – – 1,000 – 1,316 2,316	Over 3 years Total contractual cash flows A$’000 A$’000 – 57,707 – 557 – 8,443 2,000 3,500 – 1,693 – 1,392 2,000 73,292	Carrying amount A$’000 57,707 557 7,750 2,648 1,693 1,293
					71,648

(d) Capital risk management

Refer to note 29(d) for Felix Group’s objectives when managing capital.

(e) Fair value measurements

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

As of 1 January 2009, Felix adopted the amendment to IFRS 7 Financial Instruments: Disclosures which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2),and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3)

– I-33 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

The following table presents Felix Group’s and Felix’s assets and liabilities measured and recognised at fair value:

Level 2 Assets Derivatives used for hedging Total assets Liabilities Derivatives used for hedging Total liabilities	31 December 2006 A$’000 98 98 – –	31 December 2007 A$’000 11,668 11,668 234 234	31 December 2008 A$’000 – – 41,266 41,266	30 September 2009 A$’000 6,655
				6,655

				9,574
				9,574

3 Segment information

(a) Description of segments

Management has determined the operating segments based on the reports reviewed by the executive management team that are used to make strategic decisions. Within this team, the chief operating decision maker has been identified as the Managing Director.

Felix Group undertakes coal mining in Central Queensland and the Hunter Valley region of New South Wales.

The executive team monitors the performance of each coal mine separately and these operating segments have been determined to be four reportable segments, being the Ashton, Minerva, Moolarben and Yarrabee mines. The Moolarben mine commenced construction in 2009 and has not commenced production yet.

The “other” segment includes all the other operations that are not included in a reportable segment. This includes corporate functions, exploration and evaluation, Ultra Clean Coal research and development and any other items that are not appropriate to be allocated to a reportable segment.

– I-34 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(b) Segment information provided to the executive management team

The segment information provided to the executive management team for the reportable segments for the years ended 31 December 2006, 2007and 2008, and the nine months ended 30 September 2008 and 2009 is as follows:

Ashton A$’000 61,481 –	Minerva Moolarben A$’000 A$’000 62,787 – – –	Minerva Moolarben A$’000 A$’000 62,787 – – –	Yarrabee A$’000 116,915 1,924	Other A$’000 8,700 (981)	Total A$’000 249,883 943 250,826 1,679 (4,341) (14,348) (180,329) 820 54,307 (10,715) 43,592 58,648 72,996 616,610 (220,778) 395,832
61,481 321 (2,803) (5,883) (53,615) 820	62,787 276 (668) (3,733) (39,602) –	– – – – – –	118,839 93 (303) (1,561) (99,506) –	7,719 989 (567) (3,171) 12,394 –	250,826 1,679 (4,341 (14,348 (180,329 820
321 3,124 9,007 119,870 (107,252) 12,618	19,060 19,728 23,461 47,818 (30,084) 17,734	– – – – (472) (472)	17,562 17,865 19,426 58,344 (28,454) 29,890	17,364
					(10,715
				17,931 21,102 390,578 (54,516) 336,062

– I-35 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Ashton A$’000 105,295 –	Minerva Moolarben A$’000 A$’000 70,128 – – –	Minerva Moolarben A$’000 A$’000 70,128 – – –	Yarrabee A$’000 91,204 6,954	Other A$’000 938 (3,547)	Total A$’000 267,565 3,407 270,972 1,975 (6,996) (24,709) (160,485) (547) 80,210 (21,169) 59,041 87,206 111,915 682,679 (224,567) 458,112
105,295 216 (5,575) (14,137) (80,600) (547)	70,128 406 (470) (4,101) (52,738) –	– – – – 82,956 –	98,158 106 (124) (1,913) (88,995) –	(2,609) 1,247 (827) (4,558) (21,108) –	270,972 1,975 (6,996 (24,709 (160,485 (547
4,652 10,227 24,364	13,225 13,695 17,796	82,956 82,956 82,956	7,232 7,356 9,269	(27,855)
					(21,169
				(27,028) (22,470)
124,750 (98,517)	58,078 (30,945)	82,956 (26,410)	70,386 (35,668)	346,509 (33,027)	682,679 (224,567
26,233	27,133	56,546	34,718	313,482

– I-36 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Ashton A$’000 355,214 –	Minerva Moolarben A$’000 A$’000 148,674 – – –	Minerva Moolarben A$’000 A$’000 148,674 – – –	Yarrabee A$’000 146,530 41,809	Other A$’000 – (21,322)	Total A$’000 650,418 20,487 670,905 16,068 (6,924) (28,983) (241,025) (11) 410,030 (116,333) 293,697 416,954 445,937 955,767 (302,330) 653,437
355,214 1,936 (4,940) (16,695) (117,247) (11)	148,674 417 (418) (4,810) (105,189) –	– 5,745 – – 90,021 –	188,339 96 (510) (2,609) (114,267) –	(21,322) 7,874 (1,056) (4,869) 5,657 –	670,905 16,068 (6,924 (28,983 (241,025 (11
218,257 223,197 239,892	38,674 39,092 43,902	95,766 95,766 95,766	71,049 71,559 74,168	(13,716)
					(116,333
				(12,660) (7,791)
250,761 (75,755)	153,193 (64,259)	46,966 (9,666)	121,149 (62,558)	383,698 (90,092)	955,767 (302,330
175,006	88,934	37,300	58,591	293,606

– I-37 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Ashton A$’000 237,607 –	Minerva Moolarben A$’000 A$’000 106,975 – – –	Minerva Moolarben A$’000 A$’000 106,975 – – –	Yarrabee A$’000 103,711 22,661	Other A$’000 – (11,557)	Total A$’000 448,293 11,104 459,397 10,966 (6,204) (20,671) (152,643) (12) 290,833 (83,692) 207,141 297,037 317,708 872,244 (341,943) 530,301
237,607 723 (4,768) (12,057) (85,766) (12)	106,975 281 (311) (3,402) (69,088) –	– 4,275 – – 90,016 –	126,372 70 (356) (1,794) (82,484) –	(11,557) 5,617 (769) (3,418) (5,321) –	459,397 10,966 (6,204 (20,671 (152,643 (12
135,727 140,495 152,552	34,455 34,766 38,168	94,291 94,291 94,291	41,808 42,164 43,958	(15,448) (14,679) (11,261)
189,010 (113,430)	99,391 (83,993)	126,890 (4,635)	89,627 (37,336)	367,326 (102,549)	872,244 (341,943
75,580	15,398	122,255	52,291	264,777

– I-38 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Ashton A$’000 232,955 –	Minerva Moolarben A$’000 A$’000 104,391 – – –	Minerva Moolarben A$’000 A$’000 104,391 – – –	Yarrabee A$’000 146,081 26,485	Other A$’000 – (13,507)	Total A$’000 483,427 12,978 496,405 8,716 (2,545) (24,906) (282,605) (14) 195,051 (54,945) 140,106 197,596 222,502 1,051,289 (423,247) 628,042
232,955 2,600 (588) (13,713) (114,799) (14)	104,391 208 (365) (4,159) (69,638) –	– 1,159 (6) – (597) –	172,566 43 (1,014) (3,275) (110,578) –	(13,507) 4,706 (572) (3,759) 13,007 –	496,405 8,716 (2,545 (24,906 (282,605 (14
106,441 107,029 120,742	30,437 30,802 34,961	556 562 562	57,742 58,756 62,031	(125)
					(54,945
				447 4,206
176,603 (48,485)	92,103 (43,050)	76,254 (44,652)	134,746 (71,936)	571,583 (215,124)	1,051,289 (423,247
128,118	49,053	31,602	62,810	356,459

– I-39 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(c) Other segment information

(i) Segment revenue

The revenues derived from single external customers that exceed 10% of Felix Group’s coal sales revenue are as follows:

		Year ended		9 months ended	9 months ended
	31	31	31	30	30
	December	December	December	September	September
	2006	2007	2008	2008	2009
				(unaudited)
Total revenues from
customers where each
customer makes up more
than 10% of Felix Group’s
sales revenue	108,415	105,736	413,461	252,988	208,314
Number of customers	4	3	4	3	3
Proportion of each customer
contributes to total sales
revenue	10%-12%	11%-15%	11%-18%	11%-20%	12%-15%

The entity is domiciled in Australia. Segment revenues are allocated based on the country in which the customer is located as follows:

Australia China India Japan Korea Spain Taiwan Rest of world Total revenue from sales of coal	31 December 2006 10,692 11,557 25,207 90,503 22,472 25,584 7,157 48,632 241,804	Year ended 31 December 2007 13,031 1,574 10,948 118,726 52,106 19,231 15,620 38,769 270,005	31 December 2008 21,070 – 18,775 378,588 203,773 – 35,577 54,040 711,823	9 months ended 30 September 30 September 2008 2009 (unaudited) 21,070 9,405 – 62,293 18,775 1,237 198,896 236,254 140,109 105,076 – – 19,868 19,389 37,825 65,322 436,543 498,976	9 months ended 30 September 30 September 2008 2009 (unaudited) 21,070 9,405 – 62,293 18,775 1,237 198,896 236,254 140,109 105,076 – – 19,868 19,389 37,825 65,322 436,543 498,976
					498,976

Sales between segments are carried out on arm’s length basis and are eliminated on consolidation. The revenue from external parties reported to the executive management team is measured in a manner consistent with that in the statement of comprehensive income.

(ii) Segment net assets

The amounts provided to the executive management team with respect to net assets are measured in a manner consistent with that of the Financial Information. These assets and liabilities are allocated to a reportable segment based on the operations of the segment and in the case of assets the physical location of the asset.

– I-40 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

4 Revenue

31 December 2006 A$’000 241,804 9,022 –	Year ended 31 December 2007 A$’000 270,005 967 –	31 December 2008 A$’000 711,823 (40,918) –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 436,543 498,976 22,854 (45,711) – 43,140 459,397 496,405 3,209 3,782 775 913 10,966 8,716 – – 94 148 15,044 13,559 474,441 509,964	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 436,543 498,976 22,854 (45,711) – 43,140 459,397 496,405 3,209 3,782 775 913 10,966 8,716 – – 94 148 15,044 13,559 474,441 509,964
250,826 549 454 1,679 470 109 3,261	270,972 1,547 757 1,975 404 163 4,846	670,905 5,586 978 16,068 – 145 22,777	459,397 3,209 775 10,966 – 94 15,044	496,405
				3,782 913 8,716 – 148
				13,559
254,087	275,818	693,682	474,441

– I-41 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

5 Other income

Foreign exchange gains (net) Net gain on sale of available-for-sale financial assets Option agreements for sale of tenements Gain on forward foreign exchange contracts where contracts were not matched to coal sales Government grants Net gain on disposal of equity interests in Minerva and Athena Joint Ventures Net gain on disposal of equity interests in Moolarben Joint Venture Deferred income Other income Total other income	31 December 2006 A$’000 83 71 1,224 1,686 – 28,374 – – – 31,438	Year ended 31 December 2007 A$’000 8,470 1,136 – – – – 67,862 – 815 78,283	31 December 2008 A$’000 12,862 – – – 582 – 73,751 – 508 87,703	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 2,818 – – – – – – – – 388 – – 73,751 – – 118 381 3,928 76,950 4,434	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 2,818 – – – – – – – – 388 – – 73,751 – – 118 381 3,928 76,950 4,434
					4,434

There is no investment income from listed or unlisted investments.

6 Expenses

Profit before income tax includes the following specific expenses: Depreciation Buildings Plant and equipment Mine Development Less: capitalised depreciation Total depreciation	31 December 2006 A$’000 47 3,640 1,774 –	Year ended 31 December 2007 A$’000 100 10,197 2,937 –	31 December 2008 A$’000 538 8,669 6,091 –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 383 319 5,702 9,068 4,688 5,360 (45) –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 383 319 5,702 9,068 4,688 5,360 (45) –
	5,461	13,234	15,298	10,728	14,747

– I-42 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2006 A$’000 5,087 426 2,775 467 132 – 8,887 14,348	Year ended 31 December 2007 A$’000 6,161 366 4,266 524 159 – 11,476 24,710	31 December 2008 A$’000 8,037 291 4,438 741 178 – 13,685 28,983	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 6,001 5,520 207 202 3,158 3,527 478 684 135 226 (36) – 9,943 10,159 20,671 24,906	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 6,001 5,520 207 202 3,158 3,527 478 684 135 226 (36) – 9,943 10,159 20,671 24,906
				10,159
				24,906

2,346 491 1,995 – (491)	1,514 670 9,669 (4,621) (236)	1,709 364 4,851 – –	1,424 309 4,471 – –	1,916 49 580 – –
4,341	6,996	6,924	6,204	2,545

– I-43 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Year ended 31 December 31 December 2006 2007 A$’000 A$’000 Net loss/(gain) on disposal of property, plant and equipment 148 (12) Rental expense relating to operating lease payments 2,219 2,077 Government royalties 15,918 16,206 Research and development expenditure 287 1,491 Employee expenses Defined contribution superannuation expense 2,005 4,309 Employee benefits expense 33,926 41,765 Share-based payments expense 1,341 229 Total employee expenses 37,272 46,303 There were no forfeited contributions during the periods noted Significant expenses Demurrage 4,679 7,373 Loss on forward foreign exchange contracts – – Foreign exchange losses (net) – – Significant profits Gain on forward foreign exchange contracts 9,022 967 Foreign exchange gains (net) 83 8,470 Net gain on disposal of equity interests in Minerva and Athena Joint Ventures 28,374 – Net gain on disposal of equity interests in Moolarben Joint Venture (note 42) – 67,862 Gain on coal swap contracts – – Foreign exchange gains (net) where contracts were not matched to coal sales 1,686 –	31 December 2008 A$’000 (112) 1,712 47,365 2,615 1,874 45,750 880 48,504 above. 4,114 40,918 – – 12,862 – 73,751 – –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) (14) 136 1,241 1,523 27,754 36,498 1,713 4,582 2,633 3,209 37,360 49,842 67 528 40,060 53,579 2,768 2,792 – 45,711 – 7,995 22,854 – 2,818 – – – 73,751 – – 43,140 – –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) (14) 136 1,241 1,523 27,754 36,498 1,713 4,582 2,633 3,209 37,360 49,842 67 528 40,060 53,579 2,768 2,792 – 45,711 – 7,995 22,854 – 2,818 – – – 73,751 – – 43,140 – –
			53,579

			2,792 45,711 7,995 – – – – 43,140 –

– I-44 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

7 Operating profit

Reconciliation of profit before income tax to operating profit Profit before income tax Net gain on disposal of equity interests in Moolarben Joint Venture (note 42) Net gain on disposal of equity interests in Minerva and Athena Joint Ventures (note 42) Operating profit	31 December 2006 A$’000 54,307 – (28,374) 25,933	Year ended 31 December 2007 A$’000 80,210 (67,862) – 12,348	31 December 2008 A$’000 410,030 (73,751) – 336,279	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 290,833 195,051 (73,751) – – – 217,082 195,051	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 290,833 195,051 (73,751) – – – 217,082 195,051
					195,051

8 Income tax

(a) Income tax recognised in profit or loss Current tax Deferred tax Origination and reversal of temporary differences Utilisation of previously recognised tax losses Under/(over) provision in prior years Total income tax expense	31 December 2006 A$’000 533 2,740 7,442 – 10,715	Year ended 31 December 2007 A$’000 (379) 6,372 14,606 570 21,169	31 December 2008 A$’000 73,253 4,026 39,529 (475) 116,333	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 38,575 56,380 5,588 (1,435) 39,529 – – – 83,692 54,945	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 38,575 56,380 5,588 (1,435) 39,529 – – – 83,692 54,945
					54,945

– I-45 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2006 A$’000 54,307 16,292 181 402 (5,629) (531) 10,715 – 10,715	Year ended 31 December 2007 A$’000 80,210 24,063 1,061 69 (2,923) (1,671) 20,599 570 21,169	31 December 2008 A$’000 410,030 123,010 1,703 264 (7,352) (817) 116,808 (475) 116,333	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 290,833 195,051 87,249 58,515 1,571 596 21 158 (5,026) (3,397) (123) (927) 83,692 54,945 – – 83,692 54,945 28.8% 28.2% (347) (13,164) (12,924) 12,079 (13,271) (1,085) 11,201 9,748 1,703 1,703 12,904 11,451	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 290,833 195,051 87,249 58,515 1,571 596 21 158 (5,026) (3,397) (123) (927) 83,692 54,945 – – 83,692 54,945 28.8% 28.2% (347) (13,164) (12,924) 12,079 (13,271) (1,085) 11,201 9,748 1,703 1,703 12,904 11,451
19.7% (786) 265	26.4% 57 3,541	28.4% 18,007 (15,950)	28.8% (347) (12,924)	28.2% (13,164 12,079
(521)	3,598	2,057	(13,271)
10,738 1,703	10,407 1,703	10,630 1,703	11,201 1,703	9,748 1,703
12,441	12,110	12,333	12,904

– I-46 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

There is no expiry date on the future deductibility of unused tax losses. The benefit of revenue losses and capital losses are not recognised until it is probable that the subsidiary will be able to utilise these tax losses.

(e) Tax consolidation legislation

For the purposes of taxation, Felix and its 100% owned Australian subsidiaries are a tax consolidated group. The head entity of the tax consolidated group is Felix. Felix is responsible for recognising the current tax assets and liabilities for the tax consolidated group. Each entity in the tax consolidated group recognises its own deferred tax assets and liabilities, except where the deferred tax assets relate to unused tax losses and credits, in which case Felix recognises the assets.

Felix Group has entered into a tax sharing agreement whereby each company in Felix Group contributes to the income tax payable in proportion to their contribution to the profit before tax of the tax consolidated group. The tax consolidated group has also entered into a tax funding agreement whereby each entity in Felix Group can recognise their balance of the current tax assets and liabilities through inter-entity accounts. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote.

9 Current assets – Cash and cash equivalents

31 December 2006 A$’000 3,648 32,848 36,496	31 December 2007 A$’000 7,557 3,108 10,665	31 December 2008 A$’000 11,011 272,404 283,415	30 September 2009 A$’000 49,527 170,018
			219,545

936 17,287	3,146 15	382 148,059	915 11,776
18,223	3,161	148,441	12,691

(a) Effective interest rate

Information concerning the effective interest rate of cash and cash equivalents is set out in note 2.

(b) Fair value

Due to the short-term nature of the deposits, their carrying amount is assumed to approximate their fair value.

– I-47 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

10 Current assets – Trade and other receivables

31 December 2006 A$’000 20,741 2,192 – – – 9,865 32,798	31 December 2007 A$’000 19,379 3,692 – – 14,006 65,000 102,077	31 December 2008 A$’000 82,474 8,827 – 1,779 – – 93,080	30 September 2009 A$’000 23,147 8,129 100,000 1,816 – 10,724
			143,816

397 8,209 520 57,163 –	231 24,633 311 66,361 –	327 158,633 2,457 – –	807 201,816 600 46,037 100,000
66,289	91,536	161,417	349,260

Credit terms are set for individual customers following a risk assessment process. The majority of Felix Group’s sales are on payment terms that range between 5 to 14 working days from receipt of invoices or shipping documents by the buyer. Some customers that are assessed to have a low risk have credit terms ranging up to 21 days. Letters of credit are required for those customers assessed as posing a higher risk. The aging of trade receivables based on invoice date is as follows.

31 December 2006 A$’000 15,337 4,960 3 441	31 December 2007 A$’000 15,971 2,581 514 313	31 December 2008 A$’000 62,740 14,575 5,022 137	30 September 2009 A$’000 19,072 3,849 3 223
20,741 249 58 – 90	19,379 202 7 – 22	82,474 197 49 – 81	23,147
			659 13 – 135
397	231	327	807

– I-48 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(a) Past due but not impaired

Except as noted below, at all reporting dates trade receivables for Felix Group and Felix were fully performing.

Felix Group

As at 31 December 2006, 2007, 2008 and 30 September 2009, Felix Group had trade receivables of A$5,537,000, A$8,803,000, A$10,173,000 and A$409,000 that were past due but not impaired. The ageing analysis of these trade receivables is set out below.

< 15 days 15-30 days 30-45 days > 45 days	31 December 2006 A$’000 1,020 4,155 37 325 5,537	31 December 2007 A$’000 4,137 4,247 10 409 8,803	31 December 2008 A$’000 9,869 223 5 76 10,173	30 September 2009 A$’000 17 154 11 227
				409

Felix

As at 31 December 2006, 2007, 2008 and 30 September 2009 Felix had trade receivables of A$148,000, A$40,000, A$15,000 and A$155,000, respectively that were past due but not impaired. The ageing analysis of these trade receivables is set out below.

< 15 days 15-30 days 30-45 days > 45 days	31 December 2006 A$’000 – 148 – – 148	31 December 2007 A$’000 3 6 – 31 40	31 December 2008 A$’000 – 1 – 14 15	30 September 2009 A$’000 – 10 – 145
				155

The other classes within trade and other receivables do not contain impaired assets and are not past due. It is expected that these amounts will be received when due. Unless specified below, Felix Group does not hold any collateral in relation to these receivables.

(b) Other receivables

Included in receivables from other entities – interest bearing at 31 December 2006, 2007, 2008 and 30 September 2009 is funds of A$Nil, A$14,006,000, A$Nil and A$Nil, respectively, loaned to Newcastle Coal Infrastructure Group Pty Ltd, a company in which Felix Group has a non-controlling shareholding. In August 2005 Newcastle Coal Infrastructure Group Pty Ltd was selected by the New South Wales government as the preferred developer and operator of a third coal loader for the port of Newcastle. The loan was interest bearing and unsecured and was repayable upon funding of the Stage 1 expansion project. Refer to note 14 for details on the non-current portion of this loan.

– I-49 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Included in receivables from other entities at 31 December 2006, 2007, 2008 and 30 September 2009 is funds of N/A, N/A, A$Nil and A$8,809,374, respectively, loaned to Newcastle Coal Infrastructure Group Pty Ltd. The loan is non-interest bearing and unsecured and is repayable upon funding of the Stage 2 expansion project. Refer to note 14 for details on the non-current portion of this loan.

Included in receivables from other entities are funds receivable from Kores Australia Minerva Coal Pty Ltd in relation to the 7.3% sale of Felix Group’s interest in the Minerva Joint Venture. At 31 December 2006, 2007, 2008 and 30 September 2009 the amounts receivable were A$9,865,000, N/A, N/A and N/A, respectively.

Also included in receivables from other entities are funds receivable from Sojitz Moolarben Resources Pty Ltd in relation to the 10% sale of the Moolarben Coal Project. At 31 December 2006, 2007, 2008 and 30 September 2009 the amounts receivable were A$Nil, A$65,000,000, N/A and N/A, respectively.

For Felix, the receivable from controlled entities represents the receivables from tax consolidated entities under the tax funding agreement; refer to note 1(b). The advances to controlled entities are repayable at call.

The secured director loan is to Director Mr. Brian Flannery. The terms and conditions of the loan are set out in note 33.

Cash-restricted at 31 December 2006, 2007, 2008 and 30 September 2009 includes A$Nil, A$Nil, A$Nil and A$100,000,000 in a security deposit account. These funds are mortgaged in favour of the counterparty as security for a portion of the finance lease facility. Further information concerning the finance leases is set out in note 26.

(c) Foreign exchange and interest rate risk

Information about Felix Group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is set out in note 2.

(d) Fair value and credit risk

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to note 2 for more information on the risk management policy of Felix Group and the credit quality of Felix Group’s trade receivables.

– I-50 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

11 Derivative financial instruments

31 December 2006 A$’000 53 –	31 December 2007 A$’000 185 11,483	31 December 2008 A$’000 – –	30 September 2009 A$’000 – 6,655
53 45 45 –	11,668 234 234 –	– – – 41,266	6,655
			–
			–
			9,574
– 31 December 2006 A$’000 53 –	– 31 December 2007 A$’000 – 11,483	41,266 31 December 2008 A$’000 – –	9,574

			30 September 2009 A$’000 – –
53 45	11,483 –	– –	–
			–
45	–	–	–

(a) Instruments used by Felix Group

Felix Group uses derivative financial instruments in order to hedge exposure to fluctuations in interest rates, foreign exchange rates, and coal prices in accordance with the financial risk management policies (refer to note 2).

(i) Forward foreign exchange contracts – cash flow hedges

Felix Group enters into forward foreign exchange contracts to sell or purchase specified amounts of foreign currencies in the future at stipulated exchange rates. The objective of entering into the forward foreign exchange contracts is to reduce the foreign exchange rate related volatility of Felix Group’s revenue stream and capital expenditure and thereby assist in risk management for Felix Group. Foreign currency speculation is specifically excluded. Forward foreign exchange contracts are entered for contracted future sales and capital expenditure undertaken in foreign currencies.

– I-51 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The outstanding sell USD contracts are hedging highly probable forecasted sales of coal, whereas the outstanding buy USD, Euro and Yen contracts relate to the purchase of mining equipment for Moolarben (2008: Yarrabee and Minerva respectively). The contracts are timed to mature when funds for coal sales are forecast to be received and when payments for mining equipment are scheduled to be made. At each of the reporting dates, the details of the outstanding forward foreign exchange contracts are set out below.

Felix Group Buy United States Dollars Settlement Less than 6 months – USD’000 Average rate – USD Total -USD’000 Sell United States Dollars Settlement Less than 6 months – USD’000 Average rate – USD 6 months to 1 year – USD’000 Average rate – USD 1 year to less than 2 years – USD’000 Average rate – USD Total – USD’000 Buy Euros Settlement Less than 6 months – EURO’000 Average rate – EURO Total– EURO’000	31 December 2006 – – – 31 December 2006 – – – – – – – 31 December 2006 – – –	31 December 2007 – – – 31 December 2007 136,204 0.8149 12,600 0.8524 6,300 0.8524 155,104 31 December 2007 – – –	31 December 2008 – – – 31 December 2008 147,595 0.8543 – – – – 147,595 31 December 2008 – – –	30 September 2009 33,517 0.7532
				33,517

				30 September 2009 30,000 0.7674 15,000 0.7674 – –
				45,000

				30 September 2009 14,271 0.5520
				14,271

– I-52 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Felix Sell United States Dollars Settlement Less than 6 months – USD’000 Average rate – USD 6 months to 1 year – USD’000 Average rate – USD 1 year to less than 2 years – USD’000 Average rate – USD Total– USD’000	31 December 2006 – – – – –	31 December 2007 11,363 0.8149 152 0.8524 (32) 0.8524 11,483	31 December 2008 – – – – –	30 September 2009 – – – –
				–

At balance date, the details of the outstanding flexible forward foreign exchange contracts are set out below.

Buy Japanese Yen Settlement Less than 6 months – ceiling – YEN’000 – average rate – YEN – floor – YEN’000 – average rate– YEN 6 months to 1 year – ceiling – YEN’000 – average rate – YEN – floor – YEN’000 – average rate – YEN	31 December 2006 – – – – – – – – –	31 December 2007 – – – – – – – – –	31 December 2008 – – – – – – – – –	30 September 2009 989,423 72.7000 989,423 71.7000 237,693 72.7000 237,693 71.7000
				1,227,116

(ii) Coal price swap contracts – cash flow hedges

Felix Group enters into coal swap contracts to sell specified amounts of coal in the future at stipulated prices. The objective of entering into the coal swap contracts is to reduce the coal price related volatility of Felix Group’s revenue stream and thereby assist in risk management for Felix Group. Coal price speculation is specifically excluded. Coal swap contracts are entered for contracted future sales.

The outstanding coal swap contracts are hedging highly probable forecasted sales of coal. The contracts are timed to mature when funds for coal sales are forecast to be received. At the respective balance sheet dates, there were no outstanding coal swap contracts.

– I-53 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The gains and losses on hedges of anticipated coal sales, interest expense, and capital expenditure are recognised in the hedging reserve and the timing of their anticipated recognition as part of sales, interest expense, and capital expenditure are set out below.

31 December 2006 A$’000 1,019 34 12 1,065	Year ended 31 December 2007 A$’000 12,927 129 – 13,056	31 December 2008 A$’000 19,916 – – 19,916	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) (30,866) 16,296 (314) – – – (31,180) 16,296	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) (30,866) 16,296 (314) – – – (31,180) 16,296
				16,296

1,019 34 12	12,664 (32) –	– – –	– – –	– – –
1,065	12,632	–	–	–

Details of movements in the hedging reserve are set out in note 30. There was no hedge ineffectiveness in the current or prior years/periods.

(b) Credit risk exposures

Forward foreign exchange, coal swap, and interest rate swap contracts are subject to credit risk in relation to the relevant counterparties, which are principally large financial institutions. The maximum credit risk exposure is the full amount of unrealised gains on derivative financial instruments, should the counterparty fail to pay the amount which it is committed to pay Felix Group. The full amount of the exposure for Felix Group as at 31 December 2006, 2007, 2008 and 30 September 2009 are A$98,000; A$11,902,000; A$Nil and A$6,655,000 respectively, and for Felix for 31 December 2006, 2007, 2008 and 30 September 2009 is A$98,000, A$11,483,000, A$Nil and A$Nil respectively. Further information about Felix Group’s exposure to credit risk in relation to derivatives is set out in note 2.

(c) Foreign currency, interest rate and price risk

Information about Felix Group’s exposure to foreign currency risk, price risk, and interest rate risk in relation to derivatives is set out in note 2.

(d) Fair value

The fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at reporting date. The fair value of coal swap contracts is determined using forward coal price market rates at reporting date. The market rates are provided by the counterparty to the derivative. The fair value of interest rate swap contracts is calculated as the present value of the estimated future cash flows.

– I-54 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

12 Current assets – Inventories

Felix Group Coal – at cost Fuel – at cost Stock of spare parts – at cost Stock of tyres – at cost	31 December 2006 A$’000 19,887 321 247 1,838 22,293	31 December 2007 A$’000 34,137 418 251 2,401 37,207	31 December 2008 A$’000 45,028 269 2,566 1,422 49,285	30 September 2009 A$’000 53,472 426 2,317 2,254
				58,469

13 Current assets – Other current assets

31 December 2006 Felix Group A$’000 Prepayments 847 Development costs 1,789 Overburden – at cost 31,867 34,503 Felix Prepayments 66 Non-current assets – Trade and other receivables 31 December 2006 Felix Group A$’000 Advances to associated entities 3,155 Secured director loan – interest bearing 1,705 Secured loan – interest bearing – Receivables from other entities – interest bearing 4,271 Receivables from other entities – non-interest bearing – 9,131 Felix Advances to controlled entities 84,115 Less: Accumulated impairment losses (63,367) 20,748	31 December 2007 A$’000 1,324 – 38,668 39,992 40 31 December 2007 A$’000 5,904 – 1,705 – – 7,609	31 December 2008 A$’000 2,107 – 48,414 50,521 109 31 December 2008 A$’000 11,203 – – – 4,805 16,008	30 September 2009 A$’000 3,840 – 51,824
			55,664

			64

			30 September 2009 A$’000 10,328 – – – 1,293
			11,621

84,115 (63,367)	82,563 (61,815)	88,259 (61,897)	84,051 (60,483)
20,748	20,748	26,362	23,568

14 Non-current assets – Trade and other receivables

– I-55 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(a) Terms and conditions relating to the above financial instruments

The secured director loan was to former director Mr. John Rawlins. Mr. Rawlins ceased to be a director on 21 March 2007. The terms and conditions of the loan are set out in note 33.

Included in receivables from other entities – interest bearing at 31 December 2006, 2007, 2008 and 30 September 2009 is funds of A$4,271,000, A$Nil, A$Nil and A$Nil, respectively loaned to Newcastle Coal Infrastructure Group Pty Ltd, a company in which Felix Group has a non-controlling shareholding. The loan was interest bearing and unsecured and was repayable upon funding of Stage 1 of the expansion project. Refer to note 10(b) for the current portion of this loan.

Included in receivables from other entities at 31 December 2006, 2007, 2008 and 30 September 2009 is funds of N/A, N/A, A$4,805,000 and A$Nil, respectively, loaned to Newcastle Coal Infrastructure Group Pty Ltd. The loan is non-interest bearing and unsecured and is repayable upon funding of the Stage 2 expansion project. Refer to note 10(b) for the current portion of this loan.

The receivables from other entities at 30 September 2009 of A$1,293,000 is expected to be received from Wiggins Island Coal Export Terminal Pty Ltd upon successful financing of the proposed new export coal terminal at Wiggins Island, Gladstone.

Details regarding advances to associated entities are set out in note 36(e).

The advances to controlled entities by Felix are unsecured, interest free and have no fixed repayment

date.

Advances to controlled entities by Felix include a loan to White Mining Limited on acquisition to enable White Mining Limited to repay the majority of its shareholder loans. They also include advances to SASE Pty Ltd (SASE), South Australian Coal Corp Pty Ltd (SACC), Ballymoney Power Limited (BPL), Tonford Pty Ltd (TON), UCC Energy Pty Ltd (UCC), and an advance to Minerva Coal Pty Ltd which was acquired by Felix on purchase of Minerva Coal Pty Ltd.

(b) Past due but not impaired

Except as noted below, none of the non-current trade and other receivables are past due but not impaired.

(c) Impaired trade and other receivables

As at 31 December 2006, 2007, 2008 and 30 September 2009 advances to controlled entities by Felix with a nominal value of A$63,367,000, A$61,815,000, A$61,897,000 and A$60,483,000 were impaired. The impaired advances relate to the amounts receivable by Felix from SASE, SACC, TON and BPL. These amounts are principally contributions toward exploration expenditure. The value and recoverability of these amounts is related to Felix’s policies with regards to exploration and evaluation expenditure as described in note 1 of the Financial Information.

– I-56 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The impaired advances also include amounts receivable by Felix from UCC Energy Pty Limited. These amounts are principally contributions towards research and development expenditure. The value and recoverability of these amounts is related to Felix’s policies with regards to research and development expenditure as described in note 1 of the Financial Information.

Movements in the provision for impairment of advances to controlled entities are as follows: Balance at beginning of the year/ period Provision for impairment recognised during the year/period Advances written-off during the year/period as uncollectible Unused amount reversed Balance at the end of the year/period	31 December 2006 A$’000 – 63,367 – – 63,367	31 December 2007 A$’000 63,367 – (1,552) – 61,815	31 December 2008 A$’000 61,815 82 – – 61,897	30 September 2009 A$’000 61,897 8,167 (1,635) (7,946)
				60,483

The creation and release of the provision for impairment of advances to controlled entities has been included in ’administrative expenses’ in the statement of comprehensive income. Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash.

(d) Risk exposure

Information about Felix Group’s exposure to credit risk, foreign exchange and interest rate risk is provided in note 2.

(e) Fair value

The carrying values of non-current receivables approximate their fair values.

15 Investments accounted for using the equity method – Felix Group

(a) Investments accounted for using the equity method

Name of associate and jointly controlled entities Principal activity Unlisted Australian Coal Processing Holdings Pty Ltd (i) Holding company Ashton Coal Mines Limited (ii) Real estate holder & sales company Australian Coal Processing Pty Ltd Dormant	Consolidated carrying amount of investment 31 December 31 December 31 December 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 2,456 26 21 21 201 175 169 155 – – – – 2,657 201 190 176	Consolidated carrying amount of investment 31 December 31 December 31 December 30 September 2006 2007 2008 2009 A$’000 A$’000 A$’000 A$’000 2,456 26 21 21 201 175 169 155 – – – – 2,657 201 190 176
		176

– I-57 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Each of the above associates and jointly controlled entities is incorporated in Australia.

(i) A subsidiary of White Mining Limited (WML), White Mining (NSW) Pty Limited (WMNSW), holds 60% of the ordinary shares of Australian Coal Processing Holdings Pty Ltd for 31 December 2006, 2007, 2008 and 30 September 2009. Under the shareholders agreement between WMNSW and the other shareholders, ICRA Ashton Pty Ltd (ICRA) and Austral-Asia Coal Holdings Pty Ltd (Austral), all major financial and operating policy decisions require a vote by Directors who together represent shareholders holding 100% of the shares or a vote by shareholders who together hold 100% of the shares. Therefore decisions must be passed unanimously and WMNSW’s voting power is equivalent to 33.33% as at 31 December 2006, 2007, 2008 and 30 September 2009.
(ii) A subsidiary of White Mining Limited, White Mining (NSW) Pty Limited (WMNSW), holds 60% for 31 December 2006, 2007, 2008 and 30 September 2009 of the ordinary shares of Ashton Coal Mines Limited. Under the shareholders agreement between WMNSW and the other shareholders, ICRA Ashton Pty Ltd (ICRAA) and Austral-Asia Coal Holdings Pty Ltd (Austral), all major financial and operating policy decisions require a unanimous resolution of the shareholders. Therefore major decisions must be passed unanimously and WMNSW’s voting power is equivalent to 33.33% as at 31 December 2006, 2007, 2008 and 30 September 2009.

(b) Movements in carrying amounts Carrying amount at the beginning of the year/ period Return of share capital Share of net profits/(losses) (note 15(c)) Carrying amount at the end of the year/period (c) Share of profits or losses Profit/(loss) before income tax Unrecognised share of losses/(profits) for the year/period Income tax benefit/(expense) Profit/(loss) after income tax (note 15(b)) (d) Summarised financial information of associates and jointly controlled entities Assets Liabilities Revenues Profits/(losses)	31 December 2006 A$’000 3,877 (2,040) 820 2,657	31 December 2007 A$’000 2,656 (1,908) (547) 201	31 December 2008 A$’000 201 – (11) 190	30 September 2008 A$’000 (unaudited) 201 – (12) 189	30 September 2009 A$’000 190 – (14) 176 (16) – 2 (14) 37,133 (36,837) 113,476 (22)
	428 149 243	70 (514) (103)	(5) – (6)	(10) – (2)	(16 – 2
	820 20,874 (17,117) 112,249 1,118	(547) 9,626 (9,322) 178,661 (53)	(11) 109,178 (108,890) 856,111 (16)	(12) 68,443 (68,164) 390,386 (24)

– I-58 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

16 Non-current assets – Available-for-sale financial assets

	31	31	31	30
	December	December	December	September
	2006	2007	2008	2009
Felix Group	A$’000	A$’000	A$’000	A$’000
Listed securities – equity securities	642	–	–	–

Felix Group’s investments in equity securities were publicly traded on the Australian Stock Exchange.

17 Non-current assets – Other financial assets

Felix Controlled entities – at cost (note 37) Less: Accumulated impairment losses	31 December 2006 A$’000 256,736 (15,343) 241,393	31 December 2007 A$’000 256,736 (15,343) 241,393	31 December 2008 A$’000 256,736 (15,343) 241,393	30 September 2009 A$’000 276,399 (15,343)
				261,056

18 Non-current assets – Property, plant and equipment

Felix Group

Assets under construction Land acquisition in progress A$’000 A$’000 Year ended 31 December 2006 Opening net book amount 16,444 5,193 Additions 102,661 – Transfers (34,438) (4,017) Disposals (1,164) – Depreciation expense – – Amortisation expense – – Closing net book amount 83,503 1,176 At 31 December 2006 Cost 83,503 1,176 Accumulated depreciation/ amortisation – – Net book amount 83,503 1,176	Assets under construction Land acquisition in progress A$’000 A$’000 Year ended 31 December 2006 Opening net book amount 16,444 5,193 Additions 102,661 – Transfers (34,438) (4,017) Disposals (1,164) – Depreciation expense – – Amortisation expense – – Closing net book amount 83,503 1,176 At 31 December 2006 Cost 83,503 1,176 Accumulated depreciation/ amortisation – – Net book amount 83,503 1,176	Freehold land & buildings Mine development A$’000 A$’000 4,907 13,709 4,818 2,313 378 7,938 (50) (2,423) (47) (1,774) – – 10,006 19,763	Freehold land & buildings Mine development A$’000 A$’000 4,907 13,709 4,818 2,313 378 7,938 (50) (2,423) (47) (1,774) – – 10,006 19,763	Plant & equipment A$’000 11,213 304 24,359 (6,197) (3,640) – 26,039	Leased plant & equipment A$’000 25,434 3,943 5,780 (2,718) – (5,087) 27,352	Total A$’000 76,900 114,039 – (12,552) (5,461) (5,087)
						167,839

83,503 –	1,176 –	10,420 (414)	26,422 (6,659)	34,656 (8,617)	34,550 (7,198)	190,727 (22,888)
83,503	1,176	10,006	19,763	26,039	27,352	167,839

– I-59 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Assets under construction Land acquisition in progress Freehold land & buildings Mine development Plant & equipment Leased plant & equipment A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 Year ended 31 December 2007 Opening net book amount 83,503 1,176 10,006 19,763 26,039 27,352 Additions 36,534 – 3,508 3,539 115 5,287 Transfers (11,318) (1,176) 5,450 3,673 3,371 – Disposals – – (906) (295) (164) Depreciation expense – – (100) (2,937) (10,197) – Amortisation expense – – – – – (6,161) Closing net book amount 108,719 – 17,958 24,038 19,033 26,314 At 31 December 2007 Cost 108,719 – 18,456 33,633 37,812 39,567 Accumulated depreciation/ amortisation – – (498) (9,595) (18,779) (13,253) Net book amount 108,719 – 17,958 24,038 19,033 26,314 Assets under construction Freehold land & buildings Mine development Plant & equipment Leased plant & equipment A$’000 A$’000 A$’000 A$’000 A$’000 Year ended 31 December 2008 Opening net book amount 108,719 17,958 24,038 19,033 26,314 Additions 39,356 5,932 1,028 1,342 7,548 Transfers (117,417) 3,631 34,231 77,568 1,741 Disposals – (1,386) – (67) – Depreciation expense – (538) (6,091) (8,669) Amortisation expense – – – – (8,037) Closing net book amount 30,658 25,597 53,206 89,207 27,566 At 31 December 2008 Cost 30,658 26,832 68,893 116,299 48,856 Accumulated depreciation/ amortisation – (1,235) (15,687) (27,092) (21,290) Net book amount 30,658 25,597 53,206 89,207 27,566	Assets under construction Land acquisition in progress Freehold land & buildings Mine development Plant & equipment Leased plant & equipment A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 Year ended 31 December 2007 Opening net book amount 83,503 1,176 10,006 19,763 26,039 27,352 Additions 36,534 – 3,508 3,539 115 5,287 Transfers (11,318) (1,176) 5,450 3,673 3,371 – Disposals – – (906) (295) (164) Depreciation expense – – (100) (2,937) (10,197) – Amortisation expense – – – – – (6,161) Closing net book amount 108,719 – 17,958 24,038 19,033 26,314 At 31 December 2007 Cost 108,719 – 18,456 33,633 37,812 39,567 Accumulated depreciation/ amortisation – – (498) (9,595) (18,779) (13,253) Net book amount 108,719 – 17,958 24,038 19,033 26,314 Assets under construction Freehold land & buildings Mine development Plant & equipment Leased plant & equipment A$’000 A$’000 A$’000 A$’000 A$’000 Year ended 31 December 2008 Opening net book amount 108,719 17,958 24,038 19,033 26,314 Additions 39,356 5,932 1,028 1,342 7,548 Transfers (117,417) 3,631 34,231 77,568 1,741 Disposals – (1,386) – (67) – Depreciation expense – (538) (6,091) (8,669) Amortisation expense – – – – (8,037) Closing net book amount 30,658 25,597 53,206 89,207 27,566 At 31 December 2008 Cost 30,658 26,832 68,893 116,299 48,856 Accumulated depreciation/ amortisation – (1,235) (15,687) (27,092) (21,290) Net book amount 30,658 25,597 53,206 89,207 27,566	Freehold land & buildings Mine development A$’000 A$’000 10,006 19,763 3,508 3,539 5,450 3,673 (906) (100) (2,937) – – 17,958 24,038	Freehold land & buildings Mine development A$’000 A$’000 10,006 19,763 3,508 3,539 5,450 3,673 (906) (100) (2,937) – – 17,958 24,038	Freehold land & buildings Mine development A$’000 A$’000 10,006 19,763 3,508 3,539 5,450 3,673 (906) (100) (2,937) – – 17,958 24,038	Freehold land & buildings Mine development A$’000 A$’000 10,006 19,763 3,508 3,539 5,450 3,673 (906) (100) (2,937) – – 17,958 24,038	Plant & equipment A$’000 26,039 115 3,371 (295) (10,197) – 19,033	Plant & equipment A$’000 26,039 115 3,371 (295) (10,197) – 19,033	Leased plant & equipment A$’000 27,352 5,287 – (164) – (6,161)	Total A$’000 167,839 48,983 – (1,365) (13,234) (6,161) 196,062 238,187 (42,125) 196,062 Total A$’000 196,062 55,206 (246) (1,453) (15,298) (8,037) 226,234 291,538 (65,304) 226,234
								26,314

108,719 –	– –	18,456 (498)		33,633 (9,595)		37,812 (18,779)		39,567 (13,253)	238,187 (42,125
	– 17,958 24,038 19,033 26,314 Freehold land & buildings Mine development Plant & equipment Leased plant & equipment A$’000 A$’000 A$’000 A$’000 17,958 24,038 19,033 26,314 5,932 1,028 1,342 7,548 3,631 34,231 77,568 1,741 (1,386) – (67) – (538) (6,091) (8,669) – – – (8,037) 25,597 53,206 89,207 27,566							26,314



	26,832 (1,235)		68,893 (15,687)		116,299 (27,092)		48,856 (21,290)		291,538 (65,304
	25,597		53,206		89,207		27,566

– I-60 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Assets under construction A$’000 9 months ended 30 September 2009 Opening net book amount 30,658 Additions 110,459 Disposals – Transfers (52,284) Depreciation expense – Amortisation expense – Closing net book amount 88,833 At 30 September 2009 Cost 88,833 Accumulated depreciation/ amortisation – Net book amount 88,833	Assets under construction A$’000 9 months ended 30 September 2009 Opening net book amount 30,658 Additions 110,459 Disposals – Transfers (52,284) Depreciation expense – Amortisation expense – Closing net book amount 88,833 At 30 September 2009 Cost 88,833 Accumulated depreciation/ amortisation – Net book amount 88,833	Freehold land & buildings Mine development A$’000 A$’000 25,597 53,206 – – – (383) 6,114 383 (319) (5,360) – – 31,392 47,846	Freehold land & buildings Mine development A$’000 A$’000 25,597 53,206 – – – (383) 6,114 383 (319) (5,360) – – 31,392 47,846	Plant & equipment A$’000 89,207 6,132 (15,829) 41,625 (9,068) – 112,067	Leased plant & equipment A$’000 27,566 19,809 (1,796) 2,022 – (5,520) 42,081	Total A$’000 226,234 136,400 (18,008) (2,140) (14,747) (5,520) 322,219 395,166 (72,947) 322,219
	88,833 –	32,946 (1,554)	67,778 (19,932)	147,820 (35,753)	57,789 (15,708)	395,166 (72,947
	88,833	31,392	47,846	112,067	42,081

Borrowing costs of A$4,858,000 were capitalised in the year ended 31 December 2007 at a weighted average interest rate of 7.46%. No borrowing costs were capitalised in the other reporting periods.

In the nine months ended 30 September 2009, leased assets of A$19,747,000 were sold and leased back and are included in additions above. No sale and leaseback transactions occurred in the other reporting periods.

Felix

Year ended 31 December 2006 Opening net book amount Additions Transfers Disposals Depreciation expense Closing net book amount At 31 December 2006 Cost Accumulated depreciation Net book amount	Assets under construction A$’000 54 464 (292) – – 226	Plant & equipment A$’000 353 18 292 (33) (125) 505	Leased plant & equipment A$’000 – – – – – –	Total A$’000 407 482 – (33) (125) 731 970 (239) 731
	226 –	744 (239)	– –	970 (239
	226	505	–

– I-61 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Assets under construction A$’000 226 8 (130) – – 104	Plant & equipment A$’000 505 – 130 (230) (128) 277	Leased plant & equipment A$’000 – 31 – – – 31	Total A$’000 731 39 – (230) (128) 412 718 (306) 412 Total $’000 412 775 – (3) (248) (8) 928 1,492 (564) 928
104 –	583 (306)	31 –	718 (306
104 Assets under construction $’000 104 627 (372) – – – 359	277 Plant & equipment $’000 277 148 372 (2) (248) – 547	31 Leased plant & equipment $’000 31 – – (1) – (8) 22
359 –	1,102 (555)	31 (9)	1,492 (564
359	547	22

– I-62 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

9 months ended 30 September 2009 Opening net book amount Additions Disposals Transfers Depreciation expense Amortisation expense Closing net book amount At 30 September 2009 Cost Accumulated depreciation/amortisation Net book amount	Assets under construction A$’000 359 403 – 226 – – 988 988 – 988	Plant & equipment A$’000 547 736 (44) (133) (170) – 936 1,640 (704) 936	Leased plant & equipment A$’000 22 – – – – (6) 16 31 (15) 16	Total A$’000 928 1,139 (44) 93 (170) (6) 1,940 2,659 (719) 1,940

– I-63 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Assets pledged as security

Included in the balance of property, plant & equipment and other financial assets are assets over which the charges listed in notes 23 and 26 have been granted as security.

31 December 2006 A$’000 7,289 19,763 26,039 27,351 83,503 163,945	31 December 2007 A$’000 2,776 24,039 19,033 26,314 108,719 180,881	31 December 2008 A$’000 13,767 53,206 89,207 27,566 23,266 207,012	30 September 2009 A$’000 31,392 47,846 112,067 42,081 88,833
			322,219

505 – 226 92	277 31 104 92	547 22 359 92	936 16 988 92
823	504	1,020	2,032

19 Non-current assets – Exploration and evaluation assets

31 December 2006 A$’000 30,748 12,619 (317) –	31 December 2007 A$’000 43,050 2,994 (1,138) –	31 December 2008 A$’000 44,906 7,941 (1,507) –	30 September 2009 A$’000 51,340 5,453 – 2,026
43,050 (27,968) – (426) (28,394)	44,906 (28,394) 55 (366) (28,705)	51,340 (28,705) – (291) (28,996)	58,819
			(28,996 – (202
			(29,198
14,656	16,201	22,344	29,621

All exploration and evaluation assets are intangible in nature.

– I-64 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

20 Non-current assets – Deferred tax assets

31 December 2006 A$’000 – 1,129 1,666 3,100 928 1,359 – 54,153 36 62,371 – 62,371	31 December 2007 A$’000 – 1,730 2,044 299 1,053 1,697 – 39,547 1,188 47,558 – 47,558	31 December 2008 A$’000 183 2,812 2,376 907 1,139 2,533 – 18 553 10,521 12,380 22,901	30 September 2009 A$’000 2,329 3,094 2,358 1,484 1,143 2,906 4 18 30
			13,366 2,298
			15,664

55,318 7,053	42,465 5,093	15,946 6,955	7,407 8,257
62,371	47,558	22,901	15,664

– I-65 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Movements in deferred tax assets:

Felix Group Amounts recognised in profit and loss Trade and other payables Employee benefits provisions Rehabilitation provisions Property, plant and equipment Investments accounted for using the equity method Mining tenements Tax losses Other Amounts recognised directly in equity Derivative financial instruments Total	Opening balance at 1 January 2006 A$’000 643 722 867 2,249 633 1,275 61,595 96	(Charged)/ credited to profit or loss A$’000 (643) 407 799 851 295 84 (7,442) (60)	Charged to equity A$’000 – – – – – – – –	Closing balance at 31 December 2006 A$’000 – 1,129 1,666 3,100 928 1,359 54,153 36
	68,080 236	(5,709) –	– (236)	62,371 –
	68,316	(5,709)	(236)	62,371

Felix Group Amounts recognised in profit and loss Employee benefits provisions Rehabilitation provisions Property, plant and equipment Investments accounted for using the equity method Mining tenements Tax losses Other Amounts recognised directly in equity Derivative financial instruments Total	Opening balance at 1 January 2007 A$’000 1,129 1,666 3,100 928 1,359 54,153 36	Credited/ (charged) to profit or loss A$’000 601 378 (2,801) 125 338 (14,606) 1,152	Charged to equity A$’000 – – – – – – –	Closing balance at 31 December 2007 A$’000 1,730 2,044 299 1,053 1,697 39,547 1,188
	62,371 –	(14,813) –	– –	47,558 –
	62,371	(14,813)	–	47,558

– I-66 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Opening balance at 1 January 2008 A$’000 – 1,730 2,044 299 1,053 1,697 – 39,547 1,188	Credited/ (charged) to profit or loss A$’000 183 1,082 332 608 86 836 – (39,529) (635)	Credited to equity A$’000 – – – – – – – – –	Closing balance at 31 December 2008 A$’000 183 2,812 2,376 907 1,139 2,533 – 18 553
47,558 –	(37,037) –	– 12,380	10,521 12,380
47,558 Opening balance at 1 January 2009 A$’000 183 2,812 2,376 907 1,139 2,533 – 18 553	(37,037) Credited/ (charged) to profit or loss A$’000 2,146 282 (18) 577 4 373 4 – (523)	12,380 Charged to equity A$’000 – – – – – – – – –	22,901

			Closing balance at 30 September 2009 A$’000 2,329 3,094 2,358 1,484 1,143 2,906 4 18 30
10,521 12,380	2,845 –	– (10,082)	13,366 2,298
22,901	2,845	(10,082)	15,664

– I-67 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

31 December 2006 A$’000 – 86 – – 54,153 – 54,239	31 December 2007 A$’000 – 149 – – 39,547 1 39,697	31 December 2008 A$’000 205 307 18 – 18 189 737	30 September 2009 A$’000 856 383 11 5 18 –
			1,273

54,239 –	39,697 –	530 207	1,257 16
54,239	39,697	737	1,273

Mining tenements A$’000 226,690 – – (2,775) 223,915	Computer software A$’000 4 523 – (132) 395	Rail access rights A$’000 – 12,066 (2,783) (467) 8,816	Total A$’000 226,694 12,589 (2,783 (3,374
			233,126

229,470 (5,555)	541 (146)	9,192 (376)	239,203 (6,077
223,915	395	8,816	233,126

– I-68 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Mining tenements A$’000 223,915 – (15,092) (4,266) 204,557	Computer software A$’000 395 73 – (159) 309	Rail access rights A$’000 8,816 47 – (524) 8,339	Total A$’000 233,126 120 (15,092) (4,949) 213,205 224,232 (11,027) 213,205 213,205 15 (16,322) 248 (5,357) 191,789 208,173 (16,384) 191,789 191,789 373 114 (4,437) 187,839 208,660 (20,821) 187,839
214,377 (9,820)	614 (305)	9,241 (902)	224,232 (11,027
204,557	309	8,339
204,557 – (16,254) – (4,438)	309 – (68) 248 (178)	8,339 15 – – (741)	213,205 15 (16,322 248 (5,357
183,865	311	7,613
198,123 (14,258)	794 (483)	9,256 (1,643)	208,173 (16,384
183,865	311	7,613
183,865 210 – (3,527)	311 163 114 (226)	7,613 – – (684)	191,789 373 114 (4,437
180,548	362	6,929
198,333 (17,785)	1,071 (709)	9,256 (2,327)	208,660 (20,821
180,548	362	6,929

– I-69 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

As at 31 December 2006, 2007, 2008 and 30 September 2009, the Moolarben mining tenement had a net book amount of A$162,547,000, A$147,454,000, A$131,199,000 and A$131,199,000 respectively.

Felix

31 December 2006 A$’000 3 523 – – (132) 394	31 December 2007 A$’000 394 75 – – (160) 309	31 December 2008 A$’000 309 179 – – (177) 311	30 September 2009 A$’000 311 133 (93 (124
			227

540 (146)	615 (306)	794 (483)	834 (607
394	309	311	227

Assets pledged as security

There is a First Registered Mortgage over mining tenements owned by Felix Group, with the exception of the Moolarben mining tenement as follows

31 December 2006 A$’000 61,368 395 8,816 70,579	31 December 2007 A$’000 57,103 309 8,339 65,751	31 December 2008 A$’000 52,666 311 7,613 60,590	30 September 2009 A$’000 49,349 362 6,929
			56,640

394	309	311	227
394	309	311	227

– I-70 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

22 Current liabilities – Trade and other payables

31 December 2006 A$’000 27,848 – 2,975 – 2,500 – 33,323	31 December 2007 A$’000 27,770 – 953 – 3,826 – 32,549	31 December 2008 A$’000 53,260 – 427 500 7,050 – 61,237	30 September 2009 A$’000 63,107 118,313 557 500 10,304 475
			193,256

478 – – 76 – 276	204 – – 24 – 498	1,093 – 111,643 83 500 1,023	859 118,313 – 117 500 1,272
830	726	114,342	121,061

The aging of trade payables based on invoice date is as follows. 31 December 31 December Felix Group 2006 2007 A$’000 A$’000 < 30 days 23,022 27,476 31-60 days 1,001 163 61-90 days 3,504 131 > 90 days 321 – 27,848 27,770 Felix < 30 days 157 193 31-60 days – 11 61-90 days – – > 90 days 321 – 478 204	The aging of trade payables based on invoice date is as follows. 31 December 31 December Felix Group 2006 2007 A$’000 A$’000 < 30 days 23,022 27,476 31-60 days 1,001 163 61-90 days 3,504 131 > 90 days 321 – 27,848 27,770 Felix < 30 days 157 193 31-60 days – 11 61-90 days – – > 90 days 321 – 478 204	31 December 2008 A$’000 51,323 45 11 1,881 53,260	30 September 2009 A$’000 59,022 2,919 312 854
			63,107

157 – – 321	193 11 – –	1,091 2 – –	859 – – –
478	204	1,093	859

– I-71 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

The aging of other payables based on the date incurred is as follows.

31 December 2006 A$’000 2,975 – – 2,500 5,475	31 December 2007 A$’000 953 – – 3,826 4,779	31 December 2008 A$’000 927 – – 7,050 7,977	30 September 2009 A$’000 20,557 98,313 – 11,279
			130,149

76 – – 276	24 – – 498	583 – – 112,666	20,117 98,313 – 1,772
352	522	113,249	120,202

Fair Value

Due to the short-term nature of these payables their carrying amount is assumed to approximate their fair value.

23 Current liabilities – Interest-bearing liabilities

31 December 2006 A$’000 3,600 8,177 8,186 19,963	31 December 2007 A$’000 18,710 6,850 – 25,560	31 December 2008 A$’000 3,500 8,151 – 11,651	30 September 2009 A$’000 7,750 8,373 –
			16,123

3,600 –	9,500 9	3,500 22	7,750 15
3,600	9,509	3,522	7,765

Information about the timing of repayments and terms and conditions relating to the above financial instruments are set out in note 26.

– I-72 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

24 Current liabilities – Provisions

	31	31	31	30
	December	December	December	September
	2006	2007	2008	2009
Felix Group	A$’000	A$’000	A$’000	A$’000
Rehabilitation	2,422	750	608	566

Provision for future rehabilitation of mine sites is made in accordance with note 1(t). The provision is expected to settle when the area disturbed is no longer in use or at the end of the life of the mine. The above amount represents those areas expected to be rehabilitated during the next 12 months.

Movements in provisions

Movements in current provision for rehabilitation:

Rehabilitation Current Carrying amount at beginning of year/period Additional provisions recognised Amounts used Amounts derecognised on disposal of interest in joint ventures Transfers (note 28) Carrying amount at end of year/ period	31 December 2006 A$’000 1,613 1,506 (618) (79) – 2,422	31 December 2007 A$’000 2,422 – (8) – (1,664) 750	31 December 2008 A$’000 750 – – – (142) 608	30 September 2009 A$’000 608 – – – (42)
				566

25 Non-current liabilities – Trade and other payables

Felix Group Deferred payment for acquisition of equity interests in Minerva Unsecured loan – non-interest bearing Deferred income Felix Deferred payment for acquisition of equity interests in Minerva	31 December 2006 A$’000 2,423 1,693 – 4,116 2,422	31 December 2007 A$’000 2,827 1,693 – 4,520 2,826	31 December 2008 A$’000 2,538 1,693 – 4,231 2,539	30 September 2009 A$’000 2,148 1,693 1,775
				5,616

				2,148

The fair value of trade and other payables is assumed to approximate their fair value. The carrying value of the deferred payment for acquisition of equity interests in Minerva is based on cash flows discounted using a rate of 7.5%.

– I-73 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

26 Non-current liabilities – Interest bearing liabilities

31 December 2006 A$’000 73,875 19,730 – 93,605	31 December 2007 A$’000 61,165 19,850 – 81,015	31 December 2008 A$’000 6,875 18,722 – 25,597	30 September 2009 A$’000 – 33,337 1,293
			34,630

13,875 –	10,375 22	6,875 –	– –
13,875	10,397	6,875	–

(a) Terms and conditions relating to above financial instruments

Finance leases have lease terms ranging up to 7 years with some having the option to purchase the assets at completion of the lease term for the assets’ market value or contracted value. The effective interest rates implicit in the leases range from 6.9% to 12.5%. Lease liabilities are secured by charges over the leased assets. Certain leases also contain restrictions requiring notification to the lessors of any further finance leases entered into.

Bank loans represent a number of facilities as detailed below.

Multi-option facility agreement – working capital facility

A revolving cash advance facility for working capital was cancelled during the year ended 31 December 2009. This facility for up to A$27,400,000 consisted of a floating rate bill which at maturity could be rolled for 30, 60, 90, 120 or 180 days. Interest on the bill for the years ended 31 December 2006, 2007 and 2008 was charged at BBSY for the appropriate tenor plus a margin of 1.80%, 1.30% and 1.30%, respectively. As at 31 December 2006, 2007 and 2008 this was 8.29%, 8.59% and 5.50% respectively. At 31 December 2006, 2007 and 2008 the drawn down amount was A$100,000, A$6,000,000 and A$Nil, respectively.

Multi-option facility agreement – term debt facility

This is a loan for capital expenditure at the Minerva mine at 31 December 2006, 2007, 2008 and 30 September 2009 of A$17,375,000, A$13,875,000, A$10,375,000 and A$7,750,000 respectively, and consists of a fixed rate bill in the amount of A$15,341,000, A$12,249,000, A$9,160,000 and A$6,842,000 respectively, at a current interest rate of 6.00%, 6.00%, 6.00%, and 6.00%, respectively. The bill rolls quarterly with the rate fixed for the term of the loan. The facility also includes a floating rate bill of A$2,036,000, A$1,626,000, A$1,215,000 and A$908,000 respectively, which at maturity can be rolled for 30, 60, 90, 120 or 180 days. Interest on the floating rate bill is charged at BBSY for the appropriate tenor plus a margin of 1.80%, 1.30%, 1.30% and 1.30%, respectively. For 31 December 2006, 2007, 2008 and 30 September 2009 this was 8.29%, 8.59%, 5.50% and 4.73% respectively. The term debt facility matures on 30 June 2010 and principal is repayable each quarter in the amount of A$875,000. At 31 December 2006, 2007, 2008 and 30 September 2009, the current portion of the loan was A$3,500,000, A$3,500,000, A$3,500,000 and A$7,750,000 respectively, and the non-current portion was A$13,875,000, A$10,375,000, A$6,875,000 and A$Nil respectively.

– I-74 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Ashton underground – syndicated facility agreement

A facility for the development of the Ashton underground project was closed during the year ended 31 December 2008. This facility, for A$60,000,000, consisted of a floating rate bill which at maturity could be rolled for 30, 60 or 90 days. Interest on the floating rate bill was charged at BBSY for the appropriate tenor plus a margin of 0.80%, 0.80%, N/A and N/A, respectively. As at 31 December 2006, 2007 and 2008 this was 7.29%, 8.09% and N/A, respectively. The principal was repayable each quarter in varying amounts. The drawn down amounts were required to be held in a drawdown holding account and prior to project completion, amounts released from the drawdown holding account totalling A$60,000,000 attracted an additional interest margin of 0.95% per annum. At 31 December 2006, 2007 and 2008, the current portion of the loan was A$Nil, A$9,210,000 and N/A, respectively, and the non-current portion was A$60,000,000, A$50,790,000 and N/A, respectively.

Gladstone Port Corporation – Loan from other entity facility

This is a facility for up to A$2,530,000 in place to assist with the funding of the Wiggins Island Coal Export Terminal (WICET) feasibility study costs. Interest on the loan is charged at BBSY as at December 2006, 2007, 2008 and 30 September 2009 at the appropriate tenor plus a margin of, N/A, N/A, N/A and 1.85%, respectively. For 31 December 2006, 2007, 2008 and 30 September 2009 this was N/A, N/A, N/A and 5.11%, respectively. The loan is repayable in full upon commencement of the project or expiry of the facility. At 31 December 2006, 2007, 2008 and 30 September 2009 the non-current amount of the loan is N/A, N/A, N/A and A$1,293,000, respectively.

(b) Security

The above loans and other banking facilities are secured by first registered company charges (mortgage debentures), first registered mortgages, fixed and floating charges, deeds of cross charges, bank guarantees and scrip liens exist over all the assets of certain entities in Felix Group. The terms of the charges preclude the assets being sold or being used as security for further mortgages or charges without the permission of the other holders. Certain finance leases are secured by cash deposit and it is expected this security will be released when syndication of the lease facility is in place. Refer to notes 10(b), 18 and 21 for details.

(c) Financing facilities available

At reporting date, the following financing facilities had been negotiated and were available:

Felix Group Total facilities Working capital facility Term debt facility Underground syndicated facility Indemnity/guarantee facility Lease finance facility Facility from other entity	31 December 2006 A$’000 27,400 17,375 60,000 37,000 27,907 – 169,682	31 December 2007 A$’000 27,400 13,875 60,000 27,000 26,700 – 154,975	31 December 2008 A$’000 27,400 10,375 – 27,000 26,873 – 91,648	30 September 2009 A$’000 – 7,750 – 16,400 189,456 2,530
				216,136

– I-75 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2006 A$’000 100 17,375 60,000 27,658 27,907 – 133,040	31 December 2007 A$’000 6,000 13,875 60,000 19,603 26,700 – 126,178	31 December 2008 A$’000 – 10,375 – 10,201 26,873 – 47,449	30 September 2009 A$’000 – 7,750 – 16,226 41,710 1,293
			66,979

27,300 – – 9,342 – –	21,400 – – 7,397 – –	27,400 – – 16,799 – –	– – – 174 147,746 1,237
36,642	28,797	44,199	149,157

27,400 17,375 37,000 –	27,400 13,875 27,000 31	27,400 10,375 27,000 22	– 7,750 16,400 15
81,775	68,306	64,797	24,165

100 17,375 17,840 –	6,000 13,875 19,603 31	– 10,375 10,202 22	– 7,750 14,411 15
35,315	39,509	20,599	22,176

27,300 – 19,160 –	21,400 – 7,397 –	27,400 – 16,798 –	– – 1,989 –
46,460	28,797	44,198	1,989

– I-76 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(d) Fair value

The carrying amounts and fair values of borrowings at balance date are:

Carrying amount Bank loans – current Lease liabilities – current Other loans – current Bank loans – non-current Lease liabilities – non-current Loan from other entity non-current	31 December 2006 A$’000 3,600 8,177 8,186 73,875 19,730 – 113,568	31 December 2007 A$’000 18,710 6,850 – 61,165 19,850 – 106,575	31 December 2008 A$’000 3,500 8,151 – 6,875 18,722 – 37,248	30 September 2009 A$’000 7,750 8,373 – – 33,337 1,293
				50,753

The fair value of current borrowings approximates their carrying amount, as the impact of discounting is not significant. The fair value of non-current borrowings at a floating interest rate is the same as their carrying value. The fair value of non-current borrowings at a fixed interest rate does not differ to their carrying value by a material amount.

(e) Risk exposures

Information about Felix Group’s exposure to risks arising from borrowings is set out in note 2.

(f) Loans by maturity date

31 December 2006 A$’000 3,600 12,710 40,015 21,150 77,475	31 December 2007 A$’000 18,710 16,100 35,915 9,150 79,875	31 December 2008 A$’000 3,500 6,875 – – 10,375	30 September 2009 A$’000 7,750 – – –
			7,750

3,600 3,500 10,375 –	9,500 3,500 6,875 –	3,500 6,875 – –	7,750 – – –
17,475	19,875	10,375	7,750

– I-77 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

27 Non-current liabilities – Deferred tax liabilities

31 December 2006 A$’000 – 343 9,560 1,734 48,010 4,398 62 –	31 December 2007 A$’000 249 2,934 11,600 4,404 44,918 4,860 62 1,245	31 December 2008 A$’000 1,631 3,156 14,524 11,172 39,889 6,354 64 –	30 September 2009 A$’000 1,051 728 15,547 12,240 39,772 8,530 – 332
64,107 29	70,272 3,570	76,790 –	78,200 1,997
64,136	73,842	76,790	80,197

9,932 54,204	19,598 54,244	19,312 57,478	16,581 63,616
64,136	73,842	76,790	80,197

Movement in deferred tax liabilities:

Felix Group Amounts recognised in profit or loss Trade and other receivables Inventory Overburden Mine development Mining tenements Exploration and evaluation Other intangible assets Other Amounts recognised directly in equity Derivative financial instruments Total	Opening balance at 1 January 2006 A$’000 – 5 6,745 1,321 48,804 2,759 – –	Charged/ (credited) to profit or loss A$’000 – 338 2,815 413 (794) 1,639 62 –	Charged to equity A$’000 – – – – – – – –	Closing balance at 31 December 2006 A$’000 – 343 9,560 1,734 48,010 4,398 62 –
	59,634 –	4,473 –	– 29	64,107 29
	59,634	4,473	29	64,136

– I-78 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Opening balance at 1 January 2007 A$’000 – 343 9,560 1,734 48,010 4,398 62 –	Charged/ (credited) to profit or loss A$’000 249 2,591 2,040 2,670 (3,092) 462 – 1,245	Charged to equity A$’000 – – – – – – – –	Closing balance at 31 December 2007 A$’000 249 2,934 11,600 4,404 44,918 4,860 62 1,245
64,107 29	6,165 –	– 3,541	70,272 3,570
64,136 Opening balance at 1 January 2008 A$’000 249 2,934 11,600 4,404 44,918 4,860 62 1,245	6,165 Charged/ (credited) to profit or loss A$’000 1,382 222 2,924 6,768 (5,029) 1,494 2 (1,245)	3,541 Credited to equity A$’000 – – – – – – – –	73,842

			Closing balance at 31 December 2008 A$’000 1,631 3,156 14,524 11,172 39,889 6,354 64 –
70,272 3,570	6,518 –	– (3,570)	76,790 –
73,842	6,518	(3,570)	76,790

– I-79 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Opening balance at 1 January 2009 A$’000 1,631 3,156 14,524 11,172 39,889 6,354 64 –	Charged/ (credited) to profit or loss 2009 A$’000 (580) (2,428) 1,023 1,068 (117) 2,176 (64) 332	Charged to equity 2009 A$’000 – – – – – – – –	Closing balance at 30 September 2009 A$’000 1,051 728 15,547 12,240 39,772 8,530 – 332
76,790 –	1,410 –	– 1,997	78,200 1,997
76,790 31 December 2006 A$’000 – – 29 29	1,410 31 December 2007 A$’000 – 16 3,445 3,461	1,997 31 December 2008 A$’000 702 7 – 709	80,197

			30 September 2009 A$’000 28 – –
			28

29 –	3,445 16	702 7	28 –
29 31 December 2006 A$’000 3,131	3,461 31 December 2007 A$’000 6,064	709 31 December 2008 A$’000 7,313	28

			30 September 2009 A$’000 7,293

28 Non-current liabilities – Provisions

– I-80 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Movements in provisions

Provision for future rehabilitation of mine sites is made in accordance with note 1(t). The provision is expected to be settled when the area disturbed is no longer in use or at the end of the life of the mine. The above amount represents those areas expected to be rehabilitated after 12 months or at the end of the life of the mine.

Movements in non-current provision for rehabilitation:

Rehabilitation Non-current Carrying amount at beginning of year/period Additional provision recognised – charged to mine development Amounts used Amounts derecognised on disposal of interest in joint venture Unused amounts reversed – credited to mine development Transfers (note 24) Carrying amount at end of year/ period 29 Contributed equity Felix Group and Felix (a) Share capital Ordinary shares Issued and fully paid up (A$’000) Number of shares	31 December 2006 A$’000 1,377 2,206 (309) (143) – – 3,131 31 December 2006 437,320 188,655,038	31 December 2007 A$’000 3,131 1,269 – – – 1,664 6,064 31 December 2007 444,712 196,255,038	31 December 2008 A$’000 6,064 1,107 – – – 142 7,313 31 December 2008 444,833 196,325,038	30 September 2009 A$’000 7,313 251 – – (313) 42
				7,293

				30 September 2009 446,409 196,625,038

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, Felix does not have a limited amount of authorised capital and issued shares do not have a par value.

(b) Movements in ordinary share capital:

Date Details 1 January 2006 Opening balance Options exercised during the year Transfer from options reserve on exercise of options (note 30(a)) Conversion of B class shares (i) 31 December 2006 Closing balance	Number of shares 180,233,038 922,000 – 7,500,000 188,655,038	A$’000 420,133 9 1,653 15,525
		437,320

– I-81 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Date Details 1 January 2007 Opening balance Options exercised during the year Transfer from options reserve on exercise of options (note 30(a)) 31 December 2007 Closing balance 1 January 2008 Opening balance Options exercised during the year Transfer from options reserve on exercise of options (note 30(a)) 31 December 2008 Closing balance 1 January 2009 Opening balance Options exercised during the period Transfer from options reserve on exercise of options (note 30(a)) 30 September 2009 Closing balance	Number of shares 188,655,038 7,600,000 – 196,255,038	A$’000 437,320 6,531 861
		444,712

	196,255,038 70,000 –	444,712 – 121
	196,325,038	444,833

	196,325,038 300,000 –	444,833 – 1,576
	196,625,038	446,409

(i) On 15 April 2005, 82,000,000 ordinary shares, 7,500,000 A class shares and 7,500,000 B class shares were issued as consideration in the acquisition of 100% of White Mining Limited. The value placed on the ordinary shares was the market price at that date of A$2.30 per share. The value of the A class shares and the B class shares was A$2.16 and A$2.07 respectively, based on an independent valuation. A class shares converted to fully paid ordinary shares on 29 May 2005 and B class shares converted to fully paid ordinary shares on 11 November 2006.

(c) Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up Felix, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle the holder to one vote either in person or by proxy at a meeting of Felix.

(d) Capital risk management

Total capital comprises total equity as shown in the balance sheet (including non-controlling interest) plus total interest bearing liabilities. Felix Group’s primary objectives when managing capital are to ensure the continued ability to provide a consistent return for equity stakeholders through a combination of capital growth and distributions and to maintain an optimal capital structure to reduce the cost of capital. In order to achieve these objectives, Felix Group seeks to maintain a low debt to equity ratio (gearing ratio) that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable Felix Group to meet its working capital and strategic investment needs. In order to maintain or adjust the capital structure, Felix Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or alter the amount of debt.

– I-82 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

The gearing ratios were as follows:

Total borrowings (notes 23 and 26) Total equity Total capital Gearing ratio	31 December 2006 A$’000 113,568 395,832 509,400 22%	31 December 2007 A$’000 106,575 458,112 564,687 19%	31 December 2008 A$’000 37,248 653,437 690,685 5%	30 September 2009 A$’000 50,753 628,042
				678,795

				7%

There have been no changes in the capital management objectives during the Relevant Periods, nor in the items considered to be capital.

All financial covenants specified under borrowing facilities have been complied with during the Relevant Periods.

(e) Share-based payments

The following options over ordinary shares existed for Felix Group. All options are equity settled.

Grant Date Expiry date Exercise price Year ended 31 December 2006 19 November 2001 7 December 2008 (i) A$5.20 8 October 2003 8 October 2008 (ii) A$0.85 11 November 2004 30 June 2007 (iii) A$0.01 11 November 2004 30 June 2008 (iii) A$0.01 13 December 2005 12 December 2009 (v) A$0.001 11 December 2006 10 December 2010 (vi) A$0.001 Total Weighted average exercise price Weighted average fair value for options exercised during the year Weighted average remaining contractual life for options outstanding Grant Date Expiry date Exercise price Year ended 31 December 2007 19 November 2001 7 December 2008 (i) A$5.20 8 October 2003 8 October 2008 (ii) A$0.85 13 December 2005 12 December 2009 (v) A$0.001 11 December 2006 10 December 2010 (vi) A$0.001 Total Weighted average exercise price Weighted average fair value for options exercised during the year Weighted average remaining contractual life for options outstanding	Balance at start of the year Number 30,000 7,500,000 832,000 70,000 300,000 – 8,732,000 A$0.749 Balance at start of the year Number 30,000 7,500,000 200,000 100,000 7,830,000 A$0.834	Granted during the year Exercised during the year Number Number – – – – – (832,000) – (70,000) – (20,000) 100,000 – 100,000 (922,000) A$0.001 A$0.01 Granted during the year Exercised during the year Number Number – (30,000) – (7,500,000) – (45,000) – (25,000) – (7,600,000) – A$0.859	Forfeited during the year Number – – – – (80,000) – (80,000) A$0.001 Forfeited during the year Number – – (55,000) – (55,000) A$0.001	Balance at end of the year Number 30,000 7,500,000 – – 200,000 100,000 7,830,000 A$0.834 Balance at end of the year Number – – 100,000 75,000 175,000 A$0.001	Vested and exercisable at end of the year Number – 7,500,000 – – 90,000 –
					7,590,000

					A$0.84 A$4.03 1.83 years Vested and exercisable at end of the year Number – – 70,000 –
					70,000

					A$0.001 A$5.13 2.38 years

– I-83 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Balance at start of the year Number 100,000 75,000 – 175,000 A$0.001 Balance at start of the year Number 30,000 75,000 195,000	Granted during the year Number – – 195,000 195,000 A$0.001 Granted during the year Number – – –	Exercised during the year Number (70,000) – – (70,000) A$0.001 Exercised during the year Number (30,000) (75,000) (195,000)	Forfeited during the year Number – – – – – Forfeited during the year Number – – –	Balance at end of the year Number 30,000 75,000 195,000 300,000 A$0.001 Balance at end of the year Number – – –	Vested and exercisable at end of the year Number 30,000 35,000 –
					65,000
					A$0.001 A$7.75 2.53 years Vested and exercisable at end of the year Number – – –
300,000	–	(300,000)	–	–	–
A$0.001	–	A$0.001	–	–	– A$13.51

(i) Options vest and are exercisable upon the weighted average share price of ordinary shares in Felix measured over 10 consecutive trading days of the ASX after the grant date exceeding the hurdle price of A$5.20. The options cannot be transferred, will not be quoted on the ASX and do not carry voting or dividend rights.
(ii) 15,000,000 options were issued as part consideration in the purchase of Yarrabee Coal Company Pty Ltd. The options vest and are exercisable upon the weighted average share price of ordinary shares in Felix measured over 10 consecutive trading days of the ASX after the grant date exceeding the hurdle price of A$0.85. The options cannot be transferred, will not be quoted on the ASX and do not carry voting or dividend rights.
(iii) Grants of options during 2005 were approved by shareholders at the Annual General Meeting for 2004 held on 11 November 2004. The options were granted to certain Directors and other key management personnel. Options were granted for no cash consideration and vest and were exercisable anytime from immediately upon the performance hurdle being met until the expiry date. Options carry no dividend or voting rights and are non-transferable.

– I-84 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(iv) These grants of options are summarised in the table below. The options are exercisable at any time from their vesting date which is equal to issue date until the expiry date or six months after the General Manager or CFO ceases to be a General Manager or CFO. The options cannot be transferred, will not be quoted on the ASX and do not carry voting or dividend rights. The weighted average fair values at grant date as shown in the table below were determined using a binomial option pricing model which takes into account the exercise price, the life of the option, the current price of the underlying instrument, the expected volatility of the underlying instrument, the expected dividend yield, and the risk-free interest rate for the life of the option. The expected price volatility is based on an independent advisor’s report on historic volatility adjusted for any expected changes to future volatility due to publicly available information. The terms of the options plans are such that should a Change of Control Event occur, Felix will issue all of the outstanding options, if any, and the options are then exercisable. In the case of those options outstanding under (v) and (vi) in the table below, these were issued and exercised on 30 September 2009.

Grant date
Total
number
granted
(v)
Felix Resources
Operations
General
Managers Equity
Participation Plan
13 December
2005
300,000
(vi) Felix Resources
Operations
General
Managers Equity
Participation Plan
11 December
2006
100,000
(vii) Felix Resources
Operations
General
Managers Equity
Participation Plan
and Felix
Resources CFO
Equity
Participation Plan
Entered into
on 28
August 2008
with an
effective
grant date of
1 January
2008
195,000

Issues
Weighted
average
fair
value at
grant
date
Exercise
price
Expiry date
Weighted
average
share
price at
grant
date
Expected
price
volatility
of
Felix’s
shares
Expected
dividend
yield
Risk
free
interest
rate
Number
Date
60,000
13 December
2005
A$1.73
A$0.001
12 December
2009
A$1.91
55%
2.50%
5.18%
75,000
13 December
2006
75,000
13 December
2007
90,000
13 December
2008
25,000
11 December
2007
A$4.00
A$0.001
10 December
2010
A$4.16
43%
1.00%
5.86%
35,000
11 December
2008
40,000
11 December
2009
65,000
1 January
2009
A$6.28
A$0.001
31 December
2011
A$7.98
48%
6.00%
6.60%
65,000
1 January
2010
65,000
1 January
2011

(viii) Forfeited share options were those granted under the Felix Resources Operations General Managers Equity Participation Plan which lapsed upon the resignation of a General Manager in October 2006 and another in July 2007.

(f) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the year/period as part of employee benefit expense were as follows:

Options granted	31 December 2006 A$’000 1,341	Year ended 31 December 2007 A$’000 229	31 December 2008 A$’000 (unaudited) 880	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 67 528

– I-85 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

30 Other reserves and retained profits

31 December 2006 A$’000 143 745 4,285 921 424 6,518	31 December 2007 A$’000 – 9,139 4,285 289 424 14,137	31 December 2008 A$’000 – 13,941 4,285 1,048 424 19,698	30 September 2008 A$’000 (unaudited) – (21,826) 4,285 235 424 (16,882)	30 September 2009 A$’000 – 11,407 – – 424 11,831 4,285 (4,285) – – – – – 13,941 (6,191) 2,572 13,164 (12,079) 11,407
4,285 –	4,285 –	4,285 –	4,285 –	4,285 (4,285
4,285	4,285	4,285	4,285
44 99 –	143 – (143)	– – –	– – –	– – –
143	–	–	–
2,215 8,717 (10,708) 786 (265)	745 12,959 (967) (56) (3,541)	9,140 (34,060) 40,918 (18,007) 15,950	9,140 (21,383) (22,854) 347 12,924	13,941 (6,191 2,572 13,164 (12,079
745	9,140	13,941	(21,826)

– I-86 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2006 A$’000 1,233 1,341 (1,653) 921	31 December 2007 A$’000 921 229 (861) 289	31 December 2008 A$’000 289 880 (121) 1,048	30 September 2008 A$’000 (unaudited) 289 67 (121) 235	30 September 2009 A$’000 1,048 528 (1,576) – 424 424 – – – – 4,285 (4,285) – – – – – – –
424	424	424	424	424
424	424	423	424
4,285 746 921	4,285 8,842 289	4,285 – 1,048	4,285 – 235	– – –
5,952	13,416	5,333	4,520
4,285 –	4,285 –	4,285 –	4,285 –	4,285 (4,285
4,285	4,285	4,285	4,285
1,411 9,409 (10,357) 283 –	746 12,538 (967) (59) (3,416)	8,842 (12,637) – 350 3,445	8,842 (12,634) – 347 3,445	– – – – –
746	8,842	–	–

– I-87 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2006 A$’000 1,233 1,341 (1,653) 921	31 December 2007 A$’000 921 229 (861) 289	31 December 2008 A$’000 289 880 (121) 1,048	30 September 2008 A$’000 (unaudited) 289 67 (121) 235	30 September 2009 A$’000 1,048 528 (1,576) – 185,270 139,989 (163,495) 4,285 166,049 (71,077) 226,925 (163,495) 4,285 (3,362)
(87,516) 43,471 (7,210) –	(51,255) 58,855 (11,772) –	(4,172) 293,495 (104,053) –	(4,172) 207,015 (104,053) –	185,270 139,989 (163,495 4,285
(51,255)	(4,172)	185,270	98,790
(65,627) 10,990 (7,210) –	(61,847) (2,649) (11,772) –	(76,268) 109,244 (104,053) –	(76,268) 107,360 (104,053) –	(71,077 226,925 (163,495 4,285
(61,847)	(76,268)	(71,077)	(72,961)

(c) Nature and purpose of other reserves

(i) Capital profits

The capital profits reserve was used to record non-trading capital profits and the entire balance of the reserve was transferred to retained profits during the 9 months ended 30 September 2009.

– I-88 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(ii) Hedging reserve

The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 1(x). Amounts are recognised in profit or loss or as part of property, plant and equipment when the associated hedge transaction occurs.

(iii) Share option reserve

The share option reserve is used to recognise the fair value at grant date of options issued but not exercised. The options are issued under the Felix Resources Operations General Managers Equity Participation Plan and the Felix Resources CFO Equity Participation Plan.

(iv) Foreign currency translation reserve

Exchange differences arising on translation of the foreign subsidiary are taken to the foreign currency translation reserve, as described in note 1(w). The reserve is recognised in profit and loss when the net investment is disposed of.

31 Non-controlling interests

Interest in: Share capital Reserves Accumulated losses	31 December 2006 A$’000 961 3,127 (839) 3,249	31 December 2007 A$’000 961 3,127 (653) 3,435	31 December 2008 A$’000 961 3,127 (452) 3,636	30 September 2009 A$’000 961 3,127 (335) 3,753

– I-89 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

32 Dividends

(a) Ordinary shares 31 December 2006 Dividend of 4.00 cents per share paid on 31 October 2006, partially franked (20%) 31 December 2007 Dividend of 6.00 cents per share paid on 31 October 2007, unfranked 31 December 2008 Dividend of 50.00 cents per share paid on 31 October 2008, partially franked (30%) Dividend of 3.00 cents per share paid on 31 March 2008, unfranked 30 September 2008 (unaudited) Dividend of 3.00 cents per share paid on 31 March 2008, unfranked Dividend of 50.00 cents per share paid on 31 October 2008, partially franked (30%) 30 September 2009 Dividend of 3.00 cents per share paid on 31 March 2009, fully franked Special dividend of 20.00 cents per share paid on 31 March 2009, fully franked Dividend of 50.00 cents per share paid on 30 October 2009, fully franked Special dividend of 10.17 cents per share paid on 30 October 2009, fully franked (b) Dividends not recognised as at 30 September 2009 Fully franked special dividend of 50 cents per share	A$’000 7,210
	7,210

	11,772
	11,772

	98,163 5,890
	104,053

	5,890 98,163
	104,053

	5,893 39,289 98,313 20,000
	163,495

	98,313

– I-90 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(c) Franking credit balance

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

Franking account balance as at the end of the year/period at 30% Franking credits that will arise from the payment of the amount of the provision for income tax Franking debits that will arise on realisation of the current tax asset Franking debits that will arise from the payment of dividends proposed but not recognised as a liability	31 December 2006 A$’000 204 – – – 204	Year ended 31 December 2007 A$’000 204 – – – 204	31 December 2008 A$’000 4,583 72,623 – (19,364) 57,842	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 204 (24,824) 18,935 81,551 – – (12,621) (42,134) 6,518 14,593

33 Key management personnel disclosures

(a) Directors

The following persons were directors of Felix:

31 December 2006

Ian McCauley Travers Duncan Brian Flannery Jon Parker John Rawlins Anthony McLellan John Kinghorn

Chairman – non-executive Deputy Chairman – non-executive Executive Director Managing Director Managing Director Non-executive Director Non-executive Director Non-executive Director

Appointed on 21 March 2006 Resigned on 20 March 2006

31 December 2007

Travers Duncan Ian McCauley Brian Flannery John Kinghorn Vincent O’Rourke

Hans Mende

John Rawlins Anthony McLellan

Chairman – non-executive Chairman – non-executive Managing Director Non-executive Director Non-executive Director

Non-executive Director

Non-executive Director Non-executive Director

Appointed on 2 April 2007 Resigned on 21 March 2007

Appointed to Board on 2 August 2007 Appointed to Board on 29 October 2007

Resigned on 21 March 2007 Resigned on 25 June 2007

– I-91 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

31 December 2008, 30 September 2008 and 30 September 2009 Travers Duncan Chairman – non-executive Brian Flannery Managing Director John Kinghorn Non-executive Director Vincent O’Rourke Non-executive Director Hans Mende Non-executive Director

(b) Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of Felix Group, directly or indirectly:

31 December 2006

Mark McCauley Chief Financial Officer, General Manager Strategic Development and Co-Company Secretary David Knappick Finance Consultant Joseph Butta General Manager Marketing (appointed 14 January 2008) Kylie Anderson Co-Company Secretary (resigned 17 October 2006 and remained as a finance consultant until 28 February 2007)

31 December 2007 Michael Chapman Chief Operating Officer (appointed 1 July 2007) Mark McCauley Chief Financial Officer, General Manager Strategic Development and Co-Company Secretary (resigned 28 February 2007) David Knappick Chief Financial Officer and Company Secretary (appointed 28 February 2007) Joseph Butta General Manager Marketing (appointed 14 January 2008) Kylie Anderson Co-Company Secretary (resigned 17 October 2006 and remained as a finance consultant until 28 February 2007)

31 December 2008 and 30 September 2008

Michael Chapman Chief Operating Officer (appointed 1 July 2007) Craig Smith Chief Financial Officer and Company Secretary (appointed 1 February 2008) David Knappick Chief Financial Officer and Company Secretary (resigned 31 January 2007) Goran Stamenkovic General Manager Marketing (appointed 1 February 2008) Joseph Butta General Manager Marketing (resigned 31 January 2008) 30 September 2009 Michael Chapman Chief Operating Officer (appointed 1 July 2007) Craig Smith Chief Financial Officer and Company Secretary (appointed 1 February 2008) Goran Stamenkovic General Manager Marketing (appointed 1 February 2008)

– I-92 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

(c) Key management personnel compensation

31 December 2006 A$ 887,851 146,949 626,650 433,300	Year ended 31 December 2007 A$ 932,910 52,035 133,594 –	31 December 2008 A$ 2,094,022 144,867 – –	9 months ended 30 September 30 September 2008 2009 A$ A$ (unaudited) 1,662,060 1,470,357 98,525 98,525 – – – –	9 months ended 30 September 30 September 2008 2009 A$ A$ (unaudited) 1,662,060 1,470,357 98,525 98,525 – – – –
2,094,750 815,323 68,313 342,751 – 1,226,387 487,718 50,250 121,017 – 658,985	1,118,539 1,037,738 93,153 82,202 – 1,213,093 245,106 18,675 – – 263,781	2,238,889 1,073,928 90,690 533,264 – 1,697,882 547,266 45,486 114,845 – 707,597	1,760,585 737,678 63,690 399,075 – 1,200,443 420,916 34,115 85,898 – 540,929	1,568,882
				917,750 76,275 330,593 –
				1,324,618
				493,545 40,869 73,465 –
				607,879
3,980,122	2,595,413	4,644,368	3,501,957	3,501,379

– I-93 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

B. Named

Cash salary A$ – 314,174 – 30,847 – – – 345,021	Short-te Directors fees A$ 50,000 – 40,000 – 70,046 79,235 53,300 292,581	rm employee b Consulting fees A$ 157,213 – – – – – – 157,213	enefits Non- monetary benefits A$ 14,081 17,952 14,081 4,679 14,081 14,081 14,081 93,036	Post- employment benefits Cash bonus Super- annuation A$ A$ – – – 28,276 – 3,600 – 101,638 – 6,304 – 7,131 – – – 146,949	Post- employment benefits Cash bonus Super- annuation A$ A$ – – – 28,276 – 3,600 – 101,638 – 6,304 – 7,131 – – – 146,949	Share- based payment Options(1) A$ – – – 571,251 – – 55,399 626,650	Termination benefits A$ – 433,300 433,300	Total A$ 221,294 360,402 57,681 1,141,715 90,431 100,447 122,780
								2,094,750

221,812 212,000 201,000 167,737	– – – –	– – – –	4,335 4,252 4,187 –	– – – –	19,963 19,080 18,090 11,180	342,751 – – –		588,861 235,332 223,277 178,917
802,549	–	–	12,774	–	68,313	342,751	–	1,226,387

230,000 225,000	– –	– –	29,684 3,034	– –	30,000 20,250	79,943 41,074	– –	369,627 289,358
455,000 1,602,570	– 292,581	– 157,213	32,718 138,528	– –	50,250 265,512	121,017 1,090,418	– 433,300	658,985

								3,980,122

– 504,587 – – – – – – –	77,500 – 49,817 33,333 11,393 13,761 10,000 25,000 –	134,794 – – – – – – – –	19,096 10,690 10,550 4,393 1,850 2,312 18,747 5,087 –	– – – – – – – – –	– 45,413 4,483 – – 1,239 900 – –	– – – – – – – 27,472 106,122	– –	231,390 560,690 64,850 37,726 13,243 17,312 29,647 57,559 106,122
504,587	220,804	134,794	72,725	–	52,035	133,594	–	1,118,539

– I-94 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Cash salary A$ 142,500 210,000 153,670 234,067 225,000 62,707 1,027,944	Short-te Directors fees A$ – – – – – – –	rm employee b Consulting fees A$ – – – – – – –	enefits Non- monetary benefits A$ – – 37 1,589 1,804 6,364 9,794	Post- employment benefits Cash bonus Super- annuation A$ A$ – 15,000 – 18,900 – 13,830 – 21,066 – 20,250 – 4,107 – 93,153	Post- employment benefits Cash bonus Super- annuation A$ A$ – 15,000 – 18,900 – 13,830 – 21,066 – 20,250 – 4,107 – 93,153	Share- based payment Options(1) A$ 18,529 – – – – 63,673 82,202	Termination benefits A$ –	Total A$ 176,029 228,900 167,537 256,722 247,054 136,851
								1,213,093

207,500	–	–	37,606	–	18,675	–	–	263,781
207,500 1,740,031	– 220,804	– 134,794	37,606 120,125	– –	18,675 163,863	– 215,796	– –	263,781

								2,595,413

– 1,400,000 – – –	100,000 – 59,633 72,917 65,000	204,081 – – – –	11,471 11,849 6,357 6,357 6,357	– 150,000 – – –	n/a 139,500 5,367 n/a n/a	– – – – –	– – – –	315,552 1,701,349 71,357 79,274 71,357
1,400,000	297,550	204,081	42,391	150,000	144,867	–	–	2,238,889

350,000 282,500 220,000 21,407 34,282	– – – – –	– – – – –	42,841 1,065 2,557 2,138 2,138	65,000 50,000 – – –	37,350 29,925 19,800 1,927 1,688	188,729 229,690 114,845 – –	– – – – –	683,920 593,180 357,202 25,472 38,108
908,189	–	–	50,739	115,000	90,690	533,264	–	1,697,882

– I-95 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Cash salary A$ 253,400 252,000 505,400 2,813,589	Short-te Directors fees A$ – – – 297,550	rm employee Consulting fees A$ – – – 204,081	benefits Non- monetary benefits A$ 4,260 37,606 41,866 134,996	Cash bonus A$ – – – 265,000	Post- employment benefits Super- annuation A$ 22,806 22,680 45,486 281,043	Share- based payment Options(1) A$ 114,845 – 114,845 648,109	Termination benefits A$ – – – –	Total A$ 395,311 312,286
								707,597

								4,644,368

– 1,050,000 – – –	75,000 – 44,725 54,167 48,750	204,081 – – – –	10,060 10,439 4,946 4,946 4,946	– 150,000 – – –	– 94,500 4,025 – –	– – – – –	– – – – –	289,141 1,304,939 53,696 59,113 53,696
1,050,000	222,642	204,081	35,337	150,000	98,525	–	–	1,760,585

213,750 207,500 160,000 21,407 34,282	– – – – –	– – – – –	42,841 1,065 2,557 2,138 2,138	– 50,000 – – –	22,500 23,175 14,400 1,927 1,688	141,382 171,795 85,898 – –	– – – – –	420,473 453,535 262,855 25,472 38,108
636,939	–	–	50,739	50,000	63,690	399,075	–	1,200,443

190,050 189,000	– –	– –	4,260 37,606	– –	17,105 17,010	85,898 –	– –	297,313 243,616
379,050 2,065,989	– 222,642	– 204,081	41,866 127,942	– 200,000	34,115 196,330	85,898 484,973	– –	540,929

								3,501,957

– I-96 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Cash salary A$ – 1,050,000 – – – 1,050,000	Short-te Directors fees A$ 75,000 – 44,725 56,250 48,750 224,725	rm employee b Consulting fees A$ 78,750 – – – – 78,750	enefits Non- monetary benefits A$ 12,780 91,406 4,232 4,232 4,232 116,882	Post- employment benefits Cash bonus Super- annuation A$ A$ – – – 94,500 – 4,025 – – – – – 98,525	Post- employment benefits Cash bonus Super- annuation A$ A$ – – – 94,500 – 4,025 – – – – – 98,525	Share- based payment Options(1) A$ – – – – – –	Termination benefits A$ – – – – – –	Total A$ 166,530 1,235,906 52,982 60,482 52,982
								1,568,882

307,500 255,000 210,000	– – –	– – –	66,313 – 3,937	25,000 25,000 25,000	29,925 25,200 21,150	110,198 146,930 73,465		538,936 452,130 333,552
772,500	–	–	70,250	75,000	76,275	330,593	–	1,324,618

220,097 225,000	– –	– –	22,538 15,910	10,000 –	20,619 20,250	73,465 –	– –	346,719 261,160
445,097 2,267,597	– 224,725	– 78,750	38,448 225,580	10,000 85,000	40,869 215,669	73,465 404,058	– –	607,879

								3,501,379

(1) This compensation relates to the value of options approved by the Board and granted on 1 January 2008 and 13 December 2005, as well as those granted and approved by shareholders at the AGM on 11 November 2004.
^ Denotes one of the five highest paid individuals of Felix Group.
Denotes one of the five highest paid individuals of Felix.

Except as disclosed above, there was no arrangement under which a director, other key management personnel or other highest paid individual waived or agreed to waive any remuneration during the Relevant Periods.

– I-97 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(d) Equity instrument disclosures relating to key management personnel

(i) Option holdings

The number of options over ordinary shares in Felix held during the Relevant Periods by directors and other key management personnel of Felix Group, including their related parties, are set out below.

Year ended 31 December 2006 Name Directors of Felix Ian McCauley John Rawlins Jon Parker (1) Anthony McLellan Other key management personnel of Felix Group Mark McCauley Total Year ended 31 December 2007 Name Directors of Felix Ian McCauley(2) John Rawlins(2) Other key management personnel of Felix Group Michael Chapman (3) Total Year ended 31 December 2008 Name Other key management personnel of Felix Group Michael Chapman Goran Stamenkovic Craig Smith Total 9 months ended 30 September 2008 (unaudited) Name Other key management personnel of Felix Group Michael Chapman Goran Stamenkovic Craig Smith Total	Balance at the start of the year Granted as compensation 3,750,000 – 3,750,000 – 550,000 – 70,000 – 312,000 – 8,432,000 – Balance at the start of the year Granted as compensation 3,750,000 – 3,750,000 – 100,000 – 7,600,000 – Balance at the start of the year Granted as compensation 100,000 45,000 – 60,000 – 30,000 100,000 135,000 Balance at the start of the period Granted as compensation 100,000 45,000 – 60,000 – 30,000 100,000 135,000	Exercised – – – (70,000) (312,000) (382,000) Exercised (3,750,000) (3,750,000) – (7,500,000) Exercised (70,000) – – (70,000) Exercised (75,000) – – (75,000)	Other changes – – – – – – Other changes – – – – Other changes – – – – Other changes – – – –	Balance at end of the year 3,750,000 3,750,000 550,000 – – 8,050,000 Balance at end of the year – – 100,000 100,000 Bala)nce at end of the year 75,000 60,000 30,000 165,000 Balance at end of the period 75,000 60,000 30,000 165,000	Vested and exercisable 3,750,000 3,750,000 – – – 7,500,000 Vested and exercisable – – 70,000 70,000 Vested and exercisable 30,000 – – 30,000 Vested and exercisable – – – –	Unvested – – 550,000 – –
						550,000

						Unvested – – 30,000
						30,000

						Unvested 45,000 60,000 30,000
						135,000

						Unvested 75,000 60,000 30,000
						165,000

– I-98 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

9 months ended 30 September 2009 Name Other key management personnel of Felix Group Michael Chapman Goran Stamenkovic Craig Smith Total	Balance at the start of the period Granted as compensation 75,000 – 60,000 – 30,000 – 165,000 –	Exercised (75,000) (60,000) (30,000) (165,000)	Other changes – – – –	Balance at end of the period Vested and exercisable – – – – – – – –	Unvested – – –
					–

(1) Option holding at resignation date, 20 March 2006.
(2) Resigned 21 March 2007. Options were under contract on that date and were exercised on 14 May 2007 following FIRB approval.
(3) Balance at the start of the year relates to options acquired under an option plan that was in place before Mr. M. Chapman was a key management person.

(ii) Share holdings

The numbers of shares in Felix held during the financial year by each director of Felix and other key management personnel of Felix Group, including their personally related parties, are set out below.

Year ended 31 December 2006 Name Directors of Felix Ian McCauley John Rawlins Jon Parker(1) Anthony McLellan Travers Duncan(2) Brian Flannery(2) Other key management personnel of Felix Group Mark McCauley David Knappick(3) Joseph Butta(4) Total	Balance at the start of the year 15,193,050 15,082,586 880,000 30,000 26,950,000 26,850,000 168,000 13,425,000 8,950,000 107,528,636	Received during the year on the exercise of options – – – 70,000 – – 312,000 – – 382,000	Other changes during the year – – – (30,000) 2,998,706 2,600,000 – 1,125,000 750,000 7,443,706	Balance at the end of the year 15,193,050 15,082,586 880,000 70,000 29,948,706 29,450,000 480,000 14,550,000 9,700,000
				115,354,342

– I-99 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Year ended 31 December 2007 Name Directors of Felix Ian McCauley(5) John Rawlins(5) Anthony McLellan(8) Hans Mende(7) Travers Duncan Brian Flannery Other key management personnel of Felix Group Mark McCauley(6) David Knappick Joseph Butta Total Year ended 31 December 2008 Name Directors of Felix Hans Mende Travers Duncan Brian Flannery Other key management personnel of Felix Group Michael Chapman David Knappick(9) Joseph Butta(9) Total	Balance at the start of the year 15,193,050 15,082,586 70,000 37,601,724 29,948,706 29,450,000 480,000 14,550,000 9,700,000 152,076,066 Balance at the start of the year 37,601,724 29,948,706 29,450,000 – 14,550,000 9,700,000 121,250,430	Received during the year on the exercise of options 3,750,000 3,750,000 – – – – – – – 7,500,000 Received during the year on the exercise of options – – – 70,000 – – 70,000	Other changes during the year (18,943,050) (18,832,586) (70,000) – – – – – – (37,845,636) Other changes during the year – – – – (14,550,000) (9,700,000) (24,250,000)	Balance at the end of the year – – – 37,601,724 29,948,706 29,450,000 480,000 14,550,000 9,700,000
				121,730,430

				Balance at the end of the year 37,601,724 29,948,706 29,450,000 70,000 – –
				97,070,430

– I-100 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

9 months ended 30 September 2008 (unaudited) Name Directors of Felix Hans Mende Travers Duncan Brian Flannery Other key management personnel of Felix Group Michael Chapman Goran Stamenkovic Craig Smith David Knappick(9) Joseph Butta(9) Total 9 months ended 30 September 2009 Name Directors of Felix Hans Mende(7) Travers Duncan Brian Flannery Other key management personnel of Felix Group Michael Chapman Goran Stamenkovic Craig Smith Total	Balance at the start of the period 37,601,724 29,948,706 29,450,000 – – – 14,550,000 9,700,000 121,250,430 Balance at the start of the period 37,601,724 29,948,706 29,450,000 70,000 – – 97,070,430	Received during the period on the exercise of options – – – 70,000 – – – – 70,000 Received during the period on the exercise of options – – – 75,000 60,000 30,000 165,000	Other changes during the period – – – – – – (14,550,000) (9,700,000) (24,250,000) Other changes during the period – – – – – – –	Balance at the end of the period 37,601,724 29,948,706 29,450,000 70,000 – – – –
				97,070,430

				Balance at the end of the period 37,601,724 29,948,706 29,450,000 145,000 60,000 30,000
				97,235,430

(1) Shareholding at resignation date, 20 March 2006.
(2) Net change other includes 2,250,000 B class shares which converted to ordinary shares on 16 November 2006.
(3) Net change other includes 1,125,000 B class shares which converted to ordinary shares on 16 November 2006.
(4) Net change other includes 750,000 B class shares which converted to ordinary shares on 16 November 2006.
(5) Shareholdings at resignation date, 21 March 2007. Options and shareholdings were under contract on that date and were exercised/sold on 14 May 2007 following FIRB approval.
(6) Shareholding at resignation date, 28 February 2007.

– I-101 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(7) Mr Mende became a key management person upon his appointment as a director on 29 October 2007. Mr Mende has a partial interest in these shares through a director related entity.
(8) Net change other relates to shareholding at date of resignation 25 June 2007.
(9) Shareholdings at resignation date 31 January 2008.

(iii) Aggregates for key management personnel

	31	31	31	30	30
	December	December	December	September	September
	2006	2007	2008	2008	2009
	A$	A$	A$	A$	A$
				(unaudited)
Aggregate proceeds received
from other key
management personnel on
the exercise of options and
recognised as issued
capital	3,820	6,375,000	70	70	165
Fair value of shares issued to
other key management
personnel on the exercise
of options as at their issue
date	1,544,480	38,353,480	542,500	542,500	2,178,000

– I-102 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

(e) Loans to directors and other key management personnel

Aggregate for key management personnel Balance at the beginning of the year/period Loans advanced Loan repayments received Interest payable for the year/period Interest paid Balance at the end of the year/period Highest indebtedness during the year/period Number of persons in Felix Group aggregate at the end of the year/period Individuals with loans above $100,000 during the period Balance at the start of the period Loans advanced Loan repayments received Interest payable for the period Interest paid Balance at the end of the period Highest indebtedness during the period Number of persons in Felix Group aggregate at the end of the period	31 December 2006 A$’000 1,705 – – 163 (163) 1,705	31 December 2007 A$’000 – – – – – –	31 December 2008 A$’000 – 1,821 (42) 68 (68) 1,779	30 September 2008 A$’000 (unaudited) – 1,774 – – – 1,774	30 September 2009 A$’000 1,779 37 – 102 (102) 1,816 1,816 1 1,779 37 – 102 (102) 1,816 1,816 1
	1,705 1 1,705 – – 163 (163)	– – – – – – –	1,821 1 – 1,821 (42) 68 (68)	1,774 1 – 1,774 – – –	1,816 1 1,779 37 – 102 (102
	1,705 1,705 1	– – –	1,779 1,821 1	1,774 1,774 1

The loan at 31 December 2006 was to former director Mr. John Rawlins. Mr. Rawlins ceased to be a director on 21 March 2007. The loan was a secured interest bearing loan, interest payable twice yearly at the ANZ Bank corporate rate for overdrafts exceeding A$1 million. Mr Rawlins repaid the loan on 11 August 2008.

The loan at 31 December 2008, 30 September 2008 and 30 September 2009 was advanced to Mr. B. Flannery for the acquisition of a Grazing Homestead Perpetual Lease in respect of property situated at Minerva. Mr. B. Flannery and Minerva Coal Pty Ltd have entered into a Deed of Licence under which Minerva is using part of the property as an access to its mining lease situated upon the property. The loan is a secured interest bearing loan, interest is compounded daily and payable twice yearly at the rate of 10.45% per annum.

– I-103 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(f) Transactions with directors and other key management personnel

Transactions with directors of Felix and other key management personnel, including their related parties, are on commercial terms and conditions no more favourable than those available to other parties under similar circumstances unless otherwise stated.

Profit after tax includes the following items of revenue and expenses that resulted from transactions with directors of Felix and other key management personnel, including their related parties.

Amounts recognised as revenue Receipts by Ashton Coal Mines Limited from Energy Coal Marketing Pty Limited for the sale of thermal coal. Mr. H. Mende is an indirect shareholder in Energy Coal Marketing Pty Limited Receipts by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture from Coalroc Contractors Pty Ltd for property rental. Mr. B. Flannery, Mr. T. Duncan, Mr. D. Knappick and Mr. J. Butta are the majority shareholders in Coalroc Contractors Pty Ltd Receipts by Ashton Coal Mines Limited from Coalroc Contractors Pty Ltd for property rental Total recognised as revenue Amounts recognised as expense Payment to Rawmac Pastoral Pty for access licence fees. Rawmac Pastoral Pty Ltd is controlled by Mr.I.McCauley and Mr.J.Rawlins Payments to Aedion Pty Ltd by Yarrabee Coal Company Pty Ltd for accommodation. Mr. J. Rawlins is a director of Aedion Pty Ltd	31 December 2006 A$ – – – – 8,934 8,787	31 December 2007 A$ – – – – 3,300 5,200	31 December 2008 A$ – 324 1,116 1,440 – –	30 September 2008 A$ (unaudited) – 324 612 936 – –	30 September 2009 A$ 29,085,582 – 1,530
					29,087,112

					– –

– I-104 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Payments to Coalroc Contractors Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture for mining contracting and equipment hire Payments to Coalroc Contractors Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture for interest on finance leases (refer note 6) Payment to Coalroc Contractors Pty Ltd by UCC Energy Pty Limited for trade services Payments to Coalroc Contractors Pty Ltd by Australian Coal Processing Pty Ltd for trade services Payments to Yunaga Mine Services Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture for trade services. Coalroc Contractors Pty Ltd owned 50% of the share capital of Yunaga Mine Services Pty Ltd up until 15 September 2007. Coalroc Contractors Pty Ltd reduced its shareholding to nil on this date Payments to Yunaga Mine Services Pty Ltd by UCC Energy Pty Limited for trade services Payments to Yunaga Mine Services Pty Ltd by Australian Coal Processing Pty Ltd for trade services Payments to Yunaga Mine Services Pty Ltd by Ashton Coal Mines Limited for trade services Payments to Mr. B. Flannery for land access licence fees by Minerva Coal Pty Ltd Total recognised as expense	31 December 2006 A$ 443,257 – – 141,322 1,155,963 3,614 22,123 – – 1,784,000	31 December 2007 A$ 2,381,693 433,829 2,080 1,264 136,584 – 1,168 18,210 – 2,983,328	31 December 2008 A$ 2,771,991 364,116 – – 1,073 – – – 100,000 3,237,180	30 September 2008 A$ (unaudited) 2,347,979 308,752 – – – – – – – 2,656,731	30 September 2009 A$ 2,093,647 48,571 – – – – – – 76,712
					2,218,930

– I-105 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Assets and liabilities include the following items that resulted from transactions with directors of Felix and other key management personnel, including their related parties. Amounts recognised as property, plant and equipment Fair value of land and building acquired from Aedion Pty Ltd by Yarrabee Coal Company Pty Ltd Fair value of plant & equipment acquired from Coalroc Contractors Pty Ltd by Tonford Pty Ltd Payments to Coalroc Contractors Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture for mining contracting and equipment hire Finance lease charges capitalised Payments to Yunaga Mine Services Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture for mining contracting Fair value of plant & equipment acquired from Coalroc Contractors Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture Total recognised as assets	31 December 2006 A$ 412,845 – 3,326,777 491,680 50,127 7,797,600 12,079,029	31 December 2007 A$ – – 642,639 236,111 2,864 127,500 1,009,114	31 December 2008 A$ – – 55,395 – – 810,000 865,395	30 September 2008 A$ (unaudited) – – – – 865,395 865,395	30 September 2009 A$ – 16,890 – – –
					16,890

– I-106 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

Interest bearing liabilities Current Fair value of finance lease agreements with Coalroc Contractors Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture Non-current Fair value of finance lease agreements with Coalroc Contractors Pty Ltd by Ashton Coal Operations Pty Limited, as operator of the Ashton Joint Venture Total recognised as liabilities	31 December 2006 A$ 2,898,526 3,667,211 6,565,737	31 December 2007 A$ 2,103,510 1,635,042 3,738,552	31 December 2008 A$ 504,439 – 504,439	30 September 2008 A$ (unaudited) 1,201,136 – 1,201,136	30 September 2009 A$ – –
					–

Finance lease agreements with Coalroc Contractors Pty Ltd relate to mining equipment and have remaining lease terms ranging up to 3 months with the option to purchase the assets at completion of the lease term for the contracted value. The effective discount rate implicit in the leases range from 12%-13.4%.

Lease liabilities are secured by the leased assets.

(g) Outstanding balances

The following balances are outstanding at the reporting date in relation to transactions with directors of Felix and other key management personnel, including their related parties.

– –	– –	180 180	288 288	288
				288

8,848 211,230 –	– 379,291 –	– 188,579 –	– 307,477 –	– 237,467 476
220,078	379,291	189,579	307,477	237,943

– I-107 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

34 Remuneration of auditors

Amounts paid or payable to BDO (Qld) Pty Ltd: Audit and review of financial reports Non-audit services Tax compliance Tax consulting Accounting consulting Assurance related Amounts paid or payable to a related practice of BDO (Qld) Pty Ltd: Audit and review of financial reports Non-audit services Tax compliance Tax consulting	31 December 2006 A$ 306,377 159,517 208,157 – – – 2,335 – 676,386	Year ended 31 December 2007 A$ 288,306 89,809 – – – 10,121 7,584 – 395,820	31 December 2008 A$ 319,011 120,286 1,515 89,500 – 10,403 4,827 – 545,542	9 months ended 30 September 30 September 2008 2009 A$ A$ (unaudited) 276,849 204,164 87,184 107,419 765 18,547 – 129,354 – 23,972 10,121 1,114 9,902 2,508 – 3,541 384,821 490,619	9 months ended 30 September 30 September 2008 2009 A$ A$ (unaudited) 276,849 204,164 87,184 107,419 765 18,547 – 129,354 – 23,972 10,121 1,114 9,902 2,508 – 3,541 384,821 490,619
					490,619

35 Commitments

(a) Capital expenditure commitments

(i) Estimated capital expenditure contracted for at the reporting date but not provided for:

Property, plant and equipment Share of joint ventures Other Underground development Share of joint ventures Exploration expenditure Share of joint ventures	31 December 2006 A$’000 2,977 – 7,272 – 10,249	31 December 2007 A$’000 1,800 17 – – 1,817	31 December 2008 A$’000 123,991 7,993 – 697 132,681	30 September 2009 A$’000 187,491 1,068 – 533
				189,092

– I-108 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

(ii) Estimated capital expenditure authorised at the reporting date but not provided for:

Property, plant and equipment Share of joint ventures Other Freehold land and buildings Share of joint ventures Exploration expenditure Share of joint ventures	122 – – 122	36 – – 36	214,751 212 10,230 1,053 226,246	76,202 972 9,083 770
				87,027

(b) Lease expenditure commitments

(i) Non-cancellable operating leases

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Not later than one year Later than one year but not later than five years Total lease expenditure commitments not recognised in the Financial Information	31 December 2006 A$’000 1,119 2,663 3,782	31 December 2007 A$’000 1,247 1,411 2,658	31 December 2008 A$’000 1,681 557 2,238	30 September 2009 A$’000 663 262
				925

Operating leases have remaining lease terms ranging from 3 months to 5 years. Items that are subject to operating leases include mining equipment, office space and small items of office equipment. Felix Group does not have an option to purchase the leased assets at the expiry of the lease period. These leases have escalation clauses and terms of renewal by agreement between specific entity that holds the lease and the lessor.

– I-109 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

31 December 2006 A$’000 8,388 26,302 –	31 December 2007 A$’000 9,011 22,399 –	31 December 2008 A$’000 10,014 17,017 4,929	30 September 2009 A$’000 12,915 38,873 1,385 53,173 (11,463) 41,710 8,373 33,337 41,710
34,690 (6,783) 27,907 8,177 19,730	31,410 (4,710) 26,700 6,850 19,850	31,960 (5,087) 26,873 8,151 18,722	53,173 (11,463
			41,710
			8,373 33,337
27,907	26,700	26,873

Finance leases relate to mining vehicles and machinery with lease terms between 3 and 7 years. These leases have terms of renewal at the discretion of the specific entity that holds the lease with some purchase options but no escalation clauses. The leases are subject to review of financial covenant ratios on a quarterly basis and contain restrictions on further indebtedness for one particular lease.

36 Related party transactions

(a) Parent entity and subsidiaries

Felix Group consists of Felix and its subsidiaries, the ownership interests of which are set out in note

Transactions between Felix and other entities in Felix Group during the years ended 31 December 2006, 2007, 2008, and 9 months ended 30 September 2008 and 2009 consisted of:

i) loans advanced by Felix;
ii) the payment of dividends to Felix;
iii) the provision of administration, accounting, management, marketing and hire services by Felix and other entities in Felix Group, and

(b) Associates, jointly controlled entities and joint ventures

Associated entities and jointly controlled entities are set out in note 15 and joint ventures in which Felix Group is a venturer are set out in note 38.

Transactions with associates, jointly controlled entities and joint ventures during the years ended 31 December 2006, 2007, 2008, and 9 months ended 30 September 2008 and 2009 consisted of:

i) loans advanced by Felix, subsidiaries or joint ventures to associated entities;
ii) loans repaid to Felix, subsidiaries or joint ventures from associated entities;

– I-110 –

APPENDIX I FINANCIAL INFORMATION OF FELIX GROUP

iii) sales of coal by a subsidiary to an associated entity under terms and conditions specified in the Ashton Coal Joint Venture Agreement;
iv) the provision of administration, accounting, marketing, management and hire services by Felix or subsidiaries to associated entities and joint ventures;
v) the payments by a joint venture to an associated entity under the terms and conditions specified in the BOOT contract between Ashton Coal Operations Pty Ltd and Australian Coal Processing Pty Ltd.
vi) sales of coal by Yarrabee Coal Company Pty Ltd to Minerva Joint Venture; and
vii) sale of excavator by Felix to a joint venture.
(c) Key management personnel

Disclosures relating to key management personnel are set out in note 33.

(d) Transactions with related parties

The following transactions occurred with related parties:

Felix Group Sales of goods and services Sale of coal to associated entities Sales of marketing services to associated entities Purchases of goods and services Purchase of coal preparation and handling services by joint venture from associated entity	Year ended 9 months ended 31 December 2006 31 December 2007 31 December 2008 30 September 2008 30 September 2009 A$ A$ A$ A$ A$ (unaudited) 81,759,781 105,596,113 379,791,316 231,352,060 245,307,987 120,000 230,400 490,410 194,082 246,410 295,495 – – – –	Year ended 9 months ended 31 December 2006 31 December 2007 31 December 2008 30 September 2008 30 September 2009 A$ A$ A$ A$ A$ (unaudited) 81,759,781 105,596,113 379,791,316 231,352,060 245,307,987 120,000 230,400 490,410 194,082 246,410 295,495 – – – –

		–

(e) Outstanding balances arising from transactions with related parties

Balances outstanding at the reporting date to related parties are unsecured and subordinate to other liabilities. Balances outstanding at the reporting date from related parties are also unsecured, non-interest bearing and repayable on demand.

– I-111 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The following balances are outstanding at the reporting date in relation to transactions with related parties.

Felix Group Current receivables Trade debtors Receivable from Ashton Coal Mines Limited Non-current receivables Advances to associated entities Receivable from Ashton Coal Mines Limited being an unsecured, non-interest bearing loan Current payables Trade creditors Payable by Ashton Coal Operations Pty Ltd, as operator of the Ashton Joint Venture, to Australian Coal Processing Pty Ltd Felix Current receivables Advances to controlled entities Receivable from Minerva Coal Pty Ltd being an unsecured, non-interest bearing loan Advances to Minerva Coal Pty Advance to 100% owned subsidiaries Receivables from controlled entities Receivable from 100% owned subsidiaries under tax sharing agreement (note 10) Non-current receivables Advances to controlled entities Receivable from Minerva Coal Pty Ltd being an unsecured, non-interest bearing loan Receivable from SASE Pty Ltd being an unsecured, non-interest bearing loan Less: Accumulated impairment losses Receivable from 100% owned subsidiaries Less: Accumulated impairment losses Current payables Advances from 100% owned subsidiaries	31 December 2006 A$ – 3,155,000 220,000 3,228,831 82,255 57,162,707 8,208,966 748,285 32,840,713 (32,840,713) 50,525,863 (30,525,863) –	31 December 31 December 30 September 2007 2008 2009 A$ A$ A$ 5,282,000 53,726,000 11,382,146 5,904,000 11,203,000 10,328,339 127,000 – – 3,228,831 3,228,831 3,211,856 82,255 244,972 – 66,361,001 – 46,037,195 24,632,693 158,632,745 201,815,703 748,285 748,285 748,285 31,272,006 31,271,655 31,271,655 (31,272,006) (31,271,655) (31,271,655) 50,542,772 56,239,627 52,779,707 (30,542,772) (30,625,506) (29,211,773) – 111,643,000 –

(f) Terms and conditions

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

– I-112 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

37 Subsidiaries

		Consolidated percentage owned	Consolidated percentage owned	Consolidated percentage owned	Consolidated percentage owned
	Country	31	31	31	30
	of	December	December	December	September
Name of entity	incorporation	2006	2007	2008	2009
		%	%	%	%
Subsidiaries – at cost:
Auriada Limited	Northern	100	100	100	100
	Ireland
Ballymoney Power Limited	Northern	100	100	100	100
	Ireland
Balhoil Nominees Pty Ltd	Australia	100	100	100	100
South Australian Coal Corp Pty	Australia	100	100	100	100
Limited
SASE Pty Ltd	Australia	90	90	90	90
Athena Coal Pty Ltd	Australia	100	100	100	100
Minerva Mining Pty Ltd (formerly	Australia	100	100	100	100
Sandhurst Mining Pty Ltd)
Felix Coal Sales Pty Ltd	Australia	100	100	100	100
Proserpina Coal Pty Ltd	Australia	100	100	100	100
Minerva Coal Pty Ltd	Australia	51	51	51	51
Yarrabee Coal Company Pty Ltd	Australia	100	100	100	100
White Mining Limited	Australia	100	100	100	100
White Mining Services Pty Limited	Australia	100	100	100	100
Tonford Pty Ltd	Australia	100	100	100	100
Moolarben Coal Operations Pty Ltd	Australia	100	100	100	100
(formerly Splitters Hollow Pty
Ltd)
Moolarben Coal Mines Pty Limited	Australia	100	100	100	100
Ashton Coal Operations Pty Limited	Australia	100	100	100	100
White Mining (NSW) Pty Limited	Australia	100	100	100	100
UCC Energy Pty Limited	Australia	100	100	100	100
Agrarian Finance Pty Ltd	Australia	100	100	100	100
Advanced Clean Coal Technology	Australia	100	100	100	100
Pty Limited
White Mining Research Pty Ltd	Australia	100	100	100	100
Felix NSW Pty Ltd	Australia	100	100	100	100
Moolarben Coal Sales Pty Ltd	Australia	–	100	100	100

All subsidiaries have 30 June balance dates for the purpose of local statutory reporting. All equity interests are held in ordinary shares, except as noted below. All subsidiaries are vehicles for exploration, development and operational activities of Felix Group within Australia and Northern Ireland. The proportion of ownership interest is equal to the proportion of voting power held.

– I-113 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

The numbers of issued shares of each subsidiary is as follows.

		Number of	issued shares
	31	31	31	30
	December	December	December	September
	2006	2007	2008	2009
Subsidiaries:
Auriada Limited	2	2	2	2
Ballymoney Power Limited	2	2	2	2
Balhoil Nominees Pty Ltd	7,270	7,270	7,270	7,270
South Australian Coal Corp Pty Limited	2	2	2	196,625,038
SASE Pty Ltd	1,000,000	1,000,000	1,000,000	1,000,000
Athena Coal Pty Ltd	2	2	2	2
Minerva Mining Pty Ltd (formerly Sandhurst
Mining Pty Ltd)	2	2	2	2
Felix Coal Sales Pty Ltd	1	1	1	1
Proserpina Coal Pty Ltd	1	1	1	1
Minerva Coal Pty Ltd	1,000	1,000	1,000	1,000
Yarrabee Coal Company Pty Ltd	100,000	100,000	100,000	100,000
White Mining Limited – ordinary shares	1,650,000	1,650,000	1,650,000	1,650,000
White Mining Limited – class A shares	100	100	100	100
White Mining Services Pty Limited	2	2	2	2
Tonford Pty Ltd	2	2	2	2
Moolarben Coal Operations Pty Ltd (formerly
Splitters Hollow Pty Ltd)	2	2	2	2
Moolarben Coal Mines Pty Limited	1	1	1	1
Ashton Coal Operations Pty Limited	5	5	5	5
White Mining (NSW) Pty Limited	10	10	10	10
UCC Energy Pty Limited	2	2	2	2
Agrarian Finance Pty Ltd	2	2	2	2
Advanced Clean Coal Technology Pty Limited	2	2	2	2
White Mining Research Pty Ltd	2	2	2	2
Felix NSW Pty Ltd	2	2	2	2
Moolarben Coal Sales Pty Ltd	–	2	2	2

– I-114 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The amount paid up on issued shares of each subsidiary is as follows.

	Amount paid up	Amount paid up	on issued shares	on issued shares
	31	31	31	30
	December	December	December	September
	2006	2007	2008	2009
	A$	A$	A$	A$
Subsidiaries:
Auriada Limited	5	5	5	5
Ballymoney Power Limited	5	5	5	5
Balhoil Nominees Pty Ltd	7,270	7,270	7,270	7,270
South Australian Coal Corp Pty Limited	2	2	2	19,662,504
SASE Pty Ltd	9,650,564	9,650,564	9,650,564	9,650,564
Athena Coal Pty Ltd	2	2	2	2
Minerva Mining Pty Ltd (formerly Sandhurst
Mining Pty Ltd)	2	2	2	2
Felix Coal Sales Pty Ltd	1	1	1	1
Proserpina Coal Pty Ltd	1	1	1	1
Minerva Coal Pty Ltd	1,000	1,000	1,000	1,000
Yarrabee Coal Company Pty Ltd	92,080	92,080	92,080	92,080
White Mining Limited – ordinary shares	3,300,000	3,300,000	3,300,000	3,300,000
White Mining Limited – class A shares	200	200	200	200
White Mining Services Pty Limited	2	2	2	2
Tonford Pty Ltd	2	2	2	2
Moolarben Coal Operations Pty Ltd (formerly
Splitters Hollow Pty Ltd)	2	2	2	2
Moolarben Coal Mines Pty Limited	1	1	1	1
Ashton Coal Operations Pty Limited	5	5	5	5
White Mining (NSW) Pty Limited	10	10	10	10
UCC Energy Pty Limited	2	2	2	2
Agrarian Finance Pty Ltd	2	2	2	2
Advanced Clean Coal Technology Pty Limited	2	–	–	–
White Mining Research Pty Ltd	2	2	2	2
Felix NSW Pty Ltd	2	2	2	2
Moolarben Coal Sales Pty Ltd	–	2	2	2

The investment in controlled entities carried at cost is as follows.

Felix

Controlled entities – at cost: Balhoil Nominees Pty Ltd Less: Accumulated impairment loss SASE Pty Ltd Less: Accumulated impairment loss Minerva Coal Pty Ltd South Australian Coal Corp Pty Limited Yarrabee Coal Company Pty Ltd White Mining Limited	31 December 2006 A$’000 839 (839) 14,504 (14,504) 3,614 – 14,910 222,869 241,393	31 December 2007 A$’000 839 (839) 14,504 (14,504) 3,614 – 14,910 222,869 241,393	31 December 2008 A$’000 839 (839) 14,504 (14,504) 3,614 – 14,910 222,869 241,393	30 September 2009 A$’000 839 (839) 14,504 (14,504) 3,614 19,663 14,910 222,869
				261,056

– I-115 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

38 Interests in joint ventures – Felix Group

Interest in Joint Venture Operations

A subsidiary, Yarrabee Coal Company Pty Ltd, has a 50% interest in the output of Boonal Joint Venture whose principal activity is the provision of a coal haul road and train load out facilities.

A subsidiary, Proserpina Coal Pty Ltd, has a 51% interest in the output of Minerva Joint Venture whose principal activity is the development and operation of an open-cut coal mine.

A subsidiary, Athena Coal Pty Ltd, has a 51% interest in the Athena Joint Venture whose principal activity is coal exploration.

A subsidiary, White Mining (NSW) Pty Limited, has a 60% interest in the output of Ashton Joint Venture whose principal activity is the development and operation of open-cut and underground coal mines.

A subsidiary, Moolarben Coal Mines Pty Limited, has a N/A, 90, 80%, and 80%, 80%, respectively, interest for 31 December 2006, 2007, 2008 and 30 September 2008, 2009 in the output of the Moolarben Coal Joint Venture whose principal activity is the development and operation of open-cut and underground coal mines.

Felix Group’s interest in the assets, liabilities, revenue and expenses of the joint ventures are included in the Financial Information in accordance with accounting policy as set out in note 1(k) under the following classifications:

31 December 2006 A$’000 5,895 2,262 9,618 15,465 33,240	31 December 2007 A$’000 4,176 2,745 16,891 21,071 44,883	31 December 2008 A$’000 3,467 2,304 16,084 24,726 46,581	30 September 2009 A$’000 79,900 5,344 23,666 27,247
			136,157

3,147 145,650 2,364 8,223	6,750 175,165 14,485 203,029	8,163 170,284 16,381 190,081	11,110 245,781 23,273 186,196
159,384 192,624	399,429 444,312	384,909 431,490	466,360

			602,517

– I-116 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

39 Reconciliation of profit after income tax to the net cash flows from operating activities

		Year ended		9 months	ended
	31	31	31	30		30
	December	December	December	September	September
	2006	2007	2008	2008	2009
	A$’000	A$’000	A$’000	A$’000	A$’000
				(unaudited)
Profit for the year/period	43,592	59,041	293,697	207,141	140,106
Depreciation of non-current assets	5,461	13,234	15,298	10,728	14,747
Amortisation of leased assets	5,087	6,161	8,037	5,965	5,520
Amortisation of mining tenements	2,775	4,266	4,438	3,158	3,527
Amortisation of exploration	426	366	291	207		202
Amortisation of other intangible
assets	599	683	919	613		910
Amortisation of deferred purchase
consideration for equity interests
in Minerva	152	404	212	102		110
Non-cash deferred income
recognised in profit	–	–	–	–		(118)
Net loss/(gain) on disposal of
property, plant & equipment	148	(12)	(112)	(14)		136
Net profit on disposal of
available-for-sale financial asset	(71)	(1,136)	–	–		–
Net gain on disposal of equity
interests in Moolarben Joint
Venture	–	(67,862)	(73,751)	(73,751)		–
Net gain on disposal of equity
interests in Minerva and Athena
Joint Venture	(28,374)	–	–	–		–
Non-cash cash flow hedge (gains)/
losses transferred to profit for the
year/period	(13,827)	1,982	2,827	(1,155)	(43,881)
Cash received on cash flow hedges
not yet recognised in profit	–	–	60,440	–		–
Net unrealised foreign currency
losses/(gains)	3,287	(432)	–	–		–
Share-based payments expense	1,341	229	880	67		528
Share of net (profits)/losses
accounted for using the equity
method	(820)	547	11	12		14
Changes in assets and liabilities, net
of effects from disposal of
interests in joint ventures and
projects (refer note 5)
(Increase)/decrease in trade &
other receivables	(2,122)	(138)	(68,231)	(54,126)	60,025
Decrease/(increase) in inventory	32	(14,914)	(12,078)	(7,262)	(9,184)
Decrease/(increase) in
prepayments	1,626	(477)	(783)	(1,556)	(1,733)
(Increase)/decrease in deferred tax
assets	(31,932)	14,813	36,288	39,205	7,538
(Increase)/decrease in
development assets	(701)	1,789	–	–		–
Increase in overburden in advance	(13,114)	(6,800)	(9,746)	(9,829)	(3,413)
Increase/(decrease) in trade and
other payables	3,121	(5,316)	21,792	18,034	4,020
Increase in employee benefits	1,495	1,326	3,226	1,541	3,254

– I-117 –

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

Increase in rehabilitation provision Increase in tax provision Increase/(decrease) in deferred tax liabilities Net cash inflow from operating activities	31 December 2006 A$’000 2,785 82 45,749 26,797	Year ended 31 December 2007 A$’000 1,049 185 9,706 18,694	31 December 2008 A$’000 – 55,306 4,083 343,044	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) – – 38,241 15,519 5,912 (8,973) 183,233 188,854

Non-cash investing and financing activities

Finance lease transactions

During the years ended 31 December 2006, 2007, 2008 and the nine months ended 30 September 2008, 2009, Felix Group acquired plant and equipment with an aggregate fair value of A$3,943,000, A$5,584,000, A$7,548,000, A$Nil and A$19,809,000 respectively, by means of finance leases. These acquisitions are not included in the cash flow statements.

40 Earnings per share

(a) Reconciliation of earnings used in calculating earnings per share

Profit after income tax Profit attributable to non-controlling interest Profit from continuing operations attributable to the ordinary equity holders of Felix used in calculating basic earnings per share	31 December 2006 A$’000 43,592 (121) 43,471	Year ended 31 December 2007 A$’000 59,041 (186) 58,855	31 December 2008 A$’000 293,697 (202) 293,495	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 207,141 140,106 (126) (117) 207,015 139,989

– I-118 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(b) Weighted average number of shares used in calculating earnings per share

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share	31 December 2006 Number of shares 181,221,214 5,225,193 186,446,407	Year ended 31 December 2007 Number of shares 193,430,148 250,951 193,681,099	31 December 2008 Number of shares 196,318,344 236,503 196,554,847	9 months ended 30 September 30 September 2008 2009 Number of shares Number of shares (unaudited) 196,316,320 196,454,168 308,697 185,443 196,625,017 196,639,611	9 months ended 30 September 30 September 2008 2009 Number of shares Number of shares (unaudited) 196,316,320 196,454,168 308,697 185,443 196,625,017 196,639,611
					196,639,611

41 Contingent liabilities and contingent assets

Guarantees (a) Parent entity and consolidated entity Guarantees secured over deposits Performance guarantees provided to external parties Guarantees provided in respect of the cost of restoration of certain mining leases, given to government departments as required by statute (b) Joint ventures Guarantees secured over deposits Performance guarantees provided to external parties Guarantees provided in respect of the cost of restoration of certain mining leases, given to government departments as required by statute	31 December 2006 A$’000 10,263 12,308 1,350 73 69 3,595 27,658	31 December 2007 A$’000 149 12,308 2,123 75 69 4,879 19,603	31 December 2008 A$’000 303 1,562 2,472 75 69 5,720 10,201	30 September 2009 A$’000 701 1,651 3,560 75 169 10,070
				16,226

– I-119 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

42 Disposal of interest in joint ventures

31 December 2006 A$’000 32,402 9,865	Year ended 31 December 2007 A$’000 20,000 65,000	31 December 2008 A$’000 92,863 –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 92,863 – – –	9 months ended 30 September 30 September 2008 2009 A$’000 A$’000 (unaudited) 92,863 – – –
42,267 579 277 722 3,777 1,346 13,024 2,784 (2,905) (5,489) (222) – – – 13,893	85,000 – – – – – – – – – – 1,139 905 15,094 17,138	92,863 – – – – – – – – – – 1,473 1,385 16,254 19,112	92,863 – – – – – – – – – – 1,473 1,385 16,254 19,112	–
				– – – – – – – – – – – – –
				–
28,374	67,862	73,751	73,751	–

43 Events occurring after the balance sheet date

(a) Change of control and dividends

As announced on 13 August 2009, Felix entered into a binding Scheme Implementation Agreement (“Scheme”) with Yanzhou Coal Mining Limited (“Yanzhou”), a publicly traded company that is listed in Hong Kong, New York and Shanghai. Pursuant to the agreement Yanzhou would acquire all of Felix’s issued shares.

– I-120 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

On 23 October 2009, the Foreign Investment Review Board, (“FIRB”) announced its decision to approve the acquisition of Felix by Yanzhou subject to certain conditions. The Assistant Treasurer of the Government of Australia’s press release stated:

“The Assistant Treasurer, Senator Nick Sherry, has today approved the application by Yanzhou Coal Mining Company Limited (Yanzhou) to acquire full ownership of Felix, conditional upon it complying with legally enforceable undertakings provided by Yanzhou. These undertakings apply to all of Yanzhou’s operations, including the Austar mine near Newcastle which Yanzhou already owns. Yanzhou has undertaken to:

operate its Australian mines through a company, Yancoal Australia Proprietary Limited (Yancoal Australia), that is incorporated and headquartered in Australia and is managed in Australia using a predominately Australian management and sales team;
ensure Yancoal Australia, and any of its operating subsidiaries, have at least two directors whose principal place of residence is in Australia, one of whom will be independent of Yanzhou and its related entities;
ensure that the Chief Executive Officer and Chief Financial Officer of Yancoal Australia have their principal place of residence in Australia;
hold the majority of Yancoal Australia’s board meetings in Australia in any calendar year;
list Yancoal Australia on the Australian Securities Exchange by the end of 2012 and, by that time, reduce Yanzhou’s ownership of Yancoal Australia to less than a 70 percent holding; and
market coal produced at all of its Australian mines on arms-length terms with reference to international benchmarks and in line with market practices.

As several of the mines operated by Felix are owned by joint ventures with third party companies, following the listing and holding reduction in Yancoal Australia, Yanzhou’s economic ownership of the underlying mining assets must stand at no more than 50 percent. “With these undertakings provided by Yanzhou, I consider that this acquisition is consistent with Australia’s national interest,” said the Assistant Treasurer. “As such, compliance with these undertakings is a condition of my approval of the acquisition under section 25 (1A) of the Foreign Acquisitions and Takeovers Act 1975.” ... Yangzhou will report to the Foreign Investment Review Board on its compliance with these undertakings.”

A condition of the Scheme was the ’spin-off’ by Felix of the wholly-owned subsidiary South Australian Coal Corp Pty Limited (SAC). This occurred on 30 October 2009 with an in-specie distribution of shares in SAC on a 1:1 basis to all Felix shareholders. The in-specie distribution was in the form of a fully franked dividend with a value of A$0.1017 for each Felix share.

An additional fully franked A$0.50 dividend per share that was anticipated and contemplated in the terms of the Scheme was declared on 11 November 2009 and was paid 9 December 2009.

On 10 December 2009, the Federal Court of Australia approved the Scheme and Felix’s shares were suspended from trading on the Australian Stock Exchange (“ASX”) on 11 December 2009. S&P Indices removed Felix from the S&P/ASX indices after the close of business on 11 December 2009.

On 23 December 2009, the Scheme was implemented, and Computershare commenced despatch of the Scheme consideration being A$16.95 for each share held on the Scheme Record Date of 18 December 2009. All of the issued shares in Felix were transferred to Austar Coal Mine Pty Ltd, a wholly owned subsidiary of Yanzhou.

The ASX removed Felix from the official list after the close of business on 30 December 2009.

– I-121 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

(b) Resignations and appointment of directors

Mr Travers Duncan, Mr Hans Mende and Mr John Kinghorn resigned as directors of Felix on 23 December 2009. They were replaced by Mr Xin Wang, Mr Yuxiang Wu, Mr Cunliang Lai and Mr Weimin Li, from Yanzhou, and Mr Terrence Crawford was appointed as an independent director on the same day.

(c) New financing facilities

On 27 October 2009, Felix Group entered into syndicated financing with the Commonwealth Bank of Australia (Lead Arranger, Book-runner and Coordinating Bank), Sumitomo Mitsui Banking Corporation (Lead Arranger and Book-runner), BNP Paribas, WestLB AG and Westpac Banking Corporation.

In summary, the new facilities are as follows:

Facility
Term debt
Leveraged finance
leases
Working capital
Contingent liabilities
Total syndicated
facilities

Amount
Purpose
Term
A$
150,000,000
To assist in financing the
construction and development
of the Moolarben Coal
Project.
5 years
133,333,333
To assist in financing the
mobile equipment for the
Moolarben Coal Project.
5 years
50,000,000
To accommodate general
working capital requirements.
2 years revolving
50,000,000
To accommodate guarantees,
letters of credit, and,
performance bonds.
2 years revolving
383,333,333

The above loans and other banking facilities are secured on a fully cross collateralised basis by fixed and floating charges, mining mortgages and share mortgages over the assets of Felix and certain controlled entities. These securities impose various restrictions on asset disposal and creation of other security interests.

The A$150 million term debt facility is fully drawn and approximately A$68 million of the finance lease facility has been drawn. The contingent liabilities outstanding at 30 September 2009 as detailed in note 41 have increased to approximately A$46 million.

The A$7,750,000 multi option facility agreement – term debt facility outstanding at 30 September 2009 as detailed in note 26 was repaid in full on 28 October 2009.

(d) Transactions with directors

To assist with the funding of the dividend paid to shareholders on 9 December 2009, certain directors, through their related entities, loaned funds to Felix as follows:

Gaffwick Pty Ltd (Travers Duncan) A$35,650,837

Illwella Pty Ltd (Brian Flannery) A$35,287,781

AMCIC Sabeltand Holdings B.V. (Hans Mende) A$27,373,901.

– I-122 –

FINANCIAL INFORMATION OF FELIX GROUP

APPENDIX I

The loans are unsecured and repayable on interest free terms if repaid within three months of the Yanzhou scheme implementation date of 23 December 2009. Interest is payable on any part of the principal unpaid as from the scheduled repayment date at BBSY for the appropriate tenor plus a margin of 5%. Yanzhou has provided letters of credit through Bank of China (Sydney branch) to support the loans. If the loans are not repaid in full then they must be repaid in: (a) instalments on 30 September and 31 March in each calendar year (commencing 30 September 2010) out of Felix’s net profit after tax (up to a maximum amount of 70% of Felix’s net profit after tax in any financial year); and/or (b) the net proceeds of any equity raised by Felix for the purpose of repaying the loans. The repayment of the loans is subordinated to debts secured under the new syndicated funding arrangements.

44 Native title

Native title describes the rights and interests in Australia of Aboriginal and Torres Strait Islander peoples in land and waters, according to their traditional laws and customs. Native title claims exist over all or part of the areas covered by Felix Group’s exploration licences in South Australia, Queensland and New South Wales. Under the Native Title Act these areas are protected for all current and future mining operations on existing mining leases.

45 Company details

The registered office and principal place of business of Felix is:

Level 6 316 Adelaide Street Brisbane, Qld. 4000 Australia

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for Felix or any of its subsidiaries in respect of any period subsequent to 30 September 2009. Except as disclosed elsewhere in the Financial Information, no dividend has been declared, made or paid by Felix or any of its subsidiaries in respect of any period subsequent to 30 September 2009.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

– I-123 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is an illustrative and unaudited pro forma statement of assets and liabilities of the Enlarged Group, which has been prepared based on the unaudited condensed consolidated balance sheet of the Group as at 30 June 2009 as set out in the published interim report of the Group for the six months ended 30 June 2009 and the audited consolidated balance sheet of Felix as at 30 September 2009 as set out in the accountant’s report of Felix included as Appendix I to this Supplemental Circular, after making pro forma adjustments as set out below, to illustrate the effects of the Transaction, as if the Transaction had taken place on 30 June 2009. It has been prepared on the basis as set out in the notes below and is consistent with the accounting policies adopted by the Group.

The unaudited pro forma financial information of the Enlarged Group has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group had the Transaction been completed as at 30 June 2009 or any future date.

(a) Unaudited Pro Forma Consolidated Assets and Liabilities of the Enlarged Group

Current assets Bank balance and cash Term deposits Restricted cash Bills and accounts receivable Inventories Prepayments and other receivables Prepaid lease payments Prepayments for resources compensation fees Derivative financial instruments Other current assets Total current assets	Unaudited consolidated assets and liabilities of the Group as at 30 June 2009 RMB’000 Note 1 8,645,119 3,011,995 19,066 2,202,836 651,101 1,694,464 16,972 2,559 66,840 – 16,310,952	Unaudited consolidated assets and liabilities of the Group as at 30 June 2009 RMB’000 Note 1 8,645,119 3,011,995 19,066 2,202,836 651,101 1,694,464 16,972 2,559 66,840 – 16,310,952	Unaudited pro forma adjustments	Unaudited pro forma adjustments
			Audited assets and liabilities of Felix Group as at 30 September 2009 RMB’000 Note 2 1,312,616 – 597,880 138,391 349,574 146,534 – – 39,789 309,845 2,894,629	Other adjustments Purchase consideration and borrowings Fair value adjustments Elimination RMB’000 RMB’000 RMB’000 Note 3 Note 4 Note 5 – – –	Unaudited pro forma consolidated assets and liabilities of the Enlarged Group as at 30 June 2009 RMB’000 9,957,735 3,011,995 616,946 2,341,227 1,000,675 1,840,998 16,972 2,559 106,629 309,845
	16,310,952				19,205,581

– II-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX II

Unaudited consolidated assets and liabilities of the Group as at 30 June 2009 RMB’000 Note 1 1,031,502 – – 692,518 14,919 14,743,357 500,342 260,796 – 874,010 – 94,612 117,926 199,962 18,529,944	Unaudited pro forma adjustments	Unaudited pro forma adjustments	Unaudited pro forma adjustments	Unaudited pro forma adjustments
	Audited assets and liabilities of Felix Group as at 30 September 2009 RMB’000 Note 2 1,079,460 177,098 43,591 – – 1,926,483 – – – 1,052 69,480 – – 93,652 3,390,816	Other adjustments Purchase consideration and borrowings Fair value adjustments Elimination RMB’000 RMB’000 RMB’000 Note 3 Note 4 Note 5 11,900,514 3,600,236 157,912 897,920 482,337 20,119,820 (20,119,820) 20,119,820 16,556,582 (19,637,483)			Unaudited pro forma consolidated assets and liabilities of the Enlarged Group as at 30 June 2009 RMB’000 14,011,476 3,777,334 201,503 692,518 14,919 17,567,760 982,679 260,796 – 875,062 69,480 94,612 117,926 293,614
18,529,944					38,959,679
34,840,896	6,285,445	20,119,820	16,556,582	(19,637,483)	58,165,260

– II-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX II

Unaudited pro forma adjustments

		Unaudited pro forma adjustments	Unaudited pro forma adjustments	Unaudited pro forma adjustments	Unaudited pro forma adjustments	Unaudited pro forma adjustments

Current liabilities Bills and accounts payable Other payables and accrued expenses Provision for land subsidence, restoration, rehabilitation and environmental costs Amounts due to parent company and its subsidiary companies Bank borrowings-due within one year Lease liabilities-due within one year Derivative financial instruments Taxes payable Total current liabilities Non-current liabilities Amounts due to parent company and its subsidiary companies-due after one year Bank borrowings-due after one year Lease liabilities-due after one year Provision for land subsidence, restoration, rehabilitation and environmental costs Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Net assets	Unaudited consolidated assets and liabilities of the Group as at 30 June 2009 RMB’000 Note 1 743,328 4,616,688 967,365 683,169 82,000 – – 286,633	Audited assets and liabilities of Felix Group as at 30 September 2009 RMB’000 Note 2 377,304 778,135 3,384 – 46,336 50,060 57,241 454,341 1,766,801 – 10,122 199,315 43,603 479,482 31,186 763,708	Other adjustments Purchase consideration and borrowings Fair value adjustments Elimination RMB’000 RMB’000 RMB’000 Note 3 Note 4 Note 5 – – – 20,119,820 674,035 20,119,820 674,035 –			Unaudited pro forma consolidated assets and liabilities of the Enlarged Group as at 30 June 2009 RMB’000 1,120,632 5,394,823 970,749 683,169 128,336 50,060 57,241 740,974
	7,379,183					9,145,984
	3,626 165,000 – – 42,501 –					3,626 20,294,942 199,315 43,603 1,196,018 31,186
	211,127					21,768,690
	7,590,310 27,250,586	2,530,509 3,754,936	20,119,820 –	674,035 15,882,547	– (19,637,483)	30,914,674

						27,250,586

– II-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX II

(b) Notes to Unaudited Pro Forma Financial Information of the Enlarged Group

The amounts are extracted from the unaudited condensed consolidated balance sheet of the Group as at 30 June 2009 as set out in the Company’s published interim report for the six months ended 30 June 2009.
The pro forma adjustment represents the inclusion of the balances of assets and liabilities of Felix as at 30 September 2009 as extracted from the accountant’s report of Felix as set out in Appendix I to this Supplemental Circular. For the purpose of the pro forma statement of assets and liabilities, the balances denominated in Australian Dollar (“AUD”) have been translated into RMB at AUD 1 = RMB 5.9788, the exchange rate prevailing as at 30 September 2009.
The pro forma adjustment represents the estimated total cost of the Transaction amounting to approximately RMB20,120 million, comprising the purchase consideration for Felix amounting to AUD3,333 million (equivalent to approximately RMB19,926 million) and the transaction costs directly attributable to the Transaction, including professional services fees and other expenses, which are estimated to be RMB194 million. The total cost of the Transaction will be financed wholly by bank borrowings.
Upon completion of the Transaction, the identifiable assets and liabilities of Felix will be accounted for in the consolidated financial statements of the Enlarged Group at fair values under the purchase method of accounting in accordance with International Financial Reporting Standard No. 3 “Business Combinations” (“IFRS 3”).

The pro forma adjustment represents fair value adjustments and the corresponding estimated deferred income tax liabilities resulting from the Transaction. The fair value adjustments include the appreciation of intangible assets, property, plant and equipment, and the recognition of coal reserves and resources, which are determined based on the fair values of the assets and liabilities of Felix as at 30 September 2009 as estimated by an independent professional valuer, American Appraisal China Limited.

The fair value of the identifiable assets and liabilities of Felix at the date of completion may be substantially different from the estimated fair value used in the preparation of this unaudited pro forma financial information. Accordingly, the actual amount of goodwill may be different from the amount as adopted in this unaudited pro forma financial information.

The pro forma adjustment represents the elimination of investment in Felix held by the Company with the share capital and pre-acquisition reserves of Felix, and the recognition of goodwill amounting to RMB482 million, representing the excess of the cost of the Transaction of RMB20,120 million over the fair value of net assets of Felix acquired of RMB19,638 million, upon the completion of the Transaction.
Apart from the Transaction, no other adjustment has been made to reflect any trading result of the Group subsequent to 30 June 2009 and Felix Group subsequent to 30 September 2009 for the purpose of this unaudited pro forma financial information.

– II-4 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. REPORT FROM THE REPORTING ACCOUNTANT

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this Supplemental Circular.

==> picture [101 x 48] intentionally omitted <==

PricewaterhouseCoopers 22/F, Prince’s Building Central, Hong Kong

ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF YANZHOU COAL MINING COMPANY LIMITED

We report on the unaudited pro forma financial information set out on pages II-1 to II-4 under the heading of “Unaudited Pro Forma Financial Information of the Enlarged Group” (the “Unaudited Pro Forma Financial Information”) in Appendix II of the circular dated 23 March 2010 (the “Circular”) of Yanzhou Coal Mining Company Limited (the “Company”), in connection with the acquisition of Felix Resources Limited (the “Target”) by a subsidiary of the Company (the “Transaction”). The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Transaction might have affected the relevant financial information of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages II-1 to II-4 of the Circular.

Respective Responsibilities of Directors of the Company and the Reporting Accountant

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– II-5 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX II

Basis of Opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the consolidated assets and liabilities of the Group as at 30 June 2009 contained in the Unaudited Pro Forma Financial Information with the condensed consolidated financial statements of the Group for the six months ended 30 June 2009 as set out in the Company’s published interim report for the six months ended 30 June 2009, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 30 June 2009 or any future date.

Opinion

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants Hong Kong, 23 March 2010

– II-6 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

The following discussion and analysis should be read in conjunction with the consolidated financial report of Felix and its subsidiaries for the financial years ended 31 December 2008, 2007 and 2006 and for the nine months ended 30 September 2008 and 2009.

Overview

Felix is an Australian coal exploration and production company with high-quality assets and projects throughout Australia. The Felix Group has three operating open-cut coal mines and an underground coal mine, and its current priority is the development of the Moolarben open-cut coal mine. The Felix Group is also part of consortiums formed to build and operate future coal terminals in Newcastle and Gladstone.

Felix is actively pursuing research and development initiatives aimed at finding ways to utilise coal in an efficient and less carbon-intensive manner. The Felix Group is commercialising a patented clean coal technology and is a contributor to the COAL21 Fund which is part of an industry-wide response to reducing greenhouse gas emissions.

With world-class coal assets and other high-potential exploration projects, Felix’s objective is to become a significant producer. The Felix Group’s growth strategy is achieved through the development and diversification of coal products, geographic locations and port distribution channels.

During the periods reported on in this discussion, Felix has seen a marked improvement in all areas of the Felix Group, and these improvements should continue with the commencement of Moolarben production which will form the basis for future growth. All mines, Ashton open-cut and longwall underground operations, Yarrabee and Minerva open-cuts, have achieved excellent operating results along with continued maintenance of high safety standards. The Board expect these results to continue into future years.

Revenues

Sales of coal for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 were AUD250.8 million, AUD271.0 million, AUD670.9 million, AUD459.4 million and AUD496.4 million respectively. The coal sales tonnes attributable to the Felix Group for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 were 3.6 million tonnes, 4.1 million tonnes, 4.6 million tonnes, 3.3 million tonnes and 3.7 million tonnes respectively.

The increases in coal sales over the periods under review resulted from significant coal-fired power generation increases in Asia and increased selling prices for both thermal and metallurgical coal. In addition to this, the Minerva mine was commissioned in March 2006 and the Ashton underground was commissioned in March 2007.

– III-1 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Restricted infrastructure capacity in terms of port and rail capacity over the years above caps export capacity which restricts supply tonnage. However, while this supply restriction is in place, it is also a factor in supporting a floor under export coal prices. While selling prices have decreased in 2009 from the record levels experienced in 2008, they remain at high levels by historical standards. The Board expect prices in the future to remain at levels above the long-term average to date. These price levels are being supported by continued Asian demand.

Interest income

The Felix Group’s cash balances have given rise to interest revenue of AUD1.7 million, AUD2 million, AUD16.1 million, AUD11.0 million and AUD8.7 million for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 respectively. The increases reflect the increases in cash balances as well as increases in interest rates. Although the Felix Group still has substantial cash balances, the reduction between the nine months ended 30 September 2009 and the prior comparable period resulted from the decrease in interest rates on offer from banks as a consequence of the severe downturn of credit markets in late 2008.

Other income

Other income for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 includes AUD28.4 million, AUD67.9 million, AUD73.8 million and AUD73.8 million and zero respectively for sell-downs of the Felix Group’s interests in the Minerva and Moolarben joint ventures. For 2006, 2007 and 2008 and the nine months ended 30 September 2008 and 2009 other income also includes AUD0.1 million, AUD8.5 million, AUD12.9 million, AUD2.8 million and zero respectively for net foreign exchange gains made mainly on trade receivables denominated in US dollars.

Expenses

Expenses for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 were AUD227.7 million, AUD266.3 million, AUD364.4 million, AUD254.3 and AUD316.8 million respectively. The increase of expenses was mainly due to the growth of the business and the general increase in costs associated with the mining boom in Australia. All mines continue to achieve excellent results however port constraints at Gladstone and particularly Newcastle means demurrage remains a cost factor. The Felix Group continues to seek opportunities to improve operating efficiencies and thereby ensure costs are kept at minimum levels.

– III-2 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Interest expense

The Felix Group’s borrowings have given rise to interest expense of AUD4.3 million, AUD7.0 million, AUD6.9 million, AUD6.2 million and AUD2.5 million for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 respectively. The interest expense mainly relates to the Syndicated Funding Agreement (“SFA”) borrowings used to fund the construction of the Ashton underground and the Multi Option Facility Agreement (“MOFA”) borrowings used to fund capital expenditure at the Minerva mine. The increases in interest expense reflect the increased interest rates up to late 2008, which were partially offset by the capitalisation of interest at the Ashton underground until its commissioning in March 2007. Loan repayments and lower interest rates have reduced the interest expense in late 2008 and the nine months ended 30 September 2009.

Profit

The profit before income tax for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 was AUD54.3 million, AUD80.2 million, AUD410.0 million, AUD290.8 million and AUD195.1 million respectively. As a result of the foregoing factors, the profit before tax increased during the 2006, 2007 and 2008 years, and decreased during the nine months ended 30 September 2009 due to the absence of other income from joint venture sell-downs.

The profit after income tax for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 was AUD43.6 million, AUD59.0 million, AUD293.7 million, AUD207.1 million and AUD140.1 million respectively. The changes are due to the factors outlined above.

The profit attributable to equity holders of Felix for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 was AUD43.5 million, AUD58.9 million, AUD293.5 million, AUD207.1 million and AUD140.0 million respectively. The changes are due to the factors outlined above.

Segment information

The Felix Group undertakes coal mining in Central Queensland and the Hunter Valley region of New South Wales. The four reportable segments are the Ashton, Minerva, and Yarrabee mines, and the Moolarben development.

– III-3 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Yarrabee mine (100% owned)

				12 months	12 months	12 months	9 months	9 months
				2006	2007	2008	2008	2009
				’000 tonnes	’000 tonnes	’000 tonnes	’000 tonnes	’000 tonnes
Coal	sold			1,729.6	1,491.5	1,538.9	1,160.8	1,235.1
Coal	stocks	at	year-end	343.4	464.2	401.9	431.2	564.7

Yarrabee mine is located near Blackwater in Queensland and is an open-cut coal mine producing low-volatile, high-energy pulverised coal injection (“pci”) and thermal coal for export.

During 2006 and 2007, rail and port capacity restraints constricted Yarrabee’s supply potential. Commissioning of the Reg Tanna Coal Terminal expansion in late 2007 improved train unloading capability in 2008. The market for pci coal slowed considerably in late 2008 only to pick up by May 2009 to the point where in excess of 90% of Yarrabee production is now sold as pci coal. Three new contracts totaling for approximately 800,000 tonnes have been signed on 12 June 2009, 20 July 2009 and 25 August 2009 more than offsetting the loss of the Hismelt contract in Western Australia in late 2008 due to the suspension of that operation.

Exploration drilling carried out during the period identified significant coal intersections south and east of the present mine. With further drilling these resources can be brought into Joint Ore Reserves Committee (“JORC”) category. Mine planning is now underway to lift production. There are further areas surrounding Yarrabee that require exploring and applications for additional exploration licences have been lodged. A dense media/froth flotation coal preparation plant was constructed during 2008 and 2009 and commissioned in 2009. This plant is operating at design capacity with yields in the 80% to 85% range. A new overburden excavator was purchased during the nine months ended 30 September 2009. Detailed planning has commenced and a decision to expand should be made in the first quarter of calendar 2010 depending on markets for this pci coal. It is possible that the additional overburden removal will be done using a contract fleet in lieu of Yarrabee purchasing further equipment.

Obtaining a further 500,000 tonne contract should give the Board the necessary confidence to approve the expansion phase. Expansion of the coal preparation plant will not be necessary.

Port capacity is available for washed coal through Barney Point until the new Wiggins Island Coal Terminal is complete. Most Chinese and Indian customers can supply the smaller Panamax vessels which can be accommodated at Barney Point.

– III-4 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Minerva mine (51% owned)

				12 months	12 months	12 months	9 months	9 months
				2006	2007	2008	2008	2009
				’000 tonnes	’000 tonnes	’000 tonnes	’000 tonnes	’000 tonnes
Coal	sold			1,630.7	2,162.5	2,696.6	1,992.7	1,762.1
Coal	stocks	at	year-end	199.3	396.1	384.9	540.2	612.6

Minerva mine is located near Emerald in Queensland and is an open-cut coal mine producing thermal coal for export. Minerva coal does not require washing and is crushed and sold as raw product.

Minerva mine was fully commissioned and reached its planned overburden removal capacity of 18 million bank cubic metres per annum in March 2006. Coal production and sales were constrained during 2007 by a fault encountered what was interpreted as a “dome” or roll in the seams. Mining through the fault was substantially completed by mid 2007 and from then onwards the minimum planned sales of 2.6 mtpa have been achieved and are expected for future years.

Rail freight and access charges for most coal mines is an important cost input and this is particularly so for Minerva, due to the distance from the Port of Gladstone. Felix is working closely with its rail provider, Queensland Rail, to increase haulage from Minerva in order to reduce stockpile while port capacity is available.

Exploration in several areas surrounding Minerva is continuing with a number of coal-bearing areas identified, including a large underground resource at Athena to the north. Shallower coal seams to the south require further drilling to determine if this area can be economically developed as an additional open-cut mine.

Ashton mine (60% owned)

				12 months	12 months	12 months	9 months	9 months
				2006	2007	2008	2008	2009
				’000 tonnes	’000 tonnes	’000 tonnes	’000 tonnes	’000 tonnes
Coal	sold			1,516.4	1,955.2	3,328.4	2,561.6	2,691.6
Coal	stocks	at	year-end	200.4	280.6	564.0	262.1	294.6

Ashton mine is located near Singleton in New South Wales and is both an open-cut coal mine producing high quality semi-soft coking coal for export and an underground coal mine producing high quality semi-soft coking and thermal coal for export.

– III-5 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

The Ashton open-cut mine has been operating since 2004. The Ashton underground mine long-wall was commissioned in March 2007 together with the addition of a second coal preparation module. Production of the open-cut mine was lower than planned in 2006 due to mining conditions. Production of the open-cut was constrained during 2007 with the severe weather in the Hunter Valley affecting both production and sales. The open-cut performed to plan during 2008, however, the underground encountered a dyke (intrusion) which slowed production for the first three months of 2008. Both the open-cut and underground mines and the coal preparation plant operated to plan during 2009. The expected annual sales when at full production for the open-cut mine is 1.2 mtpa and for the underground mine is 1.9 mtpa.

The market for coking coal reduced during the first three months of 2009 but by May 2009 sales of this prime semi-soft coking coal had resumed to normal with all coal being sold to customers in Japan, Korea, Taiwan, China and India. Two new term contracts have been signed on 20 August 2009 and 18 September 2009 with Chinese steel mills with trial cargoes sent to three other Chinese steel mills and an Indian steel mill. This is the first time Ashton coking coal has been sold to either China or India.

Ashton coal is exported through the Port Waratah Coal Services (PWCS) coal terminal in Newcastle where demurrage remains stubbornly high. Significant time and effort has been expended by Felix management, along with management from the other 13 companies exporting through PWCS, to find a long-term solution to expand the port and transport systems in the Hunter Valley.

Further exploration has been carried out in the south east open-cut and the western open-cut on the Ashton property, west of the underground. Environmental studies were carried out on the south east open-cut area and development consent was applied for in 2009 over most of this area.

Moolarben development (80% owned)

The Moolarben development is located near Mudgee in New South Wales and is a large open-cut and underground thermal coal resource, with initial production scheduled to commence in 2010. Construction work is proceeding to schedule with the rail loop already completed and the coal preparation plant and the coal handling plant expected to be completed by April 2010. Deliveries of mining equipment have taken place with assembly and commissioning proceeding ready for commencement of overburden removal in the last quarter of calendar 2009.

Open-cut mining in stage 1 commenced in the last quarter of calendar 2009 with the first coal to be loaded on trains at Moolarben in April 2010. This will coincide with completion of stage 1 of the new Newcastle Coal Infrastructure Group coal terminal at

– III-6 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Newcastle. Marketing activity allowing some tonnage for spot markets is increasing on several fronts. Most of this coal is expected to be sold into North Asian, Chinese, Indian and domestic power station markets, with several contracts already in place.

Approval for stage 2 has also been sought. Stage 2 comprises an additional underground longwall mine plus open-cut 4. Development consent and mining leases for stage 2 are expected to be received in 2010. This will allow Moolarben production to be increased in 2013 to 13.0 mtpa of product coal for export and domestic markets. At this level approximately 8.8 mtpa will come from open-cut mining and 4.0 to 4.2 mtpa from underground mining.

Liquidity and capital resources

The Felix Group operates in an industry which requires significant capital expenditure at the development stage of a mine. The Felix Group funds its capital expenditure and working capital requirements principally from bank borrowings, proceeds from shares issued and cash generated from operating activities.

The MOFA borrowings of AUD20.0 million were drawn down in 2006 and were used to fund capital expenditure at the Minerva mine. This loan was repayable in quarterly instalments of AUD0.875 million over the term of the loan and was due to mature on 30 June 2010. The loan was fully repaid by October 2009. A MOFA revolving working capital facility for AUD27.4 million dollars that was not required was cancelled during the nine months to 30 September 2009. The MOFA also includes a AUD27.0 million dollar indemnity/guarantee facility.

The development of the Ashton underground mine, which was commissioned in March 2007, was funded mainly by the AUD60 million SFA loan which was drawn down in 2006. The loan was repayable each quarter in varying amounts, commencing 31 December 2007 and was due to mature on 31 December 2011. The loan was fully repaid by the end of 30 September 2009.

The Yarrabee wash plant’s construction started during 2008 and was completed during the nine months ended 30 September 2009 and this was funded partly from a finance lease entered in to during 2009 of AUD17.9 million and partly by operating profits made during 2008 and 2009 totalling AUD16.3 million.

The ongoing development of the Moolarben mine is being funded by a new syndicated financing facility entered into in October 2009. This consists of a finance lease facility of AUD133.3 million for mining equipment and a AUD150.0 million term debt facility, both repayable over five years. In addition to this, sale proceeds of AUD177.9 million were received from the sell-down of the Felix Group’s interest in Moolarben that were partly used to fund the Moolarben development. There is also a new AUD50 million dollar working capital facility to accommodate the Felix Group’s working capital requirements.

– III-7 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Cash flow

(i) Operating activities

The operating profits and therefore cash flows from operating activities exclude the gains made on the sell-down of interests in joint ventures, which are included in the cash flows from investing activities. The operating profit excluding the sell-down-gains for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 was AUD25.9 million, AUD12.3 million, AUD336.3 million, AUD217.1 million and AUD195.1 million respectively.

The cash inflow from operating activities for 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 was AUD26.8 million, AUD18.7 million, AUD343.0 million, AUD183.2 million and AUD188.9 million respectively.

The decreased cash inflow from operating activities in 2007 compared to 2006 was due to the lower operating profit and higher working capital requirements.

The increased cash inflow from operating activities in 2008 compared to 2007 was due to the higher operating profit for the period and the higher increase in trade and other payables, which was partially offset by the higher increase in trade and other receivables and the larger tax payment made in 2008.

The increased cash inflow in the nine months ended 30 September 2009 compared to the same period in 2008 was, despite the lower operating profit, due to the decrease in trade and other receivables, which was partially offset by the decreased increase in trade and other payables and the larger tax payment made in 2009.

(ii) Investing activities

For 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009 the net cash flow from investing activities was AUD80.8 million outflow, AUD27.8 million outflow, AUD112.4 million inflow, AUD141.5m inflow and AUD199.9 million outflow respectively.

The decreased cash outflow from investing activities in 2007 compared to 2006 was mainly due to the reduction in capital expenditure on the Ashton underground development completed in the first three months of 2007.

The increased cash inflow from investing activities in 2008 compared to 2007 was mainly due to the increased sales proceeds from the sell-down of interests in the Moolarben Joint Venture, which increased from AUD20 million to AUD157.9 million. This was partially offset by the fall in the proceeds from the sell-down of interests in the Minerva and Athena joint ventures which decreased from AUD31.8m to AUD9.7 million.

– III-8 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

The increased cash outflow from investing activities for the nine months ended 30 September 2009 compared to the same period in 2008 was due to the absence of the sales proceeds from the sell-down of interests in the Moolarben Joint Venture, the transfer of AUD100 million to restricted cash used to secure the Moolarben finance leases, and increased capital expenditure on the Moolarben development. Partially offsetting this was sale proceeds of AUD17.9 million from the sale and leaseback of the Yarrabee wash plant.

(iii) Financing activities

For 2006, 2007, 2008 and the nine months ended 30 September 2008 and 2009, the net cash flow from financing activities was AUD65.8 million inflow, AUD16.7 million outflow, AUD182.7 million outflow, AUD79.7 million outflow and AUD52.8 million outflow respectively.

The increased cash outflow from financing activities in 2007 compared to 2006 was mainly due to the reduction in the proceeds from borrowings and the increase in dividends paid. This was partially offset by the increase in the proceeds from the issue of shares.

The increased cash outflow from financing activities in 2008 compared to 2007 was mainly due to the repayment of borrowings and the increase in dividends paid. The increased cash inflow from operating activities and the increased cash inflow from investing activities during 2008 enabled the early repayment of the SFA loan and higher dividends to be paid to shareholders.

The decreased cash outflow from financing activities for the nine months ended 30 September 2009 compared to the same period in 2008 was mainly due to the reduction in the repayment of borrowings, this was partially offset by the increase in dividends paid.

(iv) Cash and cash equivalents

As at 31 December 2006, 31 December 2007, 31 December 2008, 30 September 2008 and 30 September 2009, the Felix Group held cash and cash equivalents of AUD36.5 million, AUD10.7 million, AUD283.4 million, AUD255.8 million and AUD219.5 million. The large increase between 31 December 2007 and 31 December 2008 was due to the factors noted above.

Indebtedness

As at 31 December 2006, 31 December 2007, 31 December 2008, 30 September 2008 and 30 September 2009, the Felix Group had interest bearing liabilities of AUD113.6 million, AUD106.6 million, AUD37.2 million, AUD32.8 million and AUD50.8 million respectively. All of this debt is denominated in Australian dollars. The debt comprised

– III-9 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

finance leases of AUD27.9 million, AUD26.7 million, AUD26.9 million, AUD21.5 million and AUD41.7 million respectively, and AUD77.5 million, AUD79.9 million, AUD10.4 million, AUD11.3 million, and AUD7.8 million respectively in bank loans.

At 31 December 2006 and 30 September 2009 there was also AUD8.2 million and AUD1.3 million in other loans respectively.

The bank loan outstanding as at 30 September 2009 of AUD7.8 million was repaid in October 2009 and the majority of finance leases outstanding at 30 September 2009 are expected to be repaid within the next five years.

As discussed above, subsequent to 30 September 2009, the Felix Group has arranged a new syndicated financing facility for debt totalling AUD283.3 million to further fund the Moolarben development and a new AUD50.0 million dollar working capital facility to accommodate the Felix Group’s working capital requirements. There is also new AUD50 million facility which includes guarantees, letters of credit and performance bonds. This replaces the MOFA guarantee/indemnity facility of AUD27.0 million.

Gearing ratio

			31	December	31	December	31	December	30	September	30	September
				2006		2007		2008		2008		2009
Gearing	ratio	%		22%		19%		5%		6%		7%

The gearing ratio is calculated as the ratio of interest bearing liabilities to equity plus interest bearing liabilities.

The decrease in the gearing ratio between 2006 and 2008 was due to the repayment of borrowings and the increase in profitability. The slight increase since 30 September 2008 was due to additional debt in the form of finance leases.

Fluctuations in exchange rates and hedging

The Felix Group operates entirely in Australia and its costs are primarily denominated in its functional currency, the Australian dollar. Export coal sales are denominated in US dollars. A strengthening of the Australian dollar against the US dollar has an adverse impact on earnings and cash flow. Some plant and equipment purchases are denominated in currencies other than the Australian dollar. A weakening of the Australian dollar against those other currencies has an adverse impact on earnings and cash flow.

– III-10 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

Foreign exchange risk that arises from firm commitments or highly probable transactions is managed principally through the use of forward foreign currency derivatives. The Felix Group hedges a proportion of these transactions (such as contracted US dollar sales and asset purchases settled in foreign currencies) in each currency in accordance with the Board’s risk management policy.

As at 31 December 2006, the Felix Group had no outstanding forward foreign currency derivatives in place.

As at 31 December 2007, the Felix Group had forward foreign currency derivatives in place to hedge USD155.1 million of contracted expected sales.

As at 31 December 2008, the Felix Group had forward foreign currency derivatives in place to hedge USD147.6 million of contracted expected sales.

As at 30 September 2009, the Felix Group had forward foreign currency derivatives in place to hedge the Moolarben mobile equipment purchases denominated in the foreign currencies USD, Euro and Yen.

As at 30 September 2009 the Felix Group had forward foreign currency derivatives in place to hedge USD45.0 million of contracted sales expected in the period up to June 2010.

Significant investments

The Felix Group does not hold any significant investments.

Material acquisitions and disposal of subsidiaries and associated companies

There were no material acquisitions or disposals of subsidiaries or associated companies in the periods under discussion.

The sell-down of interests in the unincorporated Moolarben, Minerva and Athena joint ventures is discussed above.

Employees and remuneration

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 September 2009, the Felix Group employed a total of 445,509,636 and 732 people respectively. Total remuneration including employee benefits expense, bonuses, superannuation contributions and share-based payment expense for 2006, 2007, 2008 and the nine months ended 30 September 2009 was AUD37.3 million, AUD46.3 million, AUD48.5 million and AUD53.6 million respectively. The increased expenses in the periods under discussion reflect the

– III-11 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

expanded operating activities across the Felix Group and the higher costs associated with the mining boom in Australia. There were no remaining share-based payment arrangements as at 30 September 2009.

Recruiting and retaining the best people who are dedicated and professional is vital for the achievement of the Felix Group’s strategy and its long term sustainability, therefore it recognises the importance of having a remuneration structure and levels aligned with the needs of the business. These are based on industry benchmarks and the Felix Group’s circumstances.

Charges on the assets of the Felix Group

As at 31 December 2006, all assets of Felix and certain controlled entities were secured by first registered company charges (mortgage debentures), first registered mortgages, fixed and floating charges, deeds of cross charges, bank guarantees and scrip liens exist over all the assets of certain entities in the consolidated entity. These securities impose various restrictions on asset disposal and creation of other security interests.

As at 31 December 2007, all assets of Felix and certain controlled entities were secured by first registered company charges (mortgage debentures), first registered mortgages, fixed and floating charges, deeds of cross charges, bank guarantees and scrip liens exist over all the assets of certain entities in the consolidated entity. These securities impose various restrictions on asset disposal and creation of other security interests. As at 31 December 2008, all assets of Felix and certain controlled entities were secured by fixed and floating charges, mining mortgages and share mortgages. These securities impose various restrictions on asset disposal and creation of other security interests.

As at 30 September 2009, all assets of Felix and certain controlled entities were secured by fixed and floating charges, mining mortgages and share mortgages. These securities impose various restrictions on asset disposal and creation of other security interests. Certain finance leases were secured by cash deposit and this security was released when syndication of the lease facility took place subsequent to 30 September 2009 as discussed above.

Future capital expenditure

As at 31 December 2006, the Felix Group planned for a further AUD10.4 million in capital expenditure. This included AUD10.2 million for the development of the Ashton underground and the upgrade of Ashton’s second coal preparation module.

As at 31 December 2007, the Felix Group planned for a further AUD1.9 million in capital expenditure. This included AUD1.8 million for plant and equipment at Ashton.

– III-12 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE FELIX GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008 AND EACH OF THE NINE MONTHS ENDED 30 SEPTEMBER 2008 AND 30 SEPTEMBER 2009

As at 31 December 2008, the Felix Group planned for a further AUD358.9 million in capital expenditure. This included AUD342.0 million for the Moolarben development and AUD7.8 million for the Yarrabee wash plant.

The Felix Group plans for a further AUD276.1 million in capital expenditure as at 30 September 2009. This includes AUD273.1 million on the Moolarben development. This expenditure will be funded by the new syndicated funding facility entered into in October 2009 and funds generated internally from operations.

Contingent liabilities

Other than bank guarantees in place, the Felix Group had no contingent liabilities as at 31 December 2006, 31 December 2007, 31 December 2008 and 30 September 2009. The majority of bank guarantees in place at each date represent guarantees to State and Federal governments in respect of the cost of restoration on certain mining leases as required by statute. At 30 September 2009, these guarantees accounted for AUD13.6 million of the total AUD16.2 million.

– III-13 –

OTHER INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This Supplemental Circular includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this Supplemental Circular and confirm, having made all reasonable enquiries, which to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. EXPERTS AND CONSENTS

The following is the qualification of the expert who has given or agreed to the inclusion of its opinions and advice in this Supplemental Circular:

Name Qualification

PwC Certified Public Accountants

The expert set out above has confirmed that it does not have any shareholding, directly or indirectly, in any member of the Enlarged Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.
The expert set out above has given and has not withdrawn its written consent to the issue of this Supplemental Circular, with the inclusion of its reports and/or references to its name, as the case may be, in the form and context in which they are included.
The expert set out above did not have any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Enlarged Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Enlarged Group since 31 December 2008 (being the date to which the latest published audited financial statements of the Group were made up).

– IV-1 –

OTHER INFORMATION

APPENDIX IV

3. STATEMENT OF INDEBTEDNESS OF THE ENLARGED GROUP

Indebtedness

As at 31 January 2010, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Supplemental Circular, the Enlarged Group had the following outstanding borrowings:

Short-term loans – unsecured Bank loans – unsecured Bank loans – secured Finance lease obligations – secured	As at 31 January 2010 RMB’000 609,620 19,974,300 1,867,840 647,507
	23,099,267

Unsecured bank loans of RMB19,798,300,000 were counter-guaranteed by Yankuang Group, the Controlling Shareholder, in favour of the Enlarged Group, and the remaining unsecured bank loans amounting to RMB176,000,000 were guaranteed by Yankuang Group.

Secured bank loans of RMB955,780,000 were secured by term deposits pledged to the bank by the Company and counter-guarantee by Yankuang Group in favour of the Enlarged Group, and the other secured bank loans amounting to RMB912,060,000 were secured by fixed and floating charge over all assets of the Felix Group.

Finance lease obligations were secured by related property, plant and equipment under finance lease arrangements entered into by the Felix Group.

Financial Guarantees

At the close of business on 31 January 2010, the Felix Group entered into bank guarantee agreements with certain commercial banks in Australia to provide performance and other guarantees in relation to the mining operations of its subsidiaries and joint ventures amounting to approximately RMB279,164,000.

Save as aforesaid or otherwise mentioned therein and apart from intra-group liabilities, none of the companies in the Enlarged Group had, at the close of the business on 31 January 2010, being the latest practicable date for the purpose of this indebtedness statement, any outstanding loan capital issued and outstanding or agreed to be issued, bank overdrafts, charges or debentures, mortgages, loans or other similar indebtedness or any finance lease commitments, hire purchase commitments, liabilities under acceptances, acceptance credits or guarantees or other material contingent liabilities.

– IV-2 –

OTHER INFORMATION

APPENDIX IV

The Directors have confirmed that there has not been any material change in the indebtedness of the Enlarged Group since 31 January 2010.

4. STATEMENT OF SUFFICIENCY OF WORKING CAPITAL OF THE ENLARGED GROUP

Taking into account the completion of the Transaction and the financial resources available to the Enlarged Group, including the internally generated funds and the available banking facilities, the Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this Supplemental Circular.

5. STATEMENT AS TO FINANCIAL AND TRADING PROSPECTS OF THE FELIX GROUP AND THE ENLARGED GROUP

Outlook for the coal market

As the macro-economy recovers, the demand for coal has been rising in 2010. The domestic and international supply and demand for coal will be in a balanced but slightly tense situation in general.

The domestic market supply and demand for coal is overall balanced while tight supply still exists in certain regions and within certain periods. The macro-economy resumes stability and reverts to a rising track and the government continues its aggressive financial policy and moderately easing monetary policy, all of which drive the rapid growth of major coal consumption industries whereas the domestic demand for coal is also growing on a stable note. Factors such as the production commencement of new coal mines and coal mines in Shanxi Province after consolidation will stimulate the supply of domestic coal resources. Resource tax and fee reform, environment protection and acceleration of corporate restructuring in certain provinces will provide strong support to coal price. The consolidation of coal resources and the accelerating establishment of large coal production conglomerates will further concentrate the coal industry and increase the market competitiveness of large coal groups.

With rising demand but limited supply in international coal market, the coal price will fluctuate at high level. The world economy has bottomed out and recovered gradually, together with a stable recovery in energy demand. Among the major coal exporting countries in the world, the coal production and export volume of Indonesia increased while Vietnam’s coal production and export volume decreased; as for Australia and South Africa, with constraints in port infrastructure, only limited increase in coal export volume was recorded. It is expected that the coal demand and supply in the Asia-pacific region will remain balanced in general. In view of the increasing import of coal in India, Japan, Korea and Taiwan and that China remains a net importer of coal, the demand for coal will have mild growth in Asia-pacific region. Affected by changes in the supply-demand relationship, the international coal price will remain volatile at high level and probably continue its rising trend.

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OTHER INFORMATION

APPENDIX IV

Outlook for the methanol market in China

In 2010, over-supply in the methanol market in China will continue, thus it is difficult to see a significant rebound in the methanol price. With the increasing production volume of the new and existing methanol production plants in China and the increasing import volume of quality methanol at low cost, the supply of methanol in China will further increase. Although the downstream products’ (such as dimethyl ether and acetic acid) demand for methanol increased, the market demand for methanol remained little changed. As the PRC government continues to accelerate the implementation of the adjustment and vitalization program for petrochemical industry, eliminate outdated methanol plants and promote fuel methanol and methanol companies taking measures to limit production, the methane market is expected to remain stable. The surging prices of raw materials such as coal and natural gas will support the methanol price.

Operating Strategies

In 2010, the Company will continue to encounter various types of pressures and challenges such as macro-economic volatility, resettlement of the villages located above coal fields, increase in costs, and difficulties in acquiring new coal resources. The resettlement of the villages located above coal fields exists generally in the economic cycles of coal mines in the eastern part of China, and the Chinese government has adopted a more stringent and prudent approval procedure for coal fields under riverbeds, the Company is not able to rule out any risk affecting its production as may be caused by the untimely resettlement of villages located above coal fields or the failure to obtain approvals for coal fields under riverbeds. The macro-economic trends, changes in supply and demand of coal, and transportation capacity of coal will cause volatility in coal price; while the resources tax, together with reforms on compensation of mine resources which may be implemented by the PRC government in the future, will increase the operating costs of the Enlarged Group. And, the intense competition in coal resource within China will make it more difficult to acquire new coal resource. Further, with the continued expansion of operation scale and business scope, factors that may influence the Enlarged Group’s investment decision-making will be more complicated.

The Company will continue to improve its profitability and shareholders’ return through implementation of strategies relating to organic development parallel with external expansion. In 2010, the Company will focus on the following operating strategies:

Proactively and steadily promote the development and establishment of external projects, and reap the benefit from new production as soon as possible . The Company will strictly implement decision-making procedures, enhance project investment management, eliminate and control investment risks. Also, the Company will stabilize the coal production of Felix, commence the production of the southeastern open-cut mine of Ashton coal mine and Moolarben open-cut coal mine, speed up the production commencement of the 0.6 million tonnes methanol project and coal resource development work of Ordos Neng Hua and commence the construction of Heze Neng

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OTHER INFORMATION

APPENDIX IV

Hua’s Wanfu Mine. The Company will expedite the process of the establishment of Yushuwan Coal Mine in Shaanxi Province, so as to commence commercial operation as soon as possible.

Enhance the capital operation and continue to look for new project acquisition opportunities . The Company will prepare for the listing of Yanzhou Coal in Australia and proactively and stably speed up the asset consolidation of Felix and Austar. Taking into full consideration of technical and economic conditions, as well as operational risks, the Company will grasp the opportunity in coal resources integration, proactively look for new investment opportunities in coal and related industries in China and abroad, so as to enlarge the Company’s coal asset scale and enhance the sustainable development capacity of the Company. With the advantage of ample fund supply, the Company will increase the efficiency of utilization of its funds; raise fund through debt financing, equity financing and by introducing strategic investors; engage in project investment, project development and establishment; and explore new ways in capital operation and financial management to create more revenue for the Company and the Shareholders.

Improving operation management, effective cost control and maximizing effectiveness of the Company . Firstly, the Company will steadfastly insist on fundamental safety management, and establish a long term and effective safe production mechanism. Secondly, the Company will optimize its own coal mine production system to ensure a smooth succession between mines and maintain its stable production and high efficiency; as well as enhance our management on the Heze Neng Hua’s Zhaolou Coal Mine and Yulin Neng Hua’s 0.6 million tonnes methanol project to maximize their return. Thirdly, the Company will further promote the establishment of “Three Nil Project”; i.e. a systematic strategy and measure adopted by the Company to improve the quality of its coal product in order to achieve “nil impurity, nil defect, and nil compliant”, continue to improve product quality and market competitiveness. Following the trend of market demand, the Company will implement flexible sales strategies, optimize product structure, customer structure, market positioning and transportation means to ensure the overall stability of coal sales and maximize return. Fourthly, the Company will enhance its financial controls by fully introducing ERP system to all subsidiaries located in China and overseas; enhance fund budget management and controls over cash flow so as to establish a global cash management system; based on cost control, the Company will reduce cost and energy consumption, fully demonstrate its potential, enhance effectiveness, so as to ensure effective cost control.

Enhance internal control and regulate operations . The Company will continue to improve its internal control of work flow and system and establish a long term mechanism for risk prevention in order to strengthen its risk prevention capabilities; and further rationalize the management system of overseas subsidiaries to secure a smooth transition and stable operation of Felix to achieve a satisfactory performance. The Company will optimize the management structures and internal control system of the subsidiaries in China and regulate their management for the purpose of raising their operation capabilities and profitability. The Company will improve its benchmarking

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OTHER INFORMATION

APPENDIX IV

and proactively make improvement by identifying the gap between the Company and its competitors so as to increase competitiveness. Furthermore, the Company will continue to improve corporate governance, and strive for a further regulated operation.

Proactively perform corporate social responsibilities . The Company will carry on the basic principles of safety, efficiency, cleanliness, and mutual benefit, so as to achieve safe, clean and healthy developments of the Company, promote the harmonious development of regional economy, and return the support and affection from the Shareholders and the society with good economic operations, and a friendly ecological environment.

6. DIRECTORS’ INTERESTS IN THE ENLARGED GROUP’S ASSETS OR CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any interest in any assets which have been, since 31 December 2008 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Enlarged Group, or were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Enlarged Group.

7. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Enlarged Group since 31 December 2008 (being the date to which the latest published audited financial statements of the Group were made up).

8. LITIGATION

As far as the Directors are aware, none of the members of the Enlarged Group was at present engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Enlarged Group as at the Latest Practicable Date.

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OTHER INFORMATION

APPENDIX IV

9. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Enlarged Group within the two years preceding the date of this Supplemental Circular which are or may be material:

the Scheme Implementation Agreement;
financing agreement dated 16 October 2009 entered into among Yancoal Australia, Bank of China, Sydney branch, China Development Bank, Hong Kong branch and China Construction Bank, Hong Kong branch, pursuant to which the banks named therein agreed to provide a bank loan in the amount of USD2.9 billion to finance the Transaction;
financing agreement dated 9 December 2009 entered into between Yancoal Australia and Bank of China, Sydney branch, pursuant to which, Bank of China, Sydney branch agreed to provide a bank loan in the amount of USD140 million to supplement the financing of the Transaction;
acquisition agreement dated 24 July 2009 entered into between the Company and Shandong Chuangye Investment and Development Limited in relation to the acquisition of 14.21% equity interest in Shandong Hua Ju Energy Limited (“Hua Ju Energy”) for a consideration of RMB116.30 million;
acquisition agreement dated 24 July 2009 entered into between the Company and Jining Shengdi Investment Management Company Limited in relation to the acquisition of 6.9% equity interest in Hua Ju Energy for a consideration of RMB56.4216 million;
acquisition agreement dated 24 July 2009 entered into between the Company and Ms. Wu Zenghua in relation to the acquisition of 0.03% equity interest in Hua Ju Energy for a consideration of RMB0.2835 million;
acquisition agreement dated 24 October 2008 entered into between the Company and Yankuang Group in relation to the acquisition of 74% equity interest in Hua Ju Energy for a consideration of RMB593.24 million;
shareholders’ loan agreement dated 10 November 2009 entered into among Felix, AMCIC Sabeltand Holdings B.V., Gaffwick Pty Ltd and Ilwella Pty Ltd, pursuant to which the lenders named therein agreed to provide loans to Felix in the amount of AUD98,212,519; and
Moolarben coal project planning agreement dated 23 April 2008 entered into among Felix, Moolarben Coal Mines Pty Ltd (“Moolarben”) and Mid Western Regional Council, pursuant to which Moolarben agreed to make certain monetary contributions to Mid Western Regional Council for development of the Moolarben Coal Project.

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OTHER INFORMATION

APPENDIX IV

10. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s principal place of business in Hong Kong at Rooms 2008-12, 20/F, The Center, 99 Queen’s Road Central, Hong Kong during normal business hours on any weekday (except public holidays) for a period of 14 days from the date of this Supplemental Circular:

the articles of association of the Company;
the Circular;
the accountant’s report of Felix prepared by PwC as set out in Appendix I to this Supplemental Circular;
the report from PwC on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix II to this Supplemental Circular;
the written consent of PwC referred to in this Appendix;
each of the contracts set out under the paragraph headed “Material Contracts” in this Appendix;
this Supplemental Circular; and
annual reports of the Felix Group for each of the financial years ended 30 June 2007, 2008 and 2009.

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AI assistant

CStone Pharmaceuticals — Proxy Solicitation & Information Statement 2010

50715_rns_2010-03-22_5afc9b9c-c1d6-4225-b271-61669090616f.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

YANZHOU COAL MINING COMPANY LIMITED

MAJOR TRANSACTION

ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL IN FELIX RESOURCES LIMITED BY WAY OF A SCHEME OF ARRANGEMENT

SUPPLEMENTAL CIRCULAR

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

YANZHOU COAL MINING COMPANY LIMITED

To the Shareholders

MAJOR TRANSACTION

ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL IN FELIX RESOURCES LIMITED BY WAY OF A SCHEME OF ARRANGEMENT

SUPPLEMENTAL CIRCULAR

INTRODUCTION

LETTER FROM THE BOARD

SUPPLEMENTAL INFORMATION NOT PREVIOUSLY DISCLOSED IN THE CIRCULAR

WAIVERS FROM THE HONG KONG STOCK EXCHANGE

1. Presentation of Historical Results of Felix in the Supplemental Circular

2. Delay in Dispatch of the Supplemental Circular

MATERIAL UPDATES SINCE THE DATE OF THE CIRCULAR

1. Financing arrangement and guarantee

2. Implementation of the Transaction

3. Company’s undertakings in respect of the Transaction

4. Status on obtaining third party consents

5. Divestment of SA Coal

ADDITIONAL INFORMATION

Directors’ responsibility

Reporting accountant’s responsibility

Opinion and review conclusion

I. FINANCIAL INFORMATION OF FELIX GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENTS

APPENDIX I

FINANCIAL INFORMATION OF FELIX GROUP

II. NOTES TO THE FINANCIAL INFORMATION

1 Summary of significant accounting policies

(a) Principles of consolidation

(i) Subsidiaries

APPENDIX I

(ii) Associates

(b) Income tax

(c) Cash and cash equivalents

(d) Financial assets and financial liabilities

(i) Loans and receivables

(ii) Financial assets at fair value through profit or loss

(iii) Available-for-sale financial assets

(iv) Financial liabilities at fair value through profit or loss

(v) Financial liabilities measured at amortised cost

(e) Loans and receivables

(f) Advances to subsidiaries

(g) Inventories

(h) Overburden in advance

(i) Property, plant and equipment

(j) Investments

APPENDIX I

(k) Interests in joint ventures

(l) Intangible assets

(i) Mining tenements

(ii) Computer software

(iii) Research and development

(iv) Rail access rights

(m) Exploration and evaluation expenditure

(n) Acquisition of assets and assumption of liabilities

(o) Recoverable amount of assets and impairment

(p) Interest bearing liabilities

(q) Borrowing costs

(r) Leases

(s) Employee benefits

(i) Annual leave, sick leave and long service leave

CStone Pharmaceuticals Proxy Solicitation & Information Statement 2010