JATCORP LIMITED — Annual Report 2012

Aug 30, 2012

JATENERGY LIMITED ABN 31 122 826 242

ASX APPENDIX 4E RESULTS FOR ANNOUNCEMENT TO THE MARKET PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2012

Financial Results

Revenue from ordinary activities for the period	$464,505	up	304%
Loss from ordinary activities after tax for the period
attributable to members	$4,628,457	up	47.75%
Net loss after tax for the period attributable to members	$4,628,457	up	47.75%

Dividends

The Company has not paid dividends and is not proposing to pay dividends.

EPS	As at 30/06/2012	As at 30/06/2011
Basic Loss per share	5.92 cents	7.83cents
Diluted Loss per Share	5.92 cents	7.83 cents
Net Tangible Assets	As at 30/06/2012	As at 30/06/2011
Net tangible assets per ordinary share	1.61 cents	5.73 cents

Commentary on Results

The major operational activities during the year were as follows:

Sydney office

On 23 May 2012, Jatenergy announced significant changes to its board and management team, with the resignation of Chairman Mr Alan Broome, Managing Director,Dr Phil Hodgson and Non-Executive Director Mr Ross Kestel. The outgoing directors were replaced by Mr Tony Crimmins as Executive Chairman and Mr Richard Pritchard as a Non-Executive Director. These changes resulted in a flatter, more efficient management structure, which has significantly reduced ongoing operating costs associated with the company’s Sydney office. Between May and June, monthly staffing costs fell by over 50%. Together with other savings, these cost reductions are expected to have a significant positive impact on the company’s future cash flows.

Jakarta office

During the year Jatenergy added staff members to its Jakarta office to assist with the development and commercialisation of its Indonesian assets.The company is looking to move its Jakarta office to new premises to lower its rental costs.

PT Barata Energy

PT Barata Energy is a local Indonesian entity, wholly owned by Jatenergy, to hold projects to mining projects in Indonesia. PT Barata Energy received its investment licence from the foreign investment regulatory authorities

(the BKPM), and its Deed of Establishment on 29 July 2011. Final incorporation, an administrative process involving the set up of a local bank account, capital injection and final clearance from the Ministry of Law and Human Rights,is still pending. Under Indonesian law, once PT Barata Energy is incorporated it will be able to enter into contracts. We have already received Clearance from Ministry of Law & Human Rights with Bank accounts set up.

Atan Bara project

The Atan Bara project is a contractual arrangement between PT Barata Energy and PT Atan Bara Sejahtera (ABS). Under this arrangement, PT Barata Energy has exclusive rights to conduct coal mining, and an exclusive right to purchase or market any coal mined from the Atan Bara project.

A production licence (or IUP Produksi ) for the Atan Bara project was granted by the Indonesian government in February 2012, following which Jatenergy completed drilling and topographical surveys for an initial mine plan. Following a drop in the price of Indonesian coal earlier this year, the value of the Atan Bara project has been impaired by $1,594,094 and plans to bring Atan Bara into production have been put on hold.

Katingan project

Blackrock Resources Pty Limited holds a conditional share purchase agreement to acquire 80% of the shares of PT Coal Soil Brik. The timing of completion of this agreement depends on converting PT Coal Soil Brik into a foreign investment vehicle and obtaining the necessary government and regulatory approvals. Completion of the transaction is targeted by the end of 2012.

The book value of the Katingan project remains unchanged from prior year at $1,478,235. The Directors are of the opinion that this figure significantly understates the true value of the Katingan asset, which the board estimates to be between US$3–5 million. This estimate cannot be reflected in the Company’s accounts owing to current accounting standards. The estimated valuation is based on negotiations for the sale of the concession, cash flow model and valuation of coal based on target mineralisation of 38mt at 10c/tonne, and is predictive in character. It may be affected by inaccurate assumptions or by known or unknown risks and uncertainties, and a formal valuation may differ materially. The Company is looking to sell the Katingan asset and is currently in negotiations with several interested parties.

Jongkang I and II projects

In late 2011, PT Barata Energy entered into a joint venture with CV Wijaya Mulia for a 30/70 joint operation and 100% off-take of coal from the Jongkang I project, near Tenggarong, East Kalimantan. The JV arrangement requires Jatenergy to provide working capital to earn 30% of the net margin for the coal, as well as to undertake full marketing and sales rights to the coal. A production license for the Jongkang project was granted by the Indonesian government in November 2011 and production began in early 2012.

In November 2011, PT Barata Energy entered into a joint venture with CV Karya Putra Bersama for a 30/70 joint operation and 100% off-take of coal from the Jongkang II project, near Tenggarong, East Kalimantan. The JV arrangement require Jatenergy to provide working capital to earn 30% of the net margin for the coal, as well as to undertake full marketing and sales rights to the coal. As an existing coal mining operation, production from Jongkang II commenced immediately.

Both Jongkang I and II offer high quality thermal coal with high gross calorific values of ~6,500 kcal/kg (adb), sulphur below 1% and low ash and moisture. In March 2012, Jatenergy completed its first shipments of coal from the Jongkang projects. Total revenues from these two projects to June 2012 were $291,000, with the majority of this total coming in the March quarter.

Following a drop in the price of Indonesian coal, a decision was made to stockpile coal from the projects and suspend some operations until the coal price improves. Operations at both Jongkang I and II remain suspended until the coal price increases, following which revenues from the production and sale of coal from the projects are expected to resume.

Queensland coal assets

Jatenergy is currently in due diligence on two coal exploration permits and fourcoal exploration permit applications (non-competing) in the Bowen and Galilee basins in Queenslandfrom Spinifex Rural Management Pty Limited and Demycoal Pty Limited, for a total consideration of $340,000 in cash and 12.5 million Jatenergy shares.

The company is currently looking to find JV partners or sell its Queensland coal assets as part of its strategy of moving away from long-term coal projects to more short-term cash return projects that can be brought into production with relatively modest investments. There has been no value assigned to the Queensland coal assets on the balance sheet at 30 June 2012.

Coal Plus

On 18 July 2012, Jatenergy announced that it had licensed the Coal Plus coal upgrading technology from Zhengzhou Zhongneng Metallurgy Co Ltd (ZZM).

Jatenergy’s licence covers an initial three year mandate period for use of the Coal Plus technology in Indonesia, Southeast Asia and Oceania. The mandate period is divided into three stages:

• Stage 1: Jatenergy will have an initial one year period to find and secure a suitable coal resource for application of the technology.

• Stage 2: Upon successful completion of Stage 1, the licence will be extended for two years to enable Jatenergy to develop a full feasibility study in collaboration with ZZM. The feasibility study will include the necessary contacts and commitments to commence a pilot or full-scale project using Coal Plus.

• Stage 3: Upon successful completion of Stage 2, the licence will be novated into an irrevocable and exclusive contract, allowing construction, start up and commissioning of the Coal Plus plant.

Jatenergy will, via its joint venture partners, source financing and bear financial responsibility to conduct the full feasibility study and construct and commission the Coal Plus plant.

As consideration for providing its technology, ZZM will be issued with shares in Jatenergy. The number of shares to be issued will be determined upon completion of Due Diligence. It is expected that the first tranche of shares will be below the 15% of the issued capital of the company. If it is above this amount then shareholder approval will be sought at each stage of the agreement.

Indonesian biofuel project

As at 30 June 2012, Jatenergy Limited, through its 70% investment in PT Jatoil Waterland, had over 2000 hectares of jatropha plantations under cultivation. The total production of crude jatropha oil for the year ending 30 June 2012 was over 1000 tonnes, with the majority of production targeted for use in power generation or in the production of renewable aviation fuel. PT Jatoil Waterland is now economically selfsupporting and is in the process of finalising permanent off-take agreements.

Corporate

The consolidated loss of the Group for the year after providing for income tax amounted to $4,664,932 (2011: $3,166,075).

The 2012 loss is attributable to the following:

Employment benefits of $291,425 (2011: $439,165) Consultancy expenses of $1,061,551 (2011: $1,232,181) Professional costs of $129,872 (2011: $403,763) Impairment of intangible of $1,594,094 (2011: $321,113)

Significant Events Since Balance Sheet Date

No matters other than the above have arisen since 30 June 2012 that have significantly affected, or may significantly affect:

• (i) the company’s operations in future financial years; or (ii) the results of those operations in future financial years; or

• (iii) the company’s state of affairs in future financial years.

Details of associates and joint venture entities

The company has equity investments of up to 45.96% in a foreign entity, Green Energy Joint Stock Company as at 30 June 2012.

Further detail is included in Note 2.

Status of audit and description of likely disputes or qualifications

This preliminary final report is in the process of being audited. No matters have arisen which would result in a dispute or qualification.

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2012

			Consolidated Entity
		2012	2011
	Note	$	$
Revenue		464,505	115,089
Consultancy expenses		(1,061,551)	(1,232,181)
Share-based compensation		(9,157)	(14,269)
Insurance expense		(44,337)	(52,860)
Depreciation and amortisation expense		(9,158)	(6,255)
Professional fees		(129,872)	(403,763)
Director’s fees		(270,927)	(245,697)
Employee benefits expense		(291,425)	(439,165)
Travel expenses		(140,513)	(136,611)
Occupancy expenses		(112,522)	(51,601)
Finance costs		-	(226)
Foreign exchange gains/(losses)		35,609	(111,199)
Oil Seed costs		(208,670)	-
Other expenses		(181,102)	(266,224)
Coal production costs		(1,111,718)	-
Impairment of assets		(1,594,094)	(321,113)
Loss before income tax		(4,664,932)	(3,166,075)
Income tax expense		-	-
Loss for theyear		(4,664,932)	(3,166,075)
Other Comprehensive Income
Other comprehensive income for theperiod,net of tax		-	-
Total comprehensive income for theperiod		(4,664,932)	(3,166,075)
Loss attributable to:
- Members of parent entity		(4,628,457)	(3,132,679)
- Non-controllinginterest		(36,475)	(33,396)
		(4,664,932)	(3,166,075)
Total comprehensive income attributable to:
- Members of parent entity		(4,628,457)	(3,132,679)
- Non-controllinginterest		(36,475)	(33,396)
		(4,664,932)	(3,166,075)
Loss per share for loss attributable to the ordinary equity
holders of the company:		Cents	Cents
Basic loss per share		(5.92)	(7.83)
Diluted lossper share		(5.92)	(7.83)

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

STATEMENT OF FINANCIAL POSITION

As at 30 June 2012

		Consolidated Entity
	2012	2011
	$	$
Assets
Current assets
Cash and cash equivalents	618,901	3,801,689
Trade and other receivables	463,981	316,868
Total current assets	1,082,882	4,118,557
Non-current assets
Property, plant and equipment	316,916	273,738
Investments	-	-
Intangibles	4,250,471	5,844,565
Total non-current assets	4,567,387	6,118,303
Total assets	5,650,269	10,236,860
Liabilities
Current liabilities
Trade and other payables	121,807	348,177
Short term provisions	716	631
Total current liabilities	122,523	348,808
Total liabilities	122,523	348,808
Net assets	5,527,746	9,888,052
Equity
Contributed equity	25,919,243	25,655,160
Non-controlling interest	5,709	(2,401)
Reserves	338,293	342,335
Accumulated losses	(20,735,499)	(16,107,042)
Total equity	5,527,746	9,888,052

The above statement of financial position should be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2012

	Contributed	Non-	Reserves	Accumulated	Total
	Equity	Controlling		Losses
		Interest
	$	$	$	$	$
Balance at 1 July 2010	16,881,950	-	328,066	(12,974,363)	4,235,653
Profit for the year	-	(33,396)	-	(3,132,679)	(3,166,075)
Total comprehensive income	-	(33,396)	-	(3,132,679)	(3,166,075)
Employee share based scheme	-	-	14,269	-	14,269
Issue of capital	8,773,210	30,995	-	-	8,804,205
Transaction with owners	8,773,210	30,995	14,269	-	8,818,474
Balance at 30 June 2011	25,655,160	(2,401)	342,335	(16,107,042)	9,888,052
Balance at 1 July 2011	25,655,160	(2,401)	342,335	(16,107,042)	9,888,052
Loss for the year	-	(36,475)	-	(4,628,457)	(4,664,932)
Total comprehensive income	-	(36,475)	-	(4,628,457)	(4,664,932)
Employee share based scheme	-	-	9,157	-	9,157
Foreign Currency translation	-	-	(13,199)	-	(13,199)
Issue of capital	264,083	44,585	-	-	308,668
Less: transaction costs arising on	-	-	-	-	-
share issue
Transaction with owners	264,083	44,585	(4,042)	-	304,626
Balance at 30 June 2012	25,919,243	5,709	338,293	(20,735,499)	5,527,746

The above statement of changes in equity should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWS

For the year ended 30 June 2012

STATEMENT OF CASH FLOWS For the year ended 30 June 2012
			Consolidated Entity
		2012	2011
	Note	$	$
Cash flows from operating activities
Receipts from customers		283,105	-
Payments to suppliers and employees		(3,791,226)	(2,760,201)
Interest received		69,896	97,392
Interest paid		-	(226)
Net cash outflow from operating activities		(3,438,225)	(2,663,035)
Cash flows from investing activities
Payments for property, plant and equipment		(44,256)	(82,093)
Payment for investments in associate		-	(321,113)
Purchase of subsidiary – net of cash acquired		-	1,476
Payments to Blackrock		-	(1,101,695)
Net cash outflow from investing activities		(44,256)	(1,503,425)
Cash flows from financing activities
Proceeds from issues of shares and other equity
securities net of transactions costs		264,083	3,845,209
Proceeds from issue of shares from non-controlling
interest		-	30,995
Net cash inflow from financing activities		264,083	3,876,205
Net decrease in cash and cash equivalents		(3,218,398)	(290,255)
Cash and cash equivalents at the beginning of the
financial year		3,801,689	4,203,143
Effect of exchange on cash holdings in foreign
currencies		35,610	(111,199)
Cash and cash equivalents at end of year		618,901	3,801,689

Note 1: Controlled Entities

(a) Controlled Entities Consolidated

	Country of
Name of entity	incorporation	Class of shares		Equity holding
			2012	2011
			%	%
Jatenergy Holdings Pte Ltd	Singapore	Ordinary	100	100
Jatenergy Indonesia Pte Ltd (*)	Singapore	Ordinary	100	100
Jatenergy Vietnam Pte Ltd (*)	Singapore	Ordinary	100	100
Blackrock Resources Pty Ltd	Australia	Ordinary	100	100
Blackrock Energy Pte Ltd (x)	Singapore	Ordinary	100	100
PT Jatoil Waterland	Indonesia	Ordinary	90	90

• These entities are subsidiaries of Jatenergy Holdings Pte Ltd.

x This entity is a subsidiary of Blackrock Resources Pty Ltd

Note 2: Non-current assets – Investments

Summarised financial information of associates

	Ownership		Groups	Share of:
	Interest %	Assets	Liabilities	Revenues	Profit/(Loss)
		$	$	$	$
2012
Green Energy Joint Stock	45.96	-	-	-	-
Company
2011
Green Energy Joint Stock	45.96	-	-	-	-
Company

The above associates are incorporated in Vietnam. Principal activities are producing processing and marketing jatropha based projects.

The Company announced on 24September 2010 that it would suspend further funding into its Vietnam operations, Green Energy Vietnam (GEV). The farmer contract model was proving too costly and slow to establish compared to the Indonesian plantation model. While Jatenergy will retain its 45.96% stake in GEV, if GEV is unable to raise further capital in the short to medium term, Jatenergy’s investment may be severely impaired or ultimately prove to be unrecoverable. While Jatenergy will endeavour to recover its investment in GEV, given the parameters of the asset impairment assessment process, a decision was taken to write down the investment in GEV to zero in 2011.

NOTE 3: OPERATING SEGMENTS

The revenues and profit generated by each of the Group’s operating segments and segment assets are summarized as follows:

	Coal	Oilseeds	Total
	2012	2012	2012
12 months to 30 June 2012	$	$	$
Revenue
From external customers	300,246	92,444	392,690
From other segments	-	-	-
Segment revenues	300,246	92,444	392,690
Segment operating result	(2,837,789)	(142,984)	(2,980,773)
Segment assets	4,755,168	354,903	5,110,071
	Coal	Oilseeds	Total
	2011	2011	2011
12 months to 30 June 2011	$	$	$
Revenue
From external customers	-	-	-
From other segments	-	-	-
Segment revenues	-	-	-
Segment operating result	-	(116,860)	(116,860)
Segment assets	5,844,565	256,038	6,100,603

The Group’s segment operating profit reconciles to the Group’s profit before tax as presented in its financial statements as follows:

Profit or loss Total reporting segment operating result Other segment loss Share-based payment expenses Group operating loss Finance costs Finance income Other financial items Group profit before tax	12 months to 30 June 2012 $000 12 months to 30 June 2011 $000 (2,980,773) (116,860) (1,744,898) (3,132,338) (9,157) (14,269)
	(4,734,828) (3,263,467) - - 69,896 97,392 - -
	(4,664,932) (3,166,075)