CULLEN RESOURCES LIMITED — Capital/Financing Update 2015

Dec 23, 2015

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ABN 46 006 045 790

www.cullenresources.com.au ASX Symbol: CUL

ASX ANNOUNCEMENT 23 December 2015

Mt Stuart Iron Ore Joint Venture Update

(Cullen Exploration Pty Ltd – 30% and the APIJV – 70%)

API Management Pty Ltd, Manager of the Mount Stuart Iron Ore Joint Venture (“MSIOJV”), has today advised Cullen Resources Limited as follows:

“The Manager of the Mt Stuart Iron Ore Joint Venture (“MSIOJV”) has been advised by the APIJV Participants (“API JVPs”) that due largely to the current iron ore market conditions, they have decided to materially cut back the feasibility work programme being undertaken on the West Pilbara Iron Ore Project (“WPIOP”). This will involve a discontinuation of the previously targeted completion of a definitive feasibility study on the WPIOP by mid-2016. However, this is not a stop project decision but a prudent review period.

The API JVPs have acknowledged the considerable progress during 2015 on project Ore Reserves, approvals, operating costs and capital costs and their commitment to optimising this work. Key project approvals and areas of potential value enhancement will continue to be pursued over the first quarter of 2016, with the project work programme and schedule reassessed at the end of the quarter.”

In light of this decision, the Manager is currently preparing a revised work programme and budget for the MSIOJV.

A copy of the announcement made today by Aurizon Holdings Limited (ASX: AZJ) who has been undertaking the feasibility study on the rail and port infrastructure for the project and also has an ownership interest in Aquila Steel Pty Ltd, one of APIJV Participants is attached.

Further information contact:

Dr Chris Ringrose or Wayne Kernaghan on (08) 9474 5511

Unit 4, 7 Hardy Street South Perth | Western Australia 6151 Telephone: +61 8 9474 5511 | Facsimile: +61 8 9474 5588 E-mail: cullen@cullenresources.com.au Website: www.cullenresources.com.au

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Aurizon Holdings Limited ABN 14 146 335 622

ASX Market Announcements ASX Limited 20 Bridge Street Sydney NSW 2000

BY ELECTRONIC LODGEMENT

23 December 2015

Market update

Please find attached announcement for release to the market.

Kind regards

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Dominic D Smith VP & Company Secretary

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T +61 7 3019 9000 | F +61 7 3019 0720 | CompanySecretary@aurizon.com.au Level 17, 175 Eagle St Brisbane QLD 4000 Australia | GPO Box 456 Brisbane QLD 4001 Australia

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ASX Announcement

23 December 2015

Market update

Aurizon Holdings Limited (ASX: AZJ) wishes to update the market on a number of business impacts associated with current trading conditions and a challenging near-term outlook for Australian commodities, particularly coal and iron ore.

This includes an update on the West Pilbara Iron Ore Project (WPIP), a revision to above rail coal volume guidance for FY16, more precise guidance on 1H earnings for FY16, and the inclusion of a non-cash impairment charge in the range of $215-240 million (before tax) which will be reported in the Company’s Half Year 2016 financial accounts.

West Pilbara Iron Ore Project

The CEO’s of the participating companies, Aurizon, Baosteel Resources, POSCO and AMCI, met in Hong Kong on December 21 to review progress of the West Pilbara Iron Ore Project.

While the CEO’s received reports on considerable progress in areas such as the capital and operating costs of the mine and infrastructure, the current market conditions and uncertainty about future supply and demand were central to the CEO considerations.

The participants are committed to consolidating the high quality work to date and minimizing Project costs, however no material further work will be undertaken on the definitive feasibility studies. The Aurizon Board has endorsed this decision. The participants agreed to meet again around end of first quarter 2016 to consider market and project status at that time. Aurizon’s period of exclusivity will continue until 30 April 2016.

Aurizon is now actively considering the implications of this decision, particularly in relation to employee impacts and Aurizon’s carrying value of the project (the current capitalised value of the investment in WPIP via Aquila is $91 million and in addition $80-$85 million of capitalised project costs) and will update the market further at Half Year Results in February.

Earnings and Volumes Guidance

While below rail tonnes on our network are tracking to date in line with the previous financial year our above rail coal volumes are lower than expected. The Company now expects above rail coal haulage volumes to be in the range of 202 – 212mt (previously 210 – 220mt) a reduction in guidance of approximately 3-4%. Given the current market conditions for our coal customers, there is a higher level of uncertainty over second half volumes than in recent years.

The Company’s guidance for iron ore and freight volumes remains unchanged.

While the benefits of ongoing operational improvements continue to be realised, these have been offset by the reduced above rail coal volumes together with the previously announced revenue and earnings impacts compared to the prior year. These include a $43 million profit on the sale of the Redbank Maintenance Facility, and the impact of lower revenue from expired customer contracts (TSC, CRT and Queensland Rail) and the award of shares to eligible employees in November 2015, at a cost of $16 million.

Against this backdrop, the Company provides underlying EBIT guidance for 1HFY16 in the range of $390m – $410m (before asset impairments).

Asset Impairments

The Company has undertaken a review of the carrying value of its asset portfolio and will recognise a total non-cash impairment charge in the range of $215-240 million (before tax) for the six months ending 31 December 2015 (subject to audit review and not including any potential impairment arising from the West Pilbara Iron Ore Project).

The impairments, outlined in the table below, relate to the value of Aurizon’s investment in Aquila, uncertainty on the timing of the Galilee Basin development opportunity, and surplus rolling stock as a consequence of significant productivity and efficiency improvements. In accordance with past practice the Board has determined that management remuneration outcomes for FY2016 will be based on profit outcomes after inclusion of costs in respect of these impairments.

Item	$m
	(EBIT)
Aquila investments (equity accounted, after tax)	60-65
Galilee Basin brownfield costs	30
Rolling stock - rolling stock and associated	125-145
inventory
**Total **	215-240

Aquila investments

The impairment to the Aquila investment relates to the value of the South African assets (iron ore and manganese) and Queensland Coal assets (including Eagle Downs).

The Aquila Board has carried out a strategic review of the South African projects and decided to place the projects into care and maintenance whilst a divestment programme is initiated.

A supplementary scoping study of the Eagle Downs project has been initiated and the timing of full development is uncertain after the termination of a major contract for the project. Approximately $8 million remains on Aurizon's balance sheet given Aquila's expectation that the mine will be developed.

All other Aquila Queensland coal assets have been written down to nil based on the current market outlook and given no substantial expenditure is planned for 2016.

Galilee Basin

The non-cash impairment of $30 million is associated with the feasibility work for the brownfield expansion of the Central Queensland Coal Network which was undertaken to advance the Galilee Basin development opportunity.

While this amount could be recovered through the regulatory process at a future date, a decision has been made to impair the costs due to uncertainty surrounding the project’s timing and the current market outlook. The carrying value for the project is now nil.

– Rolling stock rolling stock and associated inventory

As part of the Integrated Operating Plan, the transformation program work continues to drive significant efficiencies in Operations including rolling stock fleet planning, improved payloads, velocity, and dwell time and reduced variability and costs.

Our focus in this area has seen a marked improvement in performance metrics in recent years, with performance ahead of original expectations over the past twelve months. For example in the two year period to end FY15 locomotive utilisation has improved by more than 29%, wagon utilisation by more than 23%, labour productivity by more than 20% and fuel usage has dropped by approximately 7%. In addition payload in coal tonnes has increased

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by more than 6%, the active locomotive fleet has been reduced by approximately 19% and the active wagon fleet by approximately 13%.

The senior leadership team in Operations have driven continued improvements in rolling stock efficiency and productivity and this coupled with lower volume outlook has led to a further revision to Aurizon’s Rolling Stock Master Plan (RSMP). This has identified further rolling stock surplus to forecast requirements. Accordingly 124 locomotives and 1,343 wagons will be scrapped or written down to net realisable value. The impairment is expected to be in the range of $125-$145 million and represents approximately 5% of Aurizon’s total rolling stock value.

Looking ahead the RSMP will be continuously updated as new productivity and technology improvements come online. It should be noted however, that in the absence of tonnage growth exceeding the rate of productivity improvement, it is anticipated there may be further fleet reductions in the future.

MD&CEO Lance Hockridge Commentary

"Notwithstanding the very challenging market conditions for our customers our business continues to be resilient" Mr Hockridge said. "Iron ore, intermodal and below rail coal tonnes remain consistent with previous guidance and above rail coal tonnes are only slightly down on our expectations. Whilst it is disappointing our earnings for the first half of FY16 will be below the prior year's result, the reasons are essentially one off.

"We remain on target to achieve savings totalling $310-$380 million in operations and support costs from FY16 to FY18. This is in addition to the $252 million in transformation benefits delivered in the two years ended 30 June 2015."

For more information:

Investors: Media: Chris Vagg Josie Brophy +61 409 406 128 +61 418 877 574

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