PACIFIC RESOURCES LIMITED - AGM Information 2016

Coalbank Limited ACN 075 877 075

Notice of Annual General Meeting and Explanatory Statement

General Meeting to be held at Colin Biggers & Paisley Lawyers, Level 35, 1 Eagle Street, Brisbane Qld 4000 on 30 November 2016 commencing at 11:00 am AEST

This Notice of Annual General Meeting and Explanatory Statement should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser without delay.

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of Shareholders of Coalbank Limited ( Company ) will be held at Colin Biggers & Paisley Lawyers, Level 35, 1 Eagle Street, Brisbane QLD 4000 on 30 November 2016 commencing at 11:00 am AEST, for the purpose of transacting the business referred to in this Notice.

An Explanatory Statement provides additional information on matters to be considered at the Meeting.

AGENDA

Financial Reports

To receive and consider the Company’s Annual Report comprising the Directors’ Report, Auditors’ Report, Directors’ Declaration, Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and Notes to the Financial Statements for the Company for the financial year ended 30 June 2016.

Resolution 1: Adoption of Remuneration Report

To consider and, if thought fit, to pass, with or without amendment, the following advisory only resolution :

" That, for the purposes of section 250R(2) of the Corporations Act, and for all other purposes, the Remuneration Report forming part of the Company’s 2016 Annual Report be adopted. "

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting	Exclusion Statement: A vote on this Resolution 1 must not be cast (in any capacity) by or on
behalf of either of the following persons:
(a)	a member of the Key Management Personnel, details of whose remuneration are included in the
	Remuneration Report; or
(b)	a Closely Related Party of such a member.
However, a person (the voter) described above may cast a vote on this Resolution as a proxy if the vote
is not cast on behalf of a person described above and either:
(a)	the voter is appointed as a proxy by writing that specifies the way the proxy is to vote on this
	Resolution; or
(b)	the voter is the Chairman and the appointment of the Chairman as proxy:
	(i) does not specify the way the proxy is to vote on this Resolution; and
	(ii) expressly authorises the Chairman to exercise the proxy even though this Resolution is
	connected directly or indirectly with the remuneration of a member of the Key Management
	Personnel.

Resolution 2: Re-Election of Director – Mr Daniel Chan

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“ That Mr Daniel Chan, who retires in accordance with the Company's constitution and, being eligible, offers himself for re-election, be re-elected as a Director .”

Resolution 3: Re-Election of Director – Mr Nick Bolkus

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That Mr Nick Bolkus, who retires in accordance with the Company's constitution and, being eligible, offers himself for re-election, be re-elected as a Director.”

Resolution 4: Approval of 10% Placement Facility

To consider and, if thought fit, to pass the following resolution as a special resolution :

“That, for the purposes of Listing Rule 7.1A and for all other purposes, Shareholders approve the issue of Equity Securities up to 10% of the issued capital of the Company (at the time of the issue) calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions in the Explanatory Notes.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution 4 by any person who may participate in the 10% Placement Facility and a person who might obtain a benefit, except a benefit solely in the capacity of a Shareholder, if the resolution is passed, and any of their Associates, unless it is cast:

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

Resolution 5: Appointment of Auditor

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

“That RSM Australia Partners, having been nominated by a member of the Company in accordance with section 328B(1) of the Corporations Act and having given its consent to act as auditor in accordance with section 328A(1) of the Corporations Act, be appointed as auditor of the Company.

Resolution 6: Approval of conversion of Convertible Note

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Section 611 Item 7 and Chapter 2E of the Corporations Act, Listing Rule 10.11 and pursuant to the Implementation Agreement and for all other purposes, Shareholders approve the conversion of the First Convertible Note issued to Treasure Wheel (having a principal outstanding of $2,000,000) into 133,333,333 Shares at an issue price of $0.015 per Share and the issue of those Shares to Treasure Wheel on the terms described in the Explanatory Note."

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution 6 by Treasure Wheel Limited, Anthony Chan and Daniel Chan or their associates or any other person who may obtain a benefit, except solely in the capacity of a holder of ordinary securities. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form.

Resolution 7: Approval of the conversion of debt to a convertible note

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

“That conditional on the approval by Shareholders of Resolution 6 and for the purposes of Section 611 Item 7 and Chapter 2E of the Corporations Act, Listing Rule 10.11 and for all other purposes, Shareholders approve:

(a) the issue of the Second Convertible Note to Treasure Wheel at an issue price of $1,900,000 and convertible into Shares on the terms and conditions set out in the Explanatory Notes (and convertible into a maximum of 1,900,000,000 Shares representing a maximum relevant interest in the Company of up to 85.07%); and
(b) the issue of Shares upon conversion of the Second Convertible Note into Shares ."

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution 7 by Treasure Wheel Limited, Anthony Chan and Daniel Chan or their associates or any other person who may obtain a benefit, except solely in the capacity of a holder of ordinary securities. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form .

Please refer to the Explanatory Notes attached to this Notice for more information regarding Resolutions 6 and 7.

NOTES

These notes form part of the Notice of Meeting.

Time and Place of Meeting

Notice is given that a Meeting of members will be held at Colin Biggers & Paisley Lawyers, Level 35, 1 Eagle Street, Brisbane Qld 4000 on 30 November 2016 commencing at 11:00 am AEST.

Your Vote is Important

The business of the Meeting affects your shareholding and your vote is important.

Voting Eligibility

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered Shareholders at 7:00pm AEST on 28 November 2016.

Voting in Person

To vote in person, attend the Meeting at the time, date and place set out above.

Voting by proxy

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

In accordance with section 249L of the Corporations Act, members are advised that:

(a) each member has a right to appoint a proxy;
(b) the proxy need not be a member of the Company; and
(c) a member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and if it does:

(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and
(a) if the proxy has 2 or more appointments that specify different ways to vote on the resolution, the proxy must not vote on a show of hands; and
(b) if the proxy is the chair of the meeting at which the resolution is voted on, the proxy must vote
on a poll and must vote that way (i.e. as directed); and
(c) if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

(a) an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and
(b) the appointed proxy is not the chair of the meeting; and
(c) at the meeting, a poll is duly demanded on the resolution; and
(d) either of the following applies:
(i) the proxy is not recorded as attending the meeting;
(ii) the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

Voting by Corporate Representative

A body corporate that is a Shareholder, or that has been appointed as a proxy, may appoint an individual to act as its representative at the Meeting. The appointment must comply with the requirements of section 250D of the Corporations Act. The representative should bring to the Meeting, evidence of appointment, including any authority under which it is signed, unless it has previously been given to the Company.

Voting by Attorney

A Shareholder may appoint an attorney to vote on their behalf. For an appointment to be effective for the Meeting, the instrument effecting the appointment (or a certified copy of it) must be received by the Company in one of the methods listed above for the receipt of Proxy Forms, so that it is received not later than 11:00 am AEST, 28 November 2016.

Notice to Persons Outside Australia

This Explanatory Statement has been prepared in accordance with Australian laws, disclosure requirements and accounting standards. These laws, disclosure requirements and accounting standards may be different to those in other countries.

The distribution of this Explanatory Statement may, in some countries, be restricted by law or regulation. Accordingly, persons who come into possession of this Explanatory Statement should inform themselves of, and observe, any such restrictions.

Privacy

To assist the Company to conduct the Meeting, the Company may collect personal information including names, contact details and shareholding of Shareholders and the names of persons appointed by Shareholders to act as proxy at the Meeting. Personal information of this nature may be disclosed by the Company to its share registry, print and mail service providers and the Company's agents for the purposes of administration of the Company. Shareholders have certain rights to access their personal information that has been collected and should contact the Company secretary if they wish to access their personal information.

ASIC and ASX involvement

Neither ASIC, ASX nor any of their officers take any responsibility for the contents of the Notice of Meeting and Explanatory Statement.

By Order of the Board

==> picture [88 x 36] intentionally omitted <==

Leni Stanley Company Secretary 25 October 2016

EXPLANATORY NOTES Contents

EXPLANATORY NOTES Contents	EXPLANATORY NOTES Contents
Consider the Company’s Annual Report .................................................................... 8
1.	Resolution 1: Adoption of Remuneration Report ........................................... 8
2.	Resolution 2: Re-Election of Director – Mr Daniel Chan ................................ 9
3.	Resolution 3: Re-Election of Director – Mr Bolkus ......................................... 9
4.	Resolution 4: Approval of 10% Placement Facility ....................................... 10
4.1	Description of Listing Rule 7.1A ............................................................................................ 10
4.2	Listing Rule 7.1A ................................................................................................................... 11
4.3	Specific information required by Listing Rule 7.3A ................................................................ 12
4.4	Voting Exclusion .................................................................................................................... 15
4.5	Directors’ recommendation ................................................................................................... 15
5.	Resolution 5: Appointment of Auditor ........................................................... 15
6.	Resolution 6 ...................................................................................................... 15
6.1	Background to Resolution 6 .................................................................................................. 15
6.2	Why the first Convertible Note was issued ............................................................................ 16
6.3	The Agreement giving rise to the Loan ................................................................................. 16
6.4	Outstanding balance of the First Convertible Note and current Relevant Interest of Treasure
	Wheel .................................................................................................................................... 16
6.5	Repayment of the Loan ......................................................................................................... 17
6.6	Effect of Resolution 6 ............................................................................................................ 17
7.	Resolution 7 ...................................................................................................... 17
7.1	Background ........................................................................................................................... 17
7.2	The terms and conditions of the Second Convertible Note: .................................................. 17
8.	Key reasons why Shareholders should vote in favour of Resolutions 6 and
	7 ......................................................................................................................... 18
9.	Reasons why Shareholders may consider not voting in favour of
	Resolutions 6 and 7 .......................................................................................... 19
10.	Independent Expert's Report ........................................................................... 20
11.	Consequences if Shareholders do not approve Resolutions 6 and 7 .......... 20
12.	Directors' Recommendation ............................................................................ 20
13.	Regulatory requirements applying to Resolutions 6 and 7 .......................... 20
13.1	ASX Listing Rules ................................................................................................................. 20
13.2	Corporations Act - Takeovers issues .................................................................................... 22
13.3	Corporations Act - Related Party Issues ............................................................................... 25
13.4	Effect on the Company's capital structure: ............................................................................ 28
*Assuming lowest possible conversion price..................................................................................... 28
13.5	Dilutionary Impact ................................................................................................................. 28
13.6	Effect on the Company's cash and debt ................................................................................ 28
14.	Definitions ......................................................................................................... 29

Notes :

These Explanatory Notes have been prepared for the information of Shareholders in connection with the business to be conducted at the Annual General Meeting to be held on 30 November 2016.

These Explanatory Notes form part of and should be read in conjunction with the accompanying Notice. A number of words and terms used in these Explanatory Notes have defined meanings, which are set out at the end of these Explanatory Notes.

Consider the Company’s Annual Report

This item does not require voting by Shareholders. It is intended to provide an opportunity for Shareholders to raise questions on the financial statements and reports. The Company’s auditor will be present at the Meeting and available to answer any questions in relation to the conduct of the audit.

1. Resolution 1: Adoption of Remuneration Report

The Board has submitted its Remuneration Report to Shareholders for consideration and adoption by way of a non-binding advisory resolution.

The Remuneration Report is set out in the Directors’ Report section of the Annual Report. The Report:

(a) explains the Board’s policy for determining the nature and amount of remuneration of executive directors and senior executives of the Company;
(b) explains the relationship between the Board’s remuneration policy and the Company’s performance;
(c) sets out remuneration details for each Director and the most highly remunerated senior executives of the Company; and
(d) details and explains any performance conditions applicable to the remuneration of executive directors and senior executives of the Company.

A reasonable opportunity will be provided for discussion of the Remuneration Report at the Meeting.

The Remuneration Report, which is part of the Annual Report, has been sent to Shareholders who have made an election to receive the Annual Report. Copies of the Annual Report are available by contacting the Company’s Share Registry or visiting the Company’s website www.coalbank.com .

If 25% or more of votes that are cast on this non-binding Resolution are voted against the adoption of the Remuneration Report at two consecutive Annual General Meetings of the Company, Shareholders will be required to vote at the second of these meetings on a resolution (a Spill Resolution ) that another meeting be held within 90 days ( Spill Meeting ), at which:

(a) all the Company’s Directors (other than any Managing Director) cease to hold office immediately before the end of the Spill Meeting; and
(b) resolutions to appoint persons to offices that will be vacated immediately before the end of the Spill Meeting will be put to the vote at the Spill Meeting.

The approval threshold for the Spill Resolution is 50% or more of the votes that are cast on the resolution.

At the 2015 Annual General Meeting of the Company, Shareholders voted in favour of the Remuneration Report, and no first ‘strike’ was recorded by the Company.

The Board unanimously recommends that Shareholders vote in favour of Resolution 1.

2. Resolution 2: Re-Election of Director – Mr Daniel Chan

In accordance with the Company’s constitution, Mr Daniel Chan retires by rotation at the Meeting and being eligible, offers himself for re-election.

Mr Daniel Chan is the Chief Financial Officer of STDM China Holdings Ltd and STDM Management (China) Ltd and a Director of Loyal Strategic.

He has more than 10 years' management experience in real estate businesses in China. He led all real estate investment and development for STDM China and has completed construction projects in in Beijing, Shanghai, Taiyuan, Shenyang and Changzhou, among other places. Mr Chan was involved in the asset restructuring of STDM China through the sale of City Center and Central Plaza in Shanghai and orchestrated STDM becoming the exclusive partner of Louis Vuitton Moet Hennessy (LVMH) in real estate development in China.

Prior to working in the Chinese real estate industry, Mr Chan accumulated valuable financial and investment experience through working for JP Morgan Chase and Fitch Rating in London for several years. He holds a Master’s Degree in Finance from Imperial College London and is a Chartered Financial Analyst (CFA) and a member of the Royal Institute of Chartered Surveyors (MRICS).

All of the Directors (other than Daniel Chan, who makes no recommendation because of his interest in the Resolution) support Mr Chan's re-election as a Director and recommend that Shareholders vote in favour of this Resolution 2.

3. Resolution 3: Re-Election of Director – Mr Bolkus

In accordance with the Company’s constitution, Mr Bolkus retires by rotation at the Meeting and being eligible, offers himself for re-election.

Mr Bolkus served in the Australian Cabinets of Prime Ministers Bob Hawke and Paul Keating as Minister for Consumer Affairs, Minister for Administrative Services, Minister for Immigration, Minister Assisting the Treasurer (FIRB) and Minister of Multicultural Affairs.

For over a quarter of a century, he was a prominent political national identity and Senator in the Australian Parliament.

Since leaving politics in 2005, Mr Bolkus has earned a strong corporate reputation, consulting to companies in Australia and abroad and serving on a number of private-sector boards, particularly in the life sciences sector. He has also worked with the Walker Corporation on major projects in the residential and commercial development sectors. He was a foundation member of the Australia/USA Dialogue and has a comprehensive understanding of and sound relationships in China.

Respected by the Labor Party hierarchy, Mr Bolkus has an invaluable understanding of the inner workings of State and Federal Governments. Through Bespoke Approach, Mr Bolkus provides clients with a candid and individualized appraisal of how the Australian political environment will impact their business and how to manoeuvre through the multitude of challenges it presents.

All of the Directors (other than Mr Bolkus, who makes no recommendation because of his interest in the Resolution) support Mr Bolkus' re-election as a Director and recommend that Shareholders vote in favour of this Resolution 3.

4. Resolution 4: Approval of 10% Placement Facility

Listing Rule 7.1A enables eligible entities to issue Equity Securities up to 10% of its issued Share capital through placements over a 12 month period after the AGM ( 10% Placement Facility ). The 10% Placement Facility is in addition to the Company’s 15% placement capacity under Listing Rule 7.1.

An eligible entity for the purposes of Listing Rule 7.1A is an entity that is not included in the S&P/ASX 300 Index and has a market capitalisation of $300 million or less. The Company is an eligible entity.

The Company is now seeking Shareholder approval by way of a special resolution to have the ability to issue Equity Securities under the 10% Placement Facility.

The exact number of Equity Securities to be issued under the 10% Placement Facility will be determined in accordance with the formula prescribed in Listing Rule 7.1A.2 (see below).

The Company is seeking a mandate to issue securities under the additional 10% Placement Facility to enable the Company to pursue its growth strategy with the flexibility to act quickly as potential business opportunities arise.

The Board believes that this Resolution 4 is in the best interests of the Company and unanimously recommend that Shareholders vote in favour of this Resolution 4.

4.1 Description of Listing Rule 7.1A

(a) Shareholder approval

The ability to issue Equity Securities under the 10% Placement Facility is subject to Shareholder approval by way of a special resolution at an AGM.

(b) Equity Securities

Any Equity Securities issued under the 10% Placement Facility must be in the same class as an existing quoted class of Equity Securities of the Company.

The Company, as at the date of this document, has on issue only 1 class of Equity Securities, being Shares.

Listing Rule 7.1A.2 provides that eligible entities which have obtained Shareholder approval at an AGM may issue or agree to issue, during the 12 month period after the date of the AGM, a number of Equity Securities calculated in accordance with the following formula:

(A x D) – E

‘A’ is the number of Shares on issue 12 months before the date of issue or agreement:

(i) plus the number of fully paid Shares issued in the 12 months under an exception in Listing Rule 7.2;
(ii) plus the number of partly paid Shares that became fully paid in the 12 months;
(iii) plus the number of fully paid Shares issued in the 12 months with approval of holders of Shares under Listing Rule 7.1 and 7.4. This does not include an issue of fully paid Shares under the entity’s 15% placement capacity without Shareholder approval;

(iv) less the number of fully paid Shares cancelled in the 12 months.

‘ D’ is 10%;

‘ E ’ is the number of Equity Securities issued or agreed to be issued under Listing Rule 7.1A.2 in the 12 months before the date of the issue or agreement to issue that are not issued with the approval of Shareholders under Listing Rule 7.1 or 7.4.

(d) Listing Rule 7.1 and Listing Rule 7.1A

The ability of an entity to issue Equity Securities under Listing Rule 7.1A is in addition to the entity’s 15% placement capacity under Listing Rule 7.1.

At the date of this document, the Company has on issue 982,051,715 Shares. The Company therefore has a capacity to issue:

(i) 147,307,757 Equity Securities under Listing Rule 7.1; and
(ii) 98,205,171 Equity Securities under Listing Rule 7.1A.

The actual number of Equity Securities that the Company will have capacity to issue under Listing Rule 7.1A will be calculated at the date of issue of the Equity Securities in accordance with the formula prescribed in Listing Rule 7.1A.2 (refer to Section (c) above).

(e) Minimum Issue Price

The issue price of Equity Securities issued under Listing Rule 7.1A must be not less than 75% of the VWAP of Equity Securities in the same class calculated over the 15 Trading Days immediately before:

(i) the date on which the price at which the Equity Securities are to be issued is agreed; or
(ii) if the Equity Securities are not issued within 5 Trading Days of the date in paragraph (i) above, the date on which the Equity Securities are issued.
(f) 10% Placement Period

Shareholder approval of the 10% Placement Facility under Listing Rule 7.1A is valid from the date of the AGM at which the approval is obtained and expires on the earlier to occur of:

(i) the date that is 12 months after the date of the AGM at which the approval is obtained; or
(ii) the date of the approval by Shareholders of a transaction under Listing Rules 11.1.2 (a significant change to the nature or scale of activities) or 11.2 (disposal of main undertaking),

or such longer period if allowed by ASX ( 10% Placement Period ).

4.2 Listing Rule 7.1A

The effect of this Resolution 4 will be to allow the Company to issue the Equity Securities under Listing Rule 7.1A during the 10% Placement Period without using the Company’s 15% placement capacity under Listing Rule 7.1.

Resolution 4 is a special resolution and therefore requires approval of 75% of the votes cast by Shareholders present and eligible to vote (in person, by proxy, by attorney or, in the case of a corporate Shareholder, by a corporate representative).

4.3 Specific information required by Listing Rule 7.3A

Pursuant to and in accordance with Listing Rule 7.3A, information is provided in relation to the approval of the 10% Placement Facility as follows:

(a) The Equity Securities will be issued at an issue price of not less than 75% of the VWAP for the Company’s Equity Securities over the 15 Trading Days immediately before:
(i) the date on which the price at which the Equity Securities are to be issued is agreed; or
(ii) if the Equity Securities are not issued within 5 Trading Days of the date in paragraph (i) above, the date on which the Equity Securities are issued.
(b) If this Resolution 4 is approved by Shareholders and the Company issues Equity Securities under the 10% Placement Facility, the existing Shareholders’ voting power in the Company will be diluted as shown in the below table. There is a risk that:
(i) the market price for the Company’s Equity Securities may be significantly lower on the date of the issue of the Equity Securities than on the date of the Meeting; and
(ii) the Equity Securities may be issued at a price that is at a discount to the market price for the Company’s Equity Securities on the issue date or the Equity Securities are issued as part of consideration for the acquisition of a new asset,

which may have an effect on the amount of funds raised by the issue of the Equity Securities.

The table below shows the dilution of existing Shareholders on the basis of the current market price of Shares and the current number of Shares for variable “A” calculated in accordance with the formula in Listing Rule 7.1A.2 as at the date of this document.

The table shows:

(iii) two examples where variable “A” has increased by 50% and 100%. Variable “A” is based on the number of Shares the Company has on issue. The number of Shares on issue may increase as a result of issues of Shares that do not require Shareholder approval (for example, a pro rata entitlements issue or scrip issued under a takeover offer) or future specific placements under Listing Rule 7.1 that are approved at a future Shareholders’ meeting; and
(iv) two examples of where the issue price of Shares has decreased by 50% and increased by 100% as against the current market price.

Table 1.

Variable “A” in Listing Rule 7.1A.2		Dilution
		0.2 cents 50% decrease in Issue Price	0.4 cents Issue Price	0.8 cents 100% increase in Issue Price
Current Variable A 982,051,715 Shares	10% voting dilution	98,205,171 Shares
	Funds raised	$196,410	$392,820	$785,641
50% increase in current Variable A 1,473,077,572 Shares	10% voting dilution	147,307,757 Shares
	Funds raised	$294,615	$589,231	$1,178,462
100% increase in current Variable A 1,964,103,430 Shares	10% voting dilution	196,410,343 Shares
	Funds raised	$392,820	$785,641	$1,571,282

The table has been prepared on the following assumptions:

(v) No Options are issued and exercised into Shares before the date of the issue of the Equity Securities.
(vi) The 10% voting dilution reflects the aggregate percentage dilution against the issued Share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.
(vii) The table shows only the effect of issue of Equity Securities under Listing Rule 7.1A, not under the 15% placement capacity under Listing Rule 7.1.
(viii) The issue price is $0.007, being the closing price of the Shares on ASX on 22 September 2016.
(c) The Company will only issue and allot the Equity Securities during the Placement Period. The approval under Resolution 4 for the issue of the Equity Securities will cease to be valid in the event that Shareholders approve a transaction under Listing Rule 11.1.2 (a significant change to the nature or scale of activities) or Listing Rule 11.2 (disposal of main undertaking).
(d) The Company may seek to issue the Equity Securities for the following purposes:
(i) for cash consideration, in which case the Company may use the funds raised towards making (or to securing the right to make) one or more acquisitions and/or to further its existing projects; and/or general working capital; or
(ii) non-cash consideration for the acquisition of (or securing the right to make acquisitions of) new projects and investments or to further its existing

projects. In such circumstances the Company will provide a valuation of the non-cash consideration as required by Listing Rule 7.1A.3.

The Company will comply with the disclosure obligations under Listing Rules 7.1A(4) and 3.10.5A upon issue of any Equity Securities.

The Company’s allocation policy is dependent on the prevailing market conditions at the time of any proposed issue pursuant to the 10% Placement Facility. The identity of the allottees of Equity Securities will be determined on a case-by-case basis having regard to the factors including but not limited to the following:

(iii) the methods of raising funds that are available to the Company, including but not limited to, rights issues or other issues in which existing security holders can participate;
(iv) the effect of the issues of the Equity Securities on the control of the Company;
(v) the financial situation and solvency of the Company; and
(vi) advice from corporate, financial and broking advisers (if applicable).

The allottees under the 10% Placement Facility have not been determined as at the date of this document but may include existing substantial Shareholders and/or new Shareholders who are not related parties or Associates of a related party of the Company.

(e) The allottees under the 10% Placement Facility have not been determined as at the date of this document but may include existing substantial Shareholders and/or new Shareholders who are not a related party or an Associate of a related party of the Company.

Further, if the Company is successful in acquiring new assets or investments, it is possible that the allottees under the 10% Placement Facility will be the vendors of the new assets or investments.

(f) The Company previously obtained Shareholder approval under Listing Rule 7.1A on 26 November 2014.

In accordance with Listing Rule 7.3 A.6 the total number of Equity Securities issued in the 12 months preceding the date of this document is Nil representing Nil% of the Equity Securities on issue at the commencement of the 12 month period.

The Company has issued the following Equity Securities in the 12 months preceding the date of this document:

Table 2 – Previous equity issues

Date of Issue	Number of Securities	Class	Issue Price	Discount to Market price	Total Consideration	Valuation	Allottee / Basis of allotment
Nil	Nil	Fully paid ordinary Shares	Nil	Nil	Nil	N/A	Nil

In the 12 months preceding the date of this document the Company has received total cash consideration of $Nil.

The Board intends to use the working capital existing at the date of this document (which includes funds raised pursuant to the above placements) to provide working capital and to

pursue its growth strategy with the flexibility to act quickly as potential business opportunities arise.

4.4 Voting Exclusion

A voting exclusion statement is included in this document. At the date of this document, the Company has not approached any particular existing Shareholder or security holder or an identifiable class of existing security holder to participate in the issue of the Equity Securities. No existing Shareholder’s votes will therefore be excluded under the voting exclusion in this document.

4.5 Directors’ recommendation

The Directors unanimously recommend that Shareholders vote in favour of this Resolution 4.

The Chairman intends to vote all available proxies in favour of this Resolution 4.

5. Resolution 5: Appointment of Auditor

The Directors of the Company appointed RSM Partners Australia as auditor pursuant to section 327C(1) of the Corporations Act. Under section 327C(2), an auditor appointed under section 327C(1) holds office until the Company's next annual general meeting. The ongoing appointment of the auditor must then be approved by shareholders under section 327B.

In accordance with section 328B of the Corporations Act, notice in writing nominating RSM Partners Australia has been given to the Company by a shareholder and a copy thereof is appended to this Notice at Annexure A. The appointment of RSM Australia Partners will be by vote of shareholders as an ordinary resolution.

6. Resolution 6

6.1 Background to Resolution 6

On 15 July 2016, the Company announced its intention to make an investment of $1 million to acquire a 25% interest in Utilitas Pty Ltd ( Utilitas ), a biogas business. The transaction settled on 19 August 2016.

Resolution 7 pertains to the Company's mechanism for funding this investment and to its ability to raise further working capital.

The funding proposal encompassed in Resolution 7 and discussed below is conditional on Shareholders approving Resolution 6.

Resolutions 6 and 7 are aimed at restructuring the Company's existing debt, including applying unsecured loan funds used to finance the Company’s acquisition of an interest in Utilitas as Principal Money for the Second Convertible Note, as well as providing current and future working capital.

More specifically:

(a) Resolution 6 seeks approval for the issue of Shares under the First Convertible Note, so as to convert the underlying Loan of $2 million into Shares, thereby extinguishing the Loan and First Convertible Note.

(b) Resolution 7 seeks approval for the issue of the Second Convertible Note, for which the Principal Money will be allocated from unsecured loans used to finance the Company's Utilitas transaction and its ongoing activities.

6.2 Why the first Convertible Note was issued

On 27 August 2013, the Company announced that Loyal Strategic would make a proportional takeover offer for 75% of each Shareholder’s Shares at 1 cent cash per Share ( Proportional Takeover Bid ). Loyal Strategic nominated its wholly owned subsidiary, Treasure Wheel Global Limited ( Treasure Wheel ), to make the Proportional Takeover Bid, which was completed in 2013.

The Company and Loyal Strategic entered into various agreements (collectively referred to as the Implementation Agreement ) in order to implement the Proportional Takeover Bid, particulars of which were included in the Company's notice of extraordinary general meeting dated 16 September 2013 and in the Bidder's Statement.

Treasure Wheel is a wholly owned subsidiary of Loyal Strategic, which is based in Hong Kong and is controlled by Anthony Chan. Anthony Chan is also a Director of the Company.

6.3 The Agreement giving rise to the Loan

Pursuant to the terms of the Implementation Agreement, Treasure Wheel agreed to lend the Company $2 million to redeem certain Convertible Bonds then on issue ( Loan ). To this end, the Company issued a Convertible Note ( First Convertible Note ) to Treasure Wheel in accordance with the Implementation Agreement and Treasure Wheel advanced the funds, on 13 November 2013 ( Advance Date ).

After the first 12 months of the First Convertible Note ( Initial Term ), interest accrued on the balance of the note at a rate of 15% per annum.

Treasure Wheel has notified the Company that it has exercised an election ( Repayment Notice ) under the note to convert the outstanding balance of the First Convertible Note into 133,333,333 Shares at $0.015 per Ordinary Share, subject to Shareholder approval ( Debt Conversion ).

The First Convertible Note provides that should Shareholder approval not be obtained within a reasonable time of the Repayment Notice being given, Treasure Wheel may give a further notice to the Company requiring that all or part of the First Convertible Note balance:

(a) be repaid in cash no later than 18 months from the Advance Date, with interest; or
(b) be converted progressively at $0.015 per Ordinary Share, to the extent it is able to under the Corporations Act without shareholder approval (e.g. in accordance with the "creep provisions" allowing movement in voting power of no more than 3% in any six month period). If any amount of the First Convertible Note is not converted within 24 months of the Advance Date, Treasure Wheel may give notice to the Company that the amount of the First Convertible Note not yet converted is to be repaid in cash within 6 months of such notice.

6.4 Outstanding balance of the First Convertible Note and current Relevant Interest of Treasure Wheel

As at the date of this document:

(a) the outstanding amount of the First Convertible Note is $2,000,000; and
(b) Treasure Wheel and its associates hold approximately 54.16% of the voting power of in the Company, represented by 531,906,361 Shares.

6.5 Repayment of the Loan

The Company, by Resolution 6, seeks the approvals required from Shareholders to enable the conversion of the outstanding balance of the First Convertible Note into Shares pursuant to the Repayment Notice under the Implementation Agreement and First Convertible Note.

6.6 Effect of Resolution 6

If Shareholders approve Resolution 6, immediately after the conversion of the balance of the First Convertible Note (and assuming there are no further issues of Shares before completion of the Debt Conversion):

(a) the Company will issue 133,333,333 Shares ( Conversion Shares ) to Treasure Wheel, increasing the Shares it holds from 531,906,361 to 665,239,964 Shares;
(b) the voting power of Treasure Wheel and its associates will increase from approximately 54.16% to approximately 59.64%; and
(c) the outstanding balance of the First Convertible Note and Loan, will be extinguished in full.

7. Resolution 7

7.1 Background

For some time, the Company's directors have been seeking and evaluating opportunities to compliment the Company's coal exploration assets, having regard to current trends in the market and availability of capital. The Company’s directors have identified the Utilitas business as an attractive investment target for the Company. In order to fund that investment, the Company needed to raise capital.

To this end, Treasure Wheel has already advanced the Principal Money for the Second Convertible Note to the Company as an unsecured loan, to ensure that the Company had sufficient funds to complete the acquisition of its interest in Utilitas and to fund ongoing operations. If Resolution 7 is not approved, these funds are repayable on demand.

7.2 The terms and conditions of the Second Convertible Note:

The Company and Treasure Wheel have entered into a Convertible Note Deed ( Second Convertible Note ) on the following material terms and conditions:

(a) The issue price and face value of the Second Convertible Note will be $1,900,000 ( Principal Money ), of which $1,900,000 has already been advanced to the Company, as stated;
(b) The maturity date of the note is 24 months from the date of issue;
(c) The issue of the note is conditional on the approval by Shareholders of Resolution 7;
(d) Treasure Wheel may give a Conversion Notice at any time after 12 months from the Issue Date but before the Maturity Date and within 2 business days of receipt of the Conversion Notice ( Conversion Date ), the Company must either at its election:
(i) convert the Principal Money into Shares calculated as at the Conversion Date, in accordance with the Conversion Formula; or
(ii) Redeem the Note in full or in part. If the Company elects to redeem only part of the Convertible Note, the balance will be converted into shares in accordance with the Conversion Formula.

(e) At any time before:
(i) the Treasure Wheel gives a Conversion Notice; and
(ii) the maturity date,

the Company may offer to redeem the Second Convertible Note, and such offer may be accepted or rejected by Treasure Wheel in its absolute discretion. If the offer is accepted, the Issuer will redeem the Second Convertible Note within 2 business days of acceptance of the offer;

(f) The issue of Shares as a result of a conversion of the Second Convertible Note will be treated for all purposes as full repayment of the Principal Money;
(g) The number of Shares to be issued on conversion of the Second Convertible Note is calculated as follows ( Conversion Formula ):

Number of Shares = Principal Money Outstanding ÷ (10 day VWAP × 0.915).

(h) In other words, Shares issued on conversion at issued at a 8.5% discount to the VWAP over the 10 days preceding conversion, provided that a lowest possible conversion price for which approval is herein sought is $0.001 (representing conversion into 1,900,000,000 Shares and if the actual conversion price is lower, further approval for the conversion will be sought from Shareholders).
(i) If at the maturity date, no conversion notice has been given by Treasure Wheel and no offer under paragraph (e) above has been made and accepted, the Company may at its election either:
(i) convert the Principal Money into Shares in accordance with the Conversion Formula; or
(ii) repay the Second Convertible Note in cash.
(j) Until converted, the Second Convertible Note confers no rights to subscribe for new securities in the Company.
(k) If the issued capital of the Company is consolidated, subdivided or reduced, the Second Convertible Note and the number of Shares into which the Second Convertible Note is Convertible, will not be changed, except to the extent required by the ASX Listing Rules.
(l) Other than as may be required by the Corporations Act, Treasure Wheel will not be entitled to vote at any general meeting of the Company by virtue of the Second Convertible Note.

8. Key reasons why Shareholders should vote in favour of Resolutions 6 and 7

The Directors (Anthony Chan and Daniel Chan abstaining) consider that:

(a) converting the First Convertible Note into Shares on the terms described, rather than paying the balance in cash, has a number of benefits for Shareholders, as set out below:
(i) The Company does not currently have sufficient funds to repay the balance of the First Convertible Note in cash and cannot guarantee that should it seek those funds from debt or equity sources, it will be forthcoming or that it would be forthcoming on terms more beneficial than those applying to conversion of the First Convertible Note;

(ii) Approval by Shareholders of Resolution 6 is a condition for the approval of Resolution 7, without which the unsecured loan funds already advanced by Treasure Wheel and used to fund the acquisition of the investment in Utilitas, may be required by Treasure Wheel to be repaid in full or in part, on demand;
(iii) Converting the First Convertible Note at the fixed conversion price under the Implementation Agreement and Convertible Note is advantageous to Shareholders, given the current market price of the Company's securities - hence converting the First Convertible Note is likely to be materially less dilutionary for non-associated shareholders than issuing ordinary shares at market or, as is more likely, a discount to market price, in a typical placement;
(iv) The conversion of the First Convertible Note helps ensure that Treasure Wheel, which has supported the Company financially and with provision of board expertise, will continue to provide the Company that support by virtue of the Second Convertible Note the subject of Resolution 7;
(b) Approving the issue of the Second Convertible Note is in the best interests of the Company, because:
(i) It offers the Company a source of capital in a difficult capital market, wherein full equity based funding for the Company is unlikely to be available or if available, on terms better than the Second Convertible Note; and
(ii) It offers a mechanism whereby the Company can avoid dilution of Shareholders if the Second Convertible Note is repaid.
(c) The Independent Expert has concluded that the conversion of the First Convertible Note and the issue of the Second Convertible Note (and issues of Shares upon its conversion) are not fair but reasonable to Shareholders not associated with Treasure Wheel.

9. Reasons why Shareholders may consider not voting in favour of Resolutions 6 and 7

(a) Shareholders should be aware that there are some potential disadvantages to conversion of the First Convertible Note, as set out below:
(i) Conversion of the First Convertible Note will materially increase Treasure Wheel's voting power in the Company and existing Shareholders will be diluted and this voting power will be further increased if Resolution 7 is approved and the Second Convertible Note is also converted into Shares; and
(ii) The increase in voting power of Treasure Wheel as a result of approval of Resolutions 6 and 7 may result in the market for the Company's securities becoming less liquid.
(b) Shareholders may consider that the Company may be able to obtain superior funding terms that may enable it to repay the First Convertible Note in cash and complete the Utilitas Investment, without increasing the voting power of Treasure Wheel by conversion of the First Convertible Note or issue of the Second Convertible Note; however, the Directors have not received any offers for provision of such funding and assess that in the current market conditions, such offers of funding are unlikely.

10. Independent Expert's Report

The Company engaged RSM Australia Pty Limited ( Expert ) to prepare an independent expert's report ( IER ) as to whether the Debt Conversion (also taking into account the potential impact of Resolution 7 ) is "fair and reasonable" to Shareholders not associated with the Debt Conversion (i.e. Treasure Wheel) ( Non-Associated Shareholders ).

A copy of the IER is enclosed with this document. You should carefully read the IER in its entirety and, if you have any questions, you should promptly seek advice from your accountant, solicitor or other professional adviser. A summary of the Independent Expert's conclusions are set out in pages 4 to 10 of the attached report.

11. Consequences if Shareholders do not approve Resolutions 6 and 7

Resolution 7 is conditional upon approval of Resolution 6.

If Shareholder approval is not obtained for Resolution 6, as stated above, at the election of Treasure Wheel in accordance with the Implementation Agreement and First Convertible Note, the balance of the First Convertible Note:

(a) must be repaid in cash no later than 18 months from the Advance Date with interest - that date has passed, so Treasure Wheel has a right to require immediate repayment of the First Convertible Note; or
(b) be converted progressively at $0.015 per Ordinary Share, to the extent it is able to under the Corporations Act without shareholder approval (e.g. in accordance with the creep provisions allowing movement in voting power of no more than 3% in any six month period).

If any amount of the First Convertible Note is not converted within 24 months of the Advance Date (which will be on 9 November 2016), Treasure Wheel may give notice to the Company that the amount of the First Convertible Note not yet converted, is to be repaid in cash within 6 months of such notice.

If Shareholder approval is not obtained for Resolution 7, the Company may be unable to raise further funds to participate in the growth of its investment in Utilitas and it will be forced to seek other ways of complimenting its current asset portfolio. This results from tight capital market conditions and the current low liquidity levels in the Company's Shares.

12. Directors' Recommendation

In light of the above, the Directors (with Anthony Chan and Daniel Chan abstaining) are unanimously of the view that the Debt Conversion and issue of the Second Convertible Note is reasonable in the circumstances and on equal or better terms than if Company and Treasure Wheel were dealing at arm's length.

The Directors (with Anthony Chan and Daniel Chan abstaining) unanimously recommend that Shareholders vote in favour of Resolutions 6 and 7. The Chairman intends to vote all available proxies in favour of this Resolutions 6 and 7.

13. Regulatory requirements applying to Resolutions 6 and 7

13.1 ASX Listing Rules

Resolutions 6 and 7 seeks Shareholder approval in order to comply with the requirements of Listing Rule 10.11.

Listing Rule 10.11 provides that the Company must not issue or agree to issue equity securities to a related party unless the issue has been approved by holders of ordinary

securities. If approval is given by Shareholders under Listing Rule 10.11, separate Shareholder approval is not required under Listing Rule 7.1.

Under Resolutions 6 and 7, the Company seeks approval from Shareholders for:

(a) Resolution 6 : the issue of Shares ( Conversion Shares ) to Treasure Wheel on conversion of the First Convertible Note; and
(b) Resolution 7 : the issue of the Second Convertible Note to Treasure Wheel and the issue to Treasure Wheel of Shares upon conversion of the Second Convertible Note, and

Treasure Wheel is a related party of the Company through Anthony Chan and Daniel Chan.

In compliance with the information requirements of Listing Rule 10.13, Shareholders are advised of the following information in relation to Resolutions 6 and 7:

Resolution 6: First Convertible Note

(c) the Conversion Shares are to be issued to Treasure Wheel;
(d) the maximum number of Conversion Shares to be issued to Treasure Wheel is 133,333,333 (increasing the Shares it holds from 531,906,361 to 665,239,964 Shares);
(e) the Conversion Shares will be issued within one month after date of the Meeting;
(f) the Conversion Shares will be issued at a price of $0.015 per Share;
(g) the Conversion Shares will rank equally with the Company's currently issued Shares; (h) a voting exclusion statement for Resolution 6 is included in the Notice preceding these Explanatory Notes; and
(i) no cash funds will be raised from the issue of the Conversion Shares.

Resolution 7: Second Convertible Note

(j) The Company's Shares closed at $0.005 on the trading day preceding the issue of this Notice. By way of example, should the conversion price be:
(i) $0.0128, the Second Convertible Note may be converted into 148,437,500 Shares, representing voting power of 64.38% in the Company as at the date of conversion (assuming Resolution 6 is also approved);
(ii) $0.01, the Second Convertible Note may be converted into 190,000,000 Shares, representing voting power of 65.52% in the Company as at the date of conversion (assuming Resolution 6 is also approved);
(iii) $0.006, the Second Convertible Note may be converted into 316,666,667 Shares, representing voting power of 68.57% in the Company as at the date of conversion (assuming Resolution 6 is also approved);
(iv) $0.002, the Second Convertible Note may be converted into 950,000,000 Shares, representing voting power of 78.21% in the Company as at the date of conversion (assuming Resolution 6 is also approved); or
(v) $0.001, the Second Convertible Note may be converted into 1,900,000,000 Shares, representing voting power of 85.07% in the Company as at the date of conversion (assuming Resolution 6 is also approved);

Paragraph (i) is the Preferred Fair Value per Share of the Independent Expert immediately before the exercise of the Second Convertible Note.

Paragraph (iii) is the 10 way VWAP up to 14 October 2016.

The remaining prices are merely arbitrarily selected prices to illustrate the effect of price movements on the numbers of Shares into which the Second Convertible Note may convert. The lowest price at which it may convert is assumed to be $0.001 and if the price is lower, further approval for the conversion will be sought from Shareholders.

(k) the Second Convertible Note and Shares into which it may be converted, are to be issued to Treasure Wheel;
(l) only one Second Convertible Note is being issued; the number of Shares that will be issued on full or part conversion of the Second Convertible Note depends on the VWAP price, as is illustrated by the examples set out in paragraph (a) above, but for the purposes of this Resolution, a lowest conversion price of $0.001 is assumed;
(m) the Second Convertible Note will be issued within one month after date of the Meeting; the Shares into which the Second Convertible Note may be converted may be issued in one or more tranches up to the Maturity Date;
(n) the Second Convertible Note has an issue price of $1,900,000 and the issue price of the Shares to be issued on its conversion will be determined in accordance with the VWAP and examples set out in paragraph (j) above. The Preferred Fair Value per Share adopted by the Independent Expert is $0.028, but for the purposes of this Resolution, an arbitrary, illustrative lowest possible conversion price of $0.001 is assumed;
(o) the Shares issued on conversion of the Second Convertible Note will rank equally with the Company's currently issued Shares; and
(p) $1,900,000 already advanced by unsecured loan funds will be applied as Principal Money for the Second Convertible Note and no cash will be raised on the issue of Shares upon conversion of the Second Convertible Note, as the issue price of such Shares will reduce the outstanding Principal Money. If the Second Convertible Note is not issued, the funds advanced pursuant to early payment of the Principal Money for the note is repayable by the Company on demand.

13.2 Corporations Act - Takeovers issues

Section 606(1) of the Corporations Act provides that a person must not (without an available exemption under the Corporations Act) acquire a relevant interest in issued voting shares of a listed company if the person acquiring the interest does so through a transaction in relation to the securities entered into by or on behalf of the person and, because of the transaction, that person’s or someone else’s voting power in the listed company increases:

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

Under section 608(1) of the Corporations Act, a person has a relevant interest in securities if they are the holder of the securities, have power to exercise, or control the exercise of, a right to vote attached to the securities or have power to dispose of, or control the exercise of a power to dispose of, the securities. It does not matter how remote the relevant interest is, or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

An exemption applicable to the issue of any Shares upon conversion of the First Convertible Note and the Second Convertible Note is available under item 7 of section 611 of the Corporations Act.

This section broadly provides that an acquisition approved previously by a resolution passed at a general meeting of the company in which the acquisition is made is exempt from the prohibition in section 606(1), if:

(a) no votes are cast in favour of the resolution by:
(i) the person proposing to make the acquisition and their associates; or
(ii) the persons (if any) from whom the acquisition is to be made and their associates; and
(b) the members of the Company were given all information known to the person proposing to make the acquisition or their associates, or known to the Company, that was material to the decision on how to vote on the resolution, including:
(i) the identity of the person proposing to make the acquisition and their associates;
(ii) the maximum extent of the increase in that person's voting power in the company that would result from the acquisition;
(iii) the voting power that person would have as a result of the acquisition;
(iv) the maximum extent of the increase in the voting power of each of that person's associates that would result from the acquisition; and
(v) the voting power that each of that person's associates would have as a result of the acquisition.

The voting power of a person in a body corporate is determined in accordance with section 610 of the Corporations Act. The calculation of a person’s voting power in a company involves determining the voting shares in the company in which the person, and the person’s associates, have a relevant interest.

An “associate” of a company includes (among others):

(a) a body corporate that controls the company or a body corporate controlled by the company;
(b) a person with whom the company has, or proposes to enter into, a relevant agreement for the purposes of controlling or influencing the composition of the company’s board or the conduct of the company’s affairs; and
(c) a person who is acting or proposing to act in concert in relation to the company’s affairs.

This Notice of Meeting includes a voting prohibition statement restricting Treasure Wheel and each of its associates from voting on Resolutions 6 and 7.

Regulatory information for Shareholders relating to section 611 Item 7

In accordance with the provisions and requirements of section 611 item 7, as well as ASIC Regulatory Guide 74 ( Acquisitions Approved by Members ), the Company is required to disclose to Shareholders all information known to Treasure Wheel or its associates, or to the Company, that is material to their decision on how to vote on Resolutions 6 and 7, including:

(a) the identity of Treasure Wheel and its associates - Treasure Wheel is the Company's largest Shareholder, with a holding of approximately 54.16% of the Shares. The holding company of Treasure Wheel is Loyal Strategic. Anthony Chan, who is a Director, is a director and shareholder of Loyal Strategic and a director of Treasure Wheel. Daniel Chan, who is a Director, is also a director of Loyal Strategic;
(b) the maximum extent of the increase in Treasure Wheel's and its associates' voting power in the Company that would result from the conversion of:
(i) the First Convertible Note - an increase from approximately 54.16% to approximately 59.64%, being an increase of 5.4%; and
(ii) the Second Convertible Note - (assuming prior conversion of the First Convertible Note) - an increase from approximately 59.64% to a maximum of approximately 85%, being an increase of 25.36%;
(c) the maximum number of shares that will be issued to and held by Treasure Wheel would have as a result of the conversion of the:
(i) First Convertible Note - 133,333,333 Shares (increasing the Shares Treasure Wheel holds from 531,906,361 to 665,239,964 Shares); and
(ii) Second Convertible Note (assuming prior conversion of the First Convertible Note) - 1,900,000,000 Shares (increasing the Shares Treasure Wheel holds from 665,239,964 to a maximum of 2,565,239,964 Shares, representing voting power of 85.07% in the Company);
(d) details of the terms of any agreement between Treasure Wheel and the Company (or any of their respective associates) that is conditional on (or directly or indirectly depends on) the approval of Resolution 6 and 7 - The convertible Note Deed for the issue of and subscription by Treasure Wheel for the Second Convertible Note is conditional upon the approval of Resolutions 6 and 7;
(e) a statement of Treasure Wheel's intentions regarding the future of the Company if Shareholders approve Resolutions 6 and 7 and, in particular:
(i) any intention to change the business of any member of the Group - at the date of this document, Treasure Wheel does not have any such intention, other than to support the Company's investment in Utilitas and ongoing maintenance and leveraging of its other assets;
(ii) any intention to inject further capital into any member of the Group - at the date of this document, Treasure Wheel does not have any definite such intention, although it has provided a letter of support undertaking to provide financial support, to enable the Company to continue operations, for at least twelve months from the date of the Annual Report;
(iii) the future employment of present employees of any member of the Group - at the date of this document, Treasure Wheel does not have any intention to increase or decrease the number of employees of the Company or any other member of the Group;
(iv) any proposal where assets will be transferred between any member of the Group and Treasure Wheel or their respective associates - at the date of this document, Treasure Wheel does not have any such proposal; and
(v) any intention to otherwise re-deploy the fixed assets of any member of the Group - at the date of this document, Treasure Wheel does not have any such intention;

(f) any intention of Treasure Wheel to significantly change the financial or dividend distribution policies of any member of the Group - at the date of this document, Treasure Wheel does not have any such intention;
(g) the personal interests that any Director or his associates has in the Debt Conversion and the issue of the Second Convertible Note - as stated above, Treasure Wheel and its associates currently hold approximately 54.16% of the Shares and voting power of the Company. Further, Anthony Chan and Daniel Chan, each of whom are Directors, are directors of Loyal Strategic which is the parent company of Treasure Wheel and Anthony Chan is a shareholder of Loyal Strategic;
(h) reason for the issue of securities to Treasure Wheel under :
(i) Resolution 6 - repayment of the $2 million loan made by Treasure Wheel to the Company represented by the First Convertible Note; and
(ii) Resolution 7 - such Shares will be issued if all or part of the Second Convertible Note is converted and such conversion will be in full or partial repayment of the Second Convertible Note;
(i) Recommendations of Directors in relation to Resolutions 6 and 7: Each Director, other than Anthony Chan and Daniel Chan, who make no recommendation because of their interests in Strategic and Treasure Wheel, recommends that Shareholders vote in favour of Resolutions 6 and 7;
(j) An analysis of whether the proposal is fair and reasonable when considered in the context of the interests of the Shareholders other than those involved in the proposed allotment or purchase or associated with such persons.

In accordance with ASIC Regulatory Guide 74, the Company commissioned RSM Australia Pty Ltd to prepare an Independent Expert’s Report to assess whether:

(i) the conversion of the First Convertible Note as proposed;
(ii) the issue of the Second Convertible Note and the issue of Shares upon its conversion,

are fair and reasonable to Shareholders not associated with Treasure Wheel. A summary of the conclusions of the Independent Expert are set out on pages 20-20 above. A copy of the Independent Expert’s Report is contained in Attachment A.

Neither the Company nor the Directors are aware of any additional information not set out in this Explanatory Statement that would be relevant to Shareholders in deciding how to vote on the Resolutions, other than as set out in this Notice of Meeting.

13.3 Corporations Act - Related Party Issues

Chapter 2E

Resolutions 6 and 7 also seek Shareholder approval in order to comply with the requirements of Chapter 2E of the Corporations Act. Under section 208 of the Corporations Act, for a public company to give a financial benefit to a related party of the public company, the public company must:

(a) obtain the approval of its members in the way set out in sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months after the approval,

unless the giving of the benefit falls within an exception set out in sections 210 to 216 of the Corporations Act. No such exceptions apply in this case.

In compliance with the information requirements of sections 217 to 227 of the Corporations Act, Shareholders are advised of the following information:

(c) Relevant relationship - The Shares to be issued pursuant to Resolution 6, the Second Convertible Note pursuant to Resolution 7 and the Shares that may be issued on its conversion, will be issued to Treasure Wheel. Anthony Chan is a director and shareholder of Loyal Strategic, the holding company of Treasure Wheel. Daniel Chan is also a director of Loyal Strategic. As a result, ., Treasure Wheel, holder of the First Convertible Note and to whom it proposed to issue the Second Convertible Note, as well as Loyal Strategic, Anthony Chan and Daniel Chan stand to benefit from the Proposed Transaction and are related parties of the Company. .
(d) Maximum number of securities - The maximum number of securities that may be acquired by Treasure Wheel under Resolutions 6 and 7, is:
(i) Resolution 6: 133,333,333 Shares; and
(ii) Resolution 7: 1,900,000,000, based on the assumed lowest possible issue price of the Shares as set out in paragraph 13.1(j).
(e) Issue price - The issue price of the securities that may be acquired by Treasure Wheel under Resolutions 6 and 7, is:
(i) Resolution 6 - First Convertible Note: $0.015 per Share;
(ii) Resolution 7 - Second Convertible Note: the issue price depends on the VWAP of the Company's Shares in the 10 trading days preceding conversion. Using the Preferred Fair Value of Shares adopted by the Independent Expert, the issue price is assumed to be $0.0128 per Share.

The Company's Shares closed at $0.007 on the trading day preceding the issue of this Notice. By way of example, should the conversion price be:

(A) $0.0128, the Second Convertible Note may be converted into 148,437,500 Shares representing voting power of 64.38% in the Company as at the date of conversion (assuming Resolution 6 is also approved);
(B) $0.01, the Second Convertible Note may be converted into 190,000,000 Shares representing voting power of 65.52% in the Company as at the date of conversion (assuming Resolution 6 is also approved);
(C) $0.006, the Second Convertible Note may be converted into 316,666,667 Shares representing voting power of 68.57% in the Company as at the date of conversion (assuming Resolution 6 is also approved);
(D) $0.002, the Second Convertible Note may be converted into 950,000,000 Shares, representing voting power of 78.21% in the Company as at the date of conversion (assuming Resolution 6 is also approved); or
(E) $0.001, the Second Convertible Note may be converted into 1,900,000,000 Shares, representing voting power of 85.07% in the

Company as at the date of conversion (assuming Resolution 6 is also approved);

Paragraph (A) is the Preferred Fair Value per Share of the Independent Expert immediately before the exercise of the Second Convertible Note.

Paragraph (C) is the 10 way VWAP of the Company's Share up to 14 October 2016.

(f) Date of Issue:

Resolution 6: First Convertible Note

The Conversion Shares issued on Conversion of the First Convertible Note will be issued within one month after date of the Meeting.

Resolution 7: Second Convertible Note

If Resolutions 6 and 7 are approved, the Second Convertible Note will be issued within 1 month of the Meeting. Shares may be issued on conversion of the Second Convertible Note at any time before its matures.

(g) Terms of any loan - The terms of the loan represented by the First Convertible Note are summarised above and in relation to the Second Convertible Note, paragraph 7.2.
(h) Voting exclusion statement - A voting exclusion statement for each of Resolutions 6 and 7 is included in the Notice preceding these Explanatory Notes.
(i) Valuation of securities - The value of, and pricing methodology in relation to, the securities issued and to be issued pursuant to Resolutions 6 and 7 are set out at pages 16-18 of the Independent Expert Report.
(j) Relevant interests - The relevant interests of Treasure Wheel are set out in paragraph 13.2.
(k) Remuneration - The remuneration and emoluments from the Company to Treasure Wheel and its associates (Anthony Chan and Daniel Chan) for the previous financial year and the proposed remuneration and emoluments from the Company to Chan for the current financial year are set out below:

Current Financial Year	Previous Financial Year
Anthony Chan - $30,000 Daniel Chan - $20,000	Anthony Chan - $30,000 Daniel Chan - $20,000

(l) Effect of the issue of the securities - The effect of the issue of the securities under Resolutions 6 and 7 is set out in paragraphs 13.4 to 13.6.
(m) Purpose of issue of securities pursuant to Resolutions 6 and 7 - See paragraphs 6 and 7.

13.4 Effect on the Company's capital structure:

The Company's capital structure as at the date of this Notice and the impact of issues of securities pursuant to Resolutions 6 and 7, is set out in the table below:

Securities	Currently on issue	Resolution 6 - Conversion of First Convertible Note	Resolution 7 - Conversion of Second Convertible Note
Shares	982,051,715	1,115,385,048	3,015,385,048*
Convertible Notes	1	1	0

*Assuming lowest possible conversion price

13.5 Dilutionary Impact

If this Resolutions 6 and 7 are approved by Shareholders, the dilutionary impact on the holdings of existing substantial shareholders, is set out below:

Shareholder	No. of Shares	% Voting power	Resolution 6 - Conversion of First Convertible Note	% Voting Power	Resolution 7 - Conversion of Second Convertible Note at 10 day VWAP to 14/10/16**	% Voting Power	Resolution 7 - Conversion of Second Convertible Note at lowest possible price	% Voting Power
	(currently	(currentl y)
Treasure Wheel Global Limited and associates*	531,906,361	54.16%	665,239,694	59.64%	981,906,361	68.57%	2,565,239,694	85.07%
Kam’s Brother Holdings Limited*	128,093,899	13.04%	128,093,899	11.48%	128,093,899	8.94%	128,093,899	4.25%
Gregory Alexander John Baynton*	101,584,899	10.34%	101,584,899	9.11%	101,584,899	7.09%	101,584,899	3.37%
Other Shareholders*/	220,466,556	22.45%	220,466,556	19.77%	220,466,556	15.40%	220,466,556	7.32%
TOTAL	982,051,715	100%	1,115,385,048	100%	1,432,051,715	100.00%	3,015,385,048	100.00%

* Substantial Shareholders

** $0.006

** Illustratively, the lowest possible conversion price of $0.001 .

This table shows that non-associated shareholders of Coalbank will be diluted from 45.84% before conversion of the First Convertible Note to 40.36% upon its conversion and to 31.43% upon conversion of the Second Convertible Note at the 10 day VWAP up to 14 October 2016. Assuming the lowest possible conversion price, non-associated shareholders are diluted to 15%.

13.6 Effect on the Company's cash and debt

The Company's debt will be reduced by $2 million if Resolution 6 is approved.

The Company's current debt will be reduced and its non-current debt will be increased $1.9 million if Resolution 7 is passed.

14. Definitions

In these Explanatory Notes:

Anthony Chan means Mr Anthony Wai-Lun Chan.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited ACN 008 624 691 and includes any successor body.

ASX Listing Rules or Listing Rules means the listing rules of the ASX

Board means the board of Directors.

Closely Related Party (as defined in the Corporations Act) of a member of the Key Management Personnel for an entity means:

(a) a spouse or child of the member; or
(b) a child of the member’s spouse; or
(c) a dependant of the member or the member’s spouse; or
(d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity; or
(e) a company the member controls; or
(f) a person prescribed by the regulations made under the Corporations Act.

Constitution means the constitution of the Company.

Conversion Shares are the Shares to be issued to Treasure Wheel pursuant to Resolution 6.

Corporations Act means the Corporations Act 2001 (Cth).

Company means COALBANK Limited ACN 075 877 075.

Daniel Chan means Mr Daniel Kin-Wah Chan.

Directors means the directors of the Company.

First Convertible Note means the convertible note issued by the Company pursuant to the Loan.

Group means the Company and its related bodies corporate.

Key Management Personnel has the definition given in the accounting standards as those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly and indirectly, including any director (whether executive or otherwise) of that entity.

Implementation Agreement has the meaning given in the notice of extraordinary general meeting of the Company dated 16 September 2013.

Independent Expert means RSM Corporate Australia Pty Ltd ABN 82 050 508 024 AFSL 255 847.

Listing Rule means the listing rules of ASX Limited.

Loan has the meaning given in the notice of extraordinary general meeting of the Company dated 16 September 2013.

Loyal Strategic means Loyal Strategic Investment Ltd.

Meeting means the annual general meeting convened pursuant to this document.

Proposed Transaction means Resolutions 6 and 7.

Preferred Value means the preferred fair value per Share adopted by the Independent Expert and set out in the IER.

Proxy Form means a proxy form accompanying this document.

Resolution means the resolutions in the Notice of Meeting.

RG means ASIC Regulatory Guide.

Second Convertible Note means the convertible note the Company proposes to issue pursuant to Resolution 7, having the terms and conditions set out in paragraph 7.2.

Shareholder means a holder of Shares.

Shares means ordinary fully paid shares in the issued capital of the Company.

Treasure Wheel means Treasure Wheel Global Limited, a company registered in the British Virgin Islands, company number 1773613.

VWAP means volume weighted average price.

Annexure A - Auditor Nomination

ANNEXURE A

The Company Secretary Coalbank Limited Level 16, 340 Queen Street, Brisbane Qld 4000

Dear Sirs

NOMINATION OF AUDITOR

For the purposes of section 328B(1) of the Corporations Act 2001 (Cth) ( Corporations Act ), I, Leni Pia Stanley, being a member of Coalbank Limited ACN 075 877 075 ( Company ), nominate RSM Australia Partners of Level 2, 370 Queen Street, Brisbane QLD 4000 for appointment as auditor of the Company at the Annual General Meeting of the Company convened for 11am AEST on 30 November 2016 (or any adjournment thereof).

Please distribute copies of this notice of nomination as required by section 328B(3) of the Corporations Act.

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Leni Pia Stanley 19 October 2016

JUNCFKJY3S

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COALBANK LIMITED

Financial Services Guide and Independent Expert’s Report

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October 2016

FINANCIAL SERVICES GUIDE

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Contact Details

You may contact us using the details set out at the top of our letterhead on page 3 of the Independent Expert’s Report.

1. Introduction ............................................................................................................................ 3
2. Summary and Conclusion ...................................................................................................... 4
3. Summary of the Proposed Transaction .................................................................................. 8
4. Purpose of this Report .......................................................................................................... 10
5. Profile of Coalbank ............................................................................................................... 12
7. Valuation of Coalbank .......................................................................................................... 19
8. Is the Proposed Transaction Fair .......................................................................................... 30
9. Is the Proposed Transaction Reasonable ............................................................................. 31
APPENDICES ............................................................................................................................... 35
APPENDIX 1 – Declarations and Disclosures ............................................................................... 36
APPENDIX 2 – Sources of Information .......................................................................................... 37
APPENDIX 3 – Industry Overview ................................................................................................. 38
APPENDIX 4 – Glossary of Terms and Abbreviations ................................................................... 39
APPENDIX 5 – Independent Technical Specialist Report of the Exploration Tenements held by
Coalbank Limited ........................................................................................................................... 41

Direct Line: (03) 9286 8167 Email: [email protected]

18 October 2016

The Directors Coalbank Limited Level 16, 344 Queens Street Brisbane QLD 40000

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Dear Directors

INDEPENDENT EXPERT’S REPORT

1. Introduction

1.1 This Independent Expert’s Report (the “Report” or “IER”) has been prepared to accompany the Notice of General Meeting and Explanatory Statement (“NOM”) to shareholders for the Annual General Meeting of Coalbank Limited (“Coalbank” or “the Company”) to be held on or about 12 November 2016 at which shareholder approval will be sought for two resolutions relating to the issue of shares and the conversion of an unsecured loan.
1.2 The resolutions relevant to the Proposed Transaction for shareholder approval are set out in the NOM and are listed below:

Resolution 6: Approval of conversion of Convertible Note

To consider and, if thought fit, pass, with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Section 611 Item 7 and Chapter 2E of the Corporations Act, Listing Rule 10.11 and pursuant to the Implementation Agreement, and for all other purposes, Shareholders approve the conversion of the First Convertible Note issued to Treasure Wheel (having a principal outstanding of $2,000,000) into 133,333,333 Shares at an issue price of 1.5 cents per share and the issue of those Shares to Treasure Wheel on the terms set out in the Explanatory Note.”

Resolution 7: Approval of the conversion of debt to a convertible note

To consider and, if thought fit, pass, with or without amendment, the following resolution as an ordinary resolution:

(a) the issue of the Second Convertible Note to Treasure Wheel at an issue price of $1,900,000 and convertible into Shares on the terms and conditions set out in the Explanatory Notes (and convertible into a maximum of 1,900,000,000 Shares representing a maximum relevant interest in the Company of up to 85.07%); and

(b) the issue of Shares upon conversion of the Second Convertible Note into shares.

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RSM Corporate Australia Pty Ltd is beneficially owned by the Directors of RSM Australia Pty Ltd. RSM Australia Pty Ltd is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

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1. Introduction (Cont.)

1.3 The Directors of Coalbank have requested RSM Corporate Australia Pty Ltd (“RSM”), being independent and qualified for the purpose, to express an opinion as to whether Resolution 6 and Resolution 7 (“the Proposed Transaction”), are fair and reasonable to Coalbank shareholders not associated with the Proposed Transaction (“the Non-Associated Shareholders” or “Shareholders”). We have had regard to Regulatory Guide 111 Content of Expert Reports (“RG 111”), in our assessment of the fairness and reasonableness of the Proposed Transaction.
1.4 As set out above, the approval of Resolution 7 is conditional on Shareholders approving Resolution 6, however, the approval of Resolution 6 is not conditional on the approval of Resolution 7. We have therefore assessed whether Resolution 6 is fair and reasonable to Non-Associated Shareholders, and also assessed whether Resolutions 6 and 7 are fair and reasonable to Non-Associated Shareholders through evaluating whether the Proposed Transaction is, as a whole, fair and reasonable to Non-Associated Shareholders.
1.5 The ultimate decision whether to approve the Proposed Transaction should be based on each Shareholder’s assessment of their circumstances, including their risk profile, liquidity preference, tax position and expectations as to value and future market conditions. If in doubt about the Proposed Transaction, or matters dealt with in this Report, Shareholders should seek independent professional advice.

2. Summary and Conclusion

Resolution 6

2.1 In our opinion, and for the reasons set out in Sections 8 and 9 of this Report, for the purposes of Section 611, Item 7 of the Corporations Act 2001, Resolution 6 is not fair but reasonable for the Non-Associated Shareholders of Coalbank.

Fairness

2.2 In assessing the fairness of Resolution 6 we have valued a share in Coalbank prior to the approval of Resolution 6, and after the approval of Resolution 6, as set out in the table below.

	Low $	High $	Preferred $
Fair Value per share prior to Resolution 6 (on a controlling basis) $0.0087 $0.0163			$0.0128
Fair Value per share after the approval of Resolution 6 (on a non-controlling basis)	$0.0070	$0.0124	$0.0098

Table 1 – Valuation Summary of Resolution 6

2.3 In accordance with RG111, we have assessed the value of a share in Coalbank on a 100% controlling basis prior to the approval of Resolution 6, and then on a minority interest basis after the approval of Resolution 6 to account for the expected dilution of Non-Associated Shareholders’ interest in Coalbank as a result of the issue of shares to convert the First Convertible Note. We note, however, that Treasure Wheel Global Limited (“Treasure Wheel”), currently holds a 54.16% interest in Coalbank and, therefore, can already be considered to hold a controlling interest prior to the Proposed Transaction.
2.4 The above comparison is depicted graphically in the chart below.

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Fair Value per share prior to Resolution 6 (on a controlling basis)
Fair Value per share after the approval of Resolution 6 (on a non-controlling
basis)
$0.000 $0.002 $0.004 $0.006 $0.008 $0.010 $0.012 $0.014 $0.016 $0.018
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Chart 1 – Valuation Summary of Resolution 6

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2. Summary and Conclusion (Cont.)

2.5 In our opinion, as the Fair Value of a Coalbank share at the preferred level in the event Resolution 6 is approved, is less than the Fair Value of a Coalbank share at the preferred level prior to the approval of Resolution 6, we consider Resolution 6 to be not fair to the Non-Associated Shareholders of Coalbank.

Reasonableness

2.6 RG 111 establishes that an offer is reasonable if it is fair. It might also be reasonable if, despite not being fair, there are sufficient reasons for the security holders to accept the offer in the absence of any higher bid.
2.7 In our assessment of whether Resolution 6 is reasonable, we have given consideration, in Section 9 of the Report, to the future prospects of Coalbank if Resolution 6 does not proceed, the advantages and disadvantages to the Non-Associated Shareholders as a consequence of Resolution 6 proceeding, and alternative offers and sources of funds.
2.8 As at 30 June 2016, the Company disclosed a cash position of $932,756. If Resolution 6 is not successful, Coalbank will be required to pursue alternative investment proposals and raise funds in the short to medium term to fund ongoing operations, as well as to repay the First Convertible Note and the unsecured loan to Treasure Wheel. Treasure Wheel is a company associated with the Company Chairman, Anthony Chan, and another Director, Daniel Chan.
2.9 The Company has yet to generate operating revenue. Coalbank’s audited financial statements for the year ended 30 June 2016 included an emphasis of matter in the independent auditor’s report, that stated that Coalbank’s operations for the 2016 financial year indicated that the ability of the Company to continue as a going concern is dependent on the future successful raising of necessary funding through equity, reliance on the financial support of Treasure Wheel, and the conversion of the First Convertible Note in accordance with Resolution 6.
2.10 In the event that Coalbank is unable to raise sufficient funds in the short to medium term, the Company may not be able to continue as a going concern.
2.11 In our opinion, the key advantages of Resolution 6 are:
the conversion of the First Convertible Note will fully extinguish the $2 million loan payable. The First Convertible Note is repayable 18 months from the Advance Date (13 November 2013), which means the Note is repayable in full, unless converted to equity. Coalbank does not currently have sufficient cash to repay the loan; and
the fixed conversion price of the First Convertible Note is at 1.5 cents per share which is higher than Coalbank’s current share price of circa 0.5 cents as at the date of this Report, the conversion of the First Convertible Note is, therefore, less dilutive than if the conversion were to occur at the current share price.
2.12 The key disadvantages of Resolution 6 are:
Resolution 6 is not fair ;
Non-Associated Shareholders’ interest in Coalbank will be diluted from 45.84% to 40.36% on conversion of the First Convertible Note;
the dilution of Non-Associated Shareholders’ interests reduces the ability of existing shareholders to influence the strategic direction of the Company, including acceptance or rejection of takeover or merger proposals; and
notwithstanding the historically low liquidity of Coalbank’s shares, the increase in voting power of Treasury Wheel may further reduce the liquidity of Coalbank’s shares.
2.13 If Resolution 6 is not approved, the First Convertible Note is repayable on demand as is the unsecured loan from Treasure Wheel. Coalbank does not currently have the funds available to repay these amounts. We have been advised that the Board of Directors has sought alternative sources of funds but has not received any alternative funding offers. The Board has assessed that in current market conditions, alternative offers of funding are unlikely.
2.14 We are not aware of any alternative proposals at this time that would offer the Non-Associated Shareholders a premium over the terms offered by Resolution 6.

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2. Summary and Conclusion (Cont.)

2.15 We have also considered the VWAP of Coalbank’s share price and volumes traded in the period prior to, and after the announcement of the Proposed Transaction on 15 July 2016, in our assessment of the market’s response to the announcement. We note that the volume of shares traded was very low in the period prior to the Proposed Transaction, but the volume of shares traded after the announcement of the Proposed Transaction increased significantly.
2.16 The VWAP of $0.0052, in the period after the announcement from 15 July 2016 to 17 October 2016, increased by $0.0040 above the VWAP of $0.0012 (an increase of 333%), disclosed for the 60 days prior to the announcement of the Proposed Transaction. We consider that the market has reacted favourably to the Proposed Transaction.
2.17 In the absence of any other relevant information and/or a superior offer, for the purposes of Section 611, Item 7 of the Corporations Act 2001, we consider that Resolution 6 is reasonable for the Non-Associated Shareholders of Coalbank.

Resolution 7

2.18 In our opinion, and for the reasons set out in Sections 8 and 9 of this Report, for the purposes of Section 611, Item 7 of the Corporations Act 2001, Resolution 7 (including the approval of Resolution 6), is not fair but reasonable for the Non-Associated Shareholders of Coalbank.

Fairness

2.19 The approval of Resolution 7 is conditional on the approval of Resolution 6. In assessing the fairness of Resolution 7, we have valued a share in Coalbank prior to both Resolutions 6 and 7, and after the approval of Resolution 7 (inclusive of Resolution 6), as set out in the table below.

	Low $	High $	Preferred $
Fair Value per share prior to Resolutions 6 and 7 (on a controlling basis) $0.0087 $0.0163			$0.0128
Fair Value per share on issue of the shares after the approval of Resolutions 6 and 7, and as if both the First Convertible Note and Second Convertible Note are converted to shares following Shareholder approval (on a non-controlling basis)	$0.0062	$0.0103	$0.0084

Table 2 – Valuation Summary of Resolution 7

2.20 In accordance with RG111, we have assessed the value of a share in Coalbank on a 100% controlling basis prior to Resolutions 6 and 7, and then on a minority interest basis after the approval of Resolutions 6 and 7, and as if both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval . We note, however that Treasure Wheel currently holds a 54.16% interest in Coalbank and, therefore, can already be considered to hold a controlling interest prior to the Proposed Transaction.
2.21 The above comparison is depicted graphically in the chart below.

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Fair Value per share prior to Resolutions 6 and 7 (on a controlling basis)
Fair Value per share on issue of the shares after the approval of Resolutions 6
and 7, and as if both the First Convertible Note and Second Convertible Note
are converted to shares following Shareholder approval (on a non-controlling
basis)
$0.000 $0.002 $0.004 $0.006 $0.008 $0.010 $0.012 $0.014 $0.016 $0.018
----- End of picture text -----

Chart 2 – Valuation Summary of Resolution 7

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2. Summary and Conclusion (Cont.)

2.22 In our opinion, as the Fair Value of a Coalbank share at the preferred level in the event Resolution 7 is approved and both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval, is less than the Fair Value of a Coalbank share at the preferred level prior to Resolution 7, we consider Resolution 7 to be not fair to the Non-Associated Shareholders of Coalbank.

Reasonableness

2.23 RG 111 establishes that an offer is reasonable if it is fair. It might also be reasonable if, despite not being fair, there are sufficient reasons for the security holders to accept the offer in the absence of any higher bid.
2.24 In our assessment of whether Resolution 7 is reasonable, we have given consideration, in Section 9 of the Report, to the future prospects of Coalbank if Resolution 7 does not proceed, the advantages and disadvantages to the Non-Associated Shareholders as a consequence of Resolution 7 proceeding, and alternative offers and sources of funds.
2.25 As at 30 June 2016, the Company disclosed a cash position of $932,756. If Resolution 7 is not successful, Coalbank will be required to pursue alternative investment proposals and raise funds in the short to medium term to fund ongoing operations as well as to repay the First Convertible Note and the unsecured loan to Treasure Wheel.
2.26 The Company has yet to generate operating revenue. As set out above, Coalbank’s audited financial statements for the year ended 30 June 2016 included an emphasis of matter in the independent auditor’s report, that stated that Coalbank’s operations for the 2016 financial year indicated that the ability of the Company to continue as a going concern is dependent on the future successful raising of necessary funding through equity, reliance on the financial support of Treasure Wheel, and the conversion of the First Convertible Note in accordance with Resolution 6.
2.27 In the event that Coalbank is unable to raise sufficient funds in the short to medium term, the Company may not be able to continue as a going concern.
2.28 In our opinion, the key advantages of Resolution 7 are:
the unsecured loan related to the proposed Second Convertible Note of $1.9 million was advanced to Coalbank to fund the acquisition of a 25% equity interest in Utilitas Pty Ltd (“Utilitas”) and to support the Company’s operating costs. The approval of Resolution 7 will allow the deferment of the loan payable. If Resolution 7 is not approved, the loan will be repayable on demand. Coalbank does not currently have sufficient cash to repay the loan; and
the Second Convertible Note may be redeemed or converted to shares at any time after 12 months from the issue of the Note, at the 10 day Volume Weighted Average Share Price (“VWAP”) less a discount of 8.5%, preceding a conversion notice provided by Treasure Wheel. Notwithstanding the dilution, this allows Coalbank time to seek alternative sources of funding and to delay the repayment of the unsecured loan for at least 12 months.
2.29 The key disadvantages of the Resolution 7 are:
Resolution 7 is not fair ;
Non-Associated Shareholders’ interest in Coalbank may be diluted from 45.84% to 14.93% if the Second Convertible Note is converted up to the maximum permitted number of shares contemplated under Resolution 7. Based on the conversion of the Second Convertible Note using the 10 day VWAP of $0.0056 to 17 October 2016, the last day prior to the date of this Report, Non-Associated Shareholders may be diluted from 45.84% to 30.29% after the approval of Resolution 7 and assuming the Second Convertible Note is converted to shares at a VWAP of $0.0056;
the dilution of Non-Associated Shareholders’ interests reduces the ability of existing shareholders to influence the strategic direction of the Company, including acceptance or rejection of takeover or merger proposals;
notwithstanding the historically low liquidity of Coalbank’s shares, the increase in voting power of Treasury Wheel may further reduce the liquidity of Coalbank’s shares; and
in the event the Company’s share price declines further from current prices, Non-Associated Shareholders may be further diluted in the event the Second Convertible Note is converted to shares.
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2. Summary and Conclusion (Cont.)

2.30 We have been advised that the Board of Directors has sought alternative sources of funds but has not received any alternative funding offers. The Board has assessed that in current market conditions, alternative offers of funding are unlikely.
2.31 We are not aware of any alternative proposals at this time that would offer the Non-Associated Shareholders a premium over the terms offered by the Proposed Transaction.
2.32 As set out above, the VWAP of $0.0052, in the period after the announcement from 15 July 2016 to 17 October 2016, increased by $0.0040 above the VWAP of $0.0012 (an increase of 333%), disclosed for the 60 days prior to the announcement of the Proposed Transaction. We consider that the market has reacted favourably to the Proposed Transaction.
2.33 Given the significant increase in the share price as a result of the announcement of the Proposed Transaction, we consider that there is a risk that the share price will fall to historical levels disclosed prior to the announcement in the event that the Proposed Transaction is not approved.
2.34 In the absence of any other relevant information and/or a superior offer, for the purposes of Section 611, Item 7 of the Corporations Act 2001, we consider that both Resolutions 6 and 7 are reasonable for the Non-Associated Shareholders of Coalbank.

3. Summary of the Proposed Transaction

Terms of the Proposed Transaction

3.1 The terms of the Proposed Transaction comprises the following:
the issue of 133,333,333 shares in the Company to Treasure Wheel, a company associated with the Company Chairman, Anthony Chan, and another Director, Daniel Chan, as settlement for the First Convertible Note, being a convertible note of $2 million at a conversion price of 1.5 cents per share (Resolution 6);
the conversion of unsecured loans to the Company of $1.9 million due to Treasure Wheel, into an interest bearing convertible note (the Second Convertible Note), which may be converted into shares in the Company based on the 10 day VWAP of the Company preceding the date of conversion. Conversion can only occur 12 months after the issue of the Second Convertible Note and must occur prior to the maturity date, which is 24 months after the issue of the Second Convertible Note (Resolution 7); and
Resolution 7 is conditional upon the approval of Resolution 6.

Effect of the Proposed Transaction on the capital structure of the Company

3.2 The table below summarises the capital structure of the Company prior to, and on conversion of the First Convertible Note.

	Number of shares	%
Prior to Resolution 6 Shares held by Treasure Wheel (or associates) Total shares held by Non-Associated Shareholders Total shares on issue prior to Resolution 6 After the conversion of the First Convertible Note Shares currently held by Treasure Wheel (or associates) Shares issued to Treasure Wheel upon conversion of the First Convertible Note (Resolution 6) Total shares held by Non-Associated Shareholders Total shares on issue after the conversion of the First Convertible Note	531,906,361 450,145,354	54.16% 45.84%
	982,051,715	100.00%
	531,906,361 133,333,333 450,145,354	40.36% 59.64%
	1,115,385,048	100.00%

Table 3 – Coalbank share structure prior to and after the issue of the shares following Shareholder approval of Resolution 6

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3. Summary of the Proposed Transaction (Cont.)

3.3 As set out in the table above, prior to Resolution 6, the Company has 982,051,715 fully paid ordinary shares on issue, of which a related company, Treasure Wheel, which is controlled by Mr Anthony Chan and Mr Daniel Chan, both of whom are Directors of the Company, holds a 54.16% interest (531,906,361 shares). Treasure Wheel is a wholly owned subsidiary of Loyal Strategic Investment Ltd (“Loyal Strategic”).
3.4 Prior to Resolution 6, Coalbank has the First Convertible Note, a $2 million convertible note, on issue, convertible at $0.015 per share and maturing on 13 November 2014 (the “Initial Term”). After the Initial Term of the convertible note, interest is accrued at 15% per annum, however, the financial statements for the year ended 30 June 2016 stated that Treasure Wheel, will forego the interest which would have accrued from 13 November 2014 until conversion is approved by Shareholders. Conversion at $0.015 per share for the $2 million convertible note will result in the issue of 133,333,333 shares to Treasure Wheel.
3.5 The approval of Resolution 6 will result in the dilution of Non-Associated Shareholders’ interest in Coalbank from 45.84% to 40.36%, on conversion of the First Convertible Note.
3.6 The table below summarises the capital structure of the Company prior to and on conversion of both the First Convertible Note and the Second Convertible Note.

	Number of shares	%
Prior to Resolution 7 Shares held by Treasure Wheel (or associates) Total shares held by Non-Associated Shareholders Total shares on issue prior to Resolution 7 After the conversion of the First and Second Convertible Notes Shares currently held by Treasure Wheel (or associates) Shares issued to Treasure Wheel upon conversion of the First Convertible Note (Resolution 6) Potential shares issued to Treasure Wheel upon conversion of the Second Convertible Note (Resolutions 6 and 7) Total shares held by Non-Associated Shareholders Total shares potentially on issue on issue after the conversion of the First and Second Convertible Notes	531,906,361 450,145,354	54.16% 45.84%
	982,051,715	100.00%
	531,906,361 133,333,333 370,804,059 450,145,354	69.71% 30.29%
	1,486,189,107	100.00%

Table 4 – Coalbank share structure prior to and on conversion of the Second Convertible Note

3.7 As set out in the table above, prior to Resolution 7, the Company has 982,051,715 fully paid ordinary shares on issue, Treasure Wheel, holds a 54.16% interest (531,906,361 shares).
3.8 Prior to Resolution 7, Coalbank has the First Convertible Note, a $2 million convertible note, on issue, convertible at $0.015 per share and maturing on 13 November 2014. Conversion at $0.015 per share for the $2 million convertible note will result in the issue of 133,333,333 shares to Treasure Wheel.
3.9 If Resolution 7 is approved, Treasure Wheel will initially hold a total of 665,239,694 fully paid ordinary shares in the Company, together with the Second Convertible Note.
3.10 The Second Convertible Note is convertible after 12 months using the following formula:

Number of Shares = Principal Money Outstanding ÷ (10 day VWAP × 0.915)

3.11 In the absence of other information, we have utilised the 10 day VWAP as of 17 October 2016 of $0.0056, and applied the conversion formula in our calculation of the shares to be issued to Treasure Wheel in the event the Second Convertible Note is converted to equity.
3.12 Based on the above, Treasure Wheel will be issued with 370,804,059 additional shares upon conversion, bringing the total shares held by Treasure Wheel in the event Resolution 7 is approved to 1,036,043,753.

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3. Summary of the Proposed Transaction (Cont.)

3.13 The approval of Resolution 7 may result in the dilution of Non-Associated Shareholders’ interest in Coalbank from 45.84% to 14.93% if the Second Convertible Note is converted up to the maximum number of shares permitted under the resolution. As demonstrated in the table above, if the 10 day VWAP preceding conversion of the Second Convertible Note was $0.0056, Non-Associated Shareholders’ interest in Coalbank would be diluted from 45.84% to 30.29%, in accordance with the formula set out above. The dilution of the Non-Associated Shareholders will be impacted by fluctuations in the 10 day VWAP preceding conversion of the Second Convertible Note.

4. Purpose of this Report

Corporations Act

4.1 Section 606(1) of the Corporations Act provides that, subject to limited specified exemptions, a person must not acquire a “relevant interest” in issued voting shares in a public company, if as a result of the acquisition, any person’s voting power in the company would increase from 20% or below to more than 20%, or, from a starting point that is above 20% and below 90%. In broad terms, a person has a “relevant interest” if that person holds shares or has the power to control the right to vote or dispose of shares. A person’s voting power in a company is the number of voting shares in which the person (and its associates) holds, compared with the total number of voting shares in the company
4.2 Completion of the Proposed Transaction will result in Treasure Wheel increasing its relevant interest in the Company to up to 85.07% in the event that both the First and Second Convertible Notes are converted to fully paid ordinary shares in Coalbank, and the Second Convertible Note is converted to the maximum number of shares permitted under the resolution.
4.3 Therefore, the Company will be in breach of Section 606(1) of the Act in the absence of an applicable exemption.
4.4 Section 611, Item 7 of the Corporations Act provides an exemption to the rule noted in paragraph 4.1 above. Section 611, Item 7 allows a party (and its affiliates) to acquire a relevant interest in shares that would otherwise be prohibited under Section 606(1) of the Act if the proposed acquisition is approved in advance by a resolution passed at a general meeting of the Company; and:
no votes are cast in favour of the resolution by the proposed acquirers or respective associates; and
there was full disclosure of all information that was known to the persons proposed to make the acquisition or their associates or known to the Company that was material to a decision on how to vote on the resolution.
4.5 Section 611 states that shareholders must be given all information that is material to the decision on how to vote at the meeting. RG 111 advises the commissioning of an IER in such circumstances and provides guidance on the content.

ASX Listing Rule 10.11

4.6 Coalbank is also seeking approval for the issue of shares and a convertible note to a related party, Treasure Wheel, for the purposes of Listing Rule 10.11.
4.7 Chapter 10 of the Listing Rules contains certain provisions in relation to transactions between a company and "persons in a position of influence". Listing Rule 10.11 provides that a listed entity must not issue or agree to issue equity securities to a related party, or to a person whose relationship is to the listed entity, without the approval of holders of the entity's ordinary securities unless there are applicable exceptions.
4.8 Treasure Wheel is a related party of the Company as it is owned and controlled by the Directors, Anthony Chan and Daniel Chan. None of the exceptions stated in rule 10.12 are relevant in the case of this transaction.

Basis of Evaluation

4.9 In determining whether the Proposed Transaction is "fair and reasonable" we have given regard to the views expressed by ASIC in RG 111.
4.10 RG 111 provides ASIC's views on how an expert can help security holders make informed decisions about transactions. Specifically it gives guidance to experts on how to evaluate whether or not a proposed transaction is fair and reasonable.

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4. Purpose of this Report (Cont.)

4.11 RG 111 states that the expert report should focus on:
the issues facing the security holders for whom the report is being prepared; and
the substance of the transaction rather than the legal mechanism used to achieve it.
4.12 Where an issue of shares by a company otherwise prohibited under section 606 is approved under item 7 of section 611 and the effect on the company’s shareholding is comparable to a takeover bid, RG 111 states that the transaction should be analysed as if it was a takeover bid.
4.13 RG 111 applies the “fair and reasonable” test as two distinct criteria in the circumstance of a takeover bid, stating:
a takeover offer is considered “fair” if the value of the offer price or consideration is equal to or greater than the value of the securities that are the subject of the offer; and
a takeover offer is considered “reasonable” if it is fair or, where the offer is “not fair”, it may still be “reasonable” if the expert believes that there are sufficient reasons for security holders to accept the offer.
4.14 Consistent with the guidelines in RG 111, in determining whether the Proposed Transaction is "fair and reasonable" to the Non-Associated Shareholders, the analysis undertaken is as follows:
a comparison of the Fair Value of an ordinary share in Coalbank on a 100% controlling basis prior to the approval of Resolutions 6 and 7, and then on a minority interest after the approval of Resolutions 6 and 7, and as if both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval; and
a review of other significant factors which Non-Associated Shareholders might consider prior to approving Resolution 6 and Resolution 7 (inclusive of Resolution 6).
4.15 In particular, we have considered the advantages and disadvantages of Resolution 6 and Resolution 7 in the event that Resolution 6 and Resolution 7 proceeds or does not proceed including:
the future prospects of the Company if Resolution 6 and Resolution 7 does not proceed; and
any other commercial advantages and disadvantages to the Non-Associated Shareholders as a consequence of Resolution 6 and Resolution 7 proceeding.
4.16 Our assessment of the Proposed Transaction is based on economic, market and other conditions prevailing at the date of this Report.

Approval required under Listing Rule 10.11

4.17 When analysing related party transactions, RG 111 states that where the related party transaction is one component of a broader transaction or a series of transactions involving non-related parties (such as a control transaction), the expert should carefully consider what level of analysis of the related party is required. In this consideration, the expert should bear in mind whether the report has been sought to ensure that members are provided with sufficient information to decide whether to approve giving a financial benefit to the related party as well as the broader transaction.
4.18 RG 111 applies the fair and reasonable test as two distinct criteria, stating that a proposed related party transaction is fair if the value of the financial benefit to be provided by the entity to the related party is equal to or less than the value of the consideration being provided to the entity.
4.19 A related party transaction is reasonable if it is fair. It might also be reasonable if, despite being not fair, the expert believes there are sufficient reasons for members to vote for the transaction.
4.20 RG 111.63 states that, generally an expert need only conduct one analysis of whether the transaction is fair and reasonable, even if the report has been prepared for a reason other than the transaction being a related party (e.g. if Section 611, Item 7 approval is also required).

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5. Profile of Coalbank

5.1 Coalbank is an ASX-listed exploration company focused on targeting the exploration and development of existing and new coal projects in the long term, coal procurement and trading in the short to medium term and the sale or farm-in for petroleum projects. The Company’s projects are based in Blackall, Queensland, Australia.
5.2 Coalbank has four wholly owned subsidiaries, Tambo Coal & Gas Pty Limited, Moreton Energy Pty Limited, Coalbank Qld Pty Limited and Surat Gas Pty Limited. Lodestone Coal Pty Limited was a subsidiary at 30 June 2015, but was de-registered during the year ended 30 June 2016.
5.3 The current Directors of the Company are set out below:
Mr Anthony Chan (Non-Executive Chairman);
Mr Nick Bolkus (Non-Executive Deputy Chairman);
Mr George Lam (Non-Executive Director);
Mr Daniel Chan (Non-Executive Director); and
Mr Ron Marks Non-Executive Director).
5.4 The exploration permits for coal (“EPC”) and authorities to prospect for petroleum (“ATP”) are legally held by Coalbank.
5.5 Coalbank’s current mineral tenements comprise the following:
EPC1418 Tambo East 2;
EPC1625 Alpha South West 2;
EPC1632 Tambo;
EPC1719 Barcoo River-Blackall;
EPC1993 Blackall South Corner;
ATP1072 Charleville South;
ATP1095 Augathella East; and
ATP1098 Morven South.
5.6 The EPC2239 Coal Creek renewal application was withdrawn in August 2015. EPC1414 Maranoa River, EPC1415 Warrego and EPC1417 Tambo East 1 were relinquished on 30 June 2016.
5.7 On 19 August 2016, Coalbank announced that the Company had completed a $1 million investment for 25% of the shares in Utilitas, in addition to its previous investment of $28,849. Utilitas is a Brisbane based company specialising as a biogas energy developer. Utilitas was founded in 2010 and has its own Biomethane Potential Testing Facility. The investment was funded via the $1.9 million unsecured loan from Treasure Wheel.

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5. Profile of Coalbank (Cont.)

Financial Performance

5.8 The table below sets out the financial performance of Coalbank for the years ended 30 June 2016, 30 June 2015 and 30 June 2014.

	Ref	Year ended 30-Jun-16 *Draft* $	Year ended 30-Jun-15 *Audited* $	Year ended 30-Jun-14 *Audited* $
Interest income Profit on sale of fixed asset Exploration assets written off Professional services expenses Corporate overhead expenses Depreciation expenses Directors' remuneration Impairment of available for sale financial assets Net finance expense Loss before income tax Income tax expense Net loss for the year from continuing operations Profit from discontinued operations Other comprehensive income Total comprehensive loss for the year	5.10 5.11	1,144 - (1,899,625) (330,740) (124,138) (6,691) (111,900) - -	16,889 3,182 (3,362,485) (763,364) (244,027) (7,015) (111,900) - (102,872)	16,075 - (84,000) (804,872) (233,142) (7,902) (86,788) (450,000) (299,843)
		(2,471,950) -	(4,571,592) -	(1,950,472) -
		(2,471,950)	(4,571,592)	(1,950,472)
		- -	- -	1,340,555 -
		(2,471,950)	(4,571,592)	(609,917)

Table 5 – Coalbank Financial Performance

5.9 As the Company remains in the exploration phase of its mining projects, the revenue generated by Coalbank in the three years ended 30 June 2016 primarily comprised interest income.
5.10 The Company disclosed losses from continuing operations of $2.5 million, $4.6 million and $2.0 million for the years ended 30 June 2016, 30 June 2015 and 30 June 2014, respectively.
5.11 Coalbank disclosed total comprehensive losses of $2.5 million, $4.6 million and $610,000 for the years ended 30 June 2016, 30 June 2015 and 30 June 2014, respectively. The Company disclosed profit from discontinued operations of $1.3 million for the year ended 30 June 2014, due to the disposal its wholly owned subsidiary Harvest Metals Pty Limited, along with four EPC’s comprising the Biloela South, Coalbank South and Chinchilla East Projects, to Treasure Wheel for $2 million on 20 November 2013.

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5. Profile of Coalbank (Cont.)

Financial Position

5.12 The table below sets out the financial position of Coalbank as at 30 June 2016, 30 June 2015 and 30 June 2014.

		As at 30-Jun-16	As at 30-Jun-15	As at 30-Jun-14
		*Draft*	*Audited*	*Audited*
	Ref	$	$	$
Current assets Cash and cash equivalents Trade and other receivables		932,756 116,327	233,183 20,372	142,424 167,927
Total current assets	5.14	1,049,083	253,555	310,351
Non-current assets Plant and equipment Investments Exploration and evaluation assets Other assets		5,456 28,849 15,389,119 174,796	12,147 - 17,005,387 182,296	17,225 - 19,810,991 73,000
Total non-current assets	5.15	15,598,220	17,199,830	19,901,216

Total assets		16,647,303	17,453,385	20,211,567
Current liabilities Trade and other payables Borrowings	5.14, 5.16	198,615 3,620,000	152,747 2,000,000	157,212 2,103,513
Total current liabilities		3,818,615	2,152,747	2,260,725
Non-current liabilities Other financial liabilities	5.17	1,500,000	1,500,000	1,500,000
Total non-current liabilities		1,500,000	1,500,000	1,500,000

Total liabilities	5.16	5,318,615	3,652,747	3,760,725
NET ASSETS	5.13	11,328,688	13,800,638	16,450,842
EQUITY Issued capital Reserves Accumulated losses		62,974,400 3,528,043 (55,173,755)	62,974,400 3,528,043 (52,701,805)	61,053,012 3,528,043 (48,130,213)
TOTAL EQUITY		11,328,688	13,800,638	16,450,842

Table 6 – Coalbank Financial Position

5.13 Coalbank had net assets of $11.3 million at 30 June 2016, compared to net assets of $13.8 million and $16.5 million as at 30 June 2015 and 30 June 2014, respectively.
5.14 At 30 June 2016, Coalbank disclosed a working capital deficit (current assets less current liabilities) of $2.8 million, comprising primarily cash and cash equivalents of $933,000 and borrowings of $3.6 million.
5.15 At 30 June 2016, the Company disclosed total non-current assets of $15.6 million, primarily comprising capitalised exploration and evaluation assets of $15.4 million, as well as other assets of $175,000 (representing security deposits lodged for the tenements) and investments of $28,849 (representing an investment in Utilitas).
5.16 The Company disclosed total liabilities of $5.3 million at 30 June 2016, primarily comprising current borrowings of $3.6 million and other financial liabilities of $1.5 million. Current liabilities included the First Convertible Note of $2 million and the unsecured loan from Treasure Wheel of $1.62 million. A further $280,000 of unsecured loans was received from Treasure Wheel post year end, on 15 August 2016.

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5. Profile of Coalbank (Cont.)

5.17 Non-current liabilities comprised $1.5 million received from Oliver Lennox-King, whereby Oliver Lennox-King has paid $1.5 million to Coalbank in return for a royalty of 1% of the gross value of coal sold from tenements currently held by Coalbank.

Capital Structure

5.18 As at the date of this Report, Coalbank has 982,051,715 ordinary shares on issue. The top 20 shareholders of Coalbank, representing 82.5% of total shares, are set out in the table below.

Name	Number of shares	%
Treasure Wheel Global Limited (BNP Paribas Nominees Pty Ltd) Kam's Brother Holdings Limited Ms Sihol Marito Gultom Comsec Nominees Pty Limited Group 4 Solutions Pty Ltd Leejames Nominees Pty Ltd Mr Anthony Bratton Mr Trevor Robert Learey Mr Nicholas Playford Forgan Mr Ianaki Semerdziev Ms Gayle Patric Doran Square Resources Pty Ltd State One Nominees Pty Ltd Mr John Andrew Zampaglione Campbell Marine Pty Ltd Mrs Fiona Mary Learey Bowles Mr Oliver Lennox-King Mr Craig Sexton & Mrs Loren Sexton Tre Pty Ltd Mr Gary Clive Gumpl	531,906,361 128,093,700 28,000,000 16,632,833 11,635,839 11,500,000 10,621,709 10,585,126 9,264,917 6,025,675 6,000,000 5,937,500 5,460,349 5,000,000 4,918,346 4,104,073 3,750,000 3,635,274 3,600,000 3,500,000	54.2% 13.0% 2.9% 1.7% 1.2% 1.2% 1.1% 1.1% 0.9% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4%
Other shareholders	810,171,702 171,880,013	82.5% 17.5%
Total	982,051,715	100.0%

Table 7 – Coalbank Shareholder Summary

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5. Profile of Coalbank (Cont.)

Share Price and Performance

5.19 The daily closing share price and traded volumes of Coalbank shares on the ASX for from 1 September 2015 to 17 October 2016 are set out in the chart below;

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

15-Sep-16:
Share Price ($) Coalbank Historical Share Price and Volume Response to ASX Volume traded
price query
$0.0105 disclosed 90,000,000
$0.0095 80,000,000
17-Aug-16: 84,198,440
$0.0085 shares are traded
70,000,000
(including disposals by
significant shareholders)
$0.0075
60,000,000
19-Aug-16:
$0.0065 Completion of
Utilitas acquisition 50,000,000
announced
$0.0055 16-Aug-16: 29,440,000
shares traded (including 40,000,000
disposals by significant
$0.0045 shareholder)
30,000,000
$0.0035 15-Jul-16: Proposed
Transaction announced
20,000,000
$0.0025
$0.0015 10,000,000
$0.0005 -
Coalbank Limited (ASX:CBQ) - Volume Coalbank Limited (ASX:CBQ) - Share Pricing
----- End of picture text -----

Chart 3 – Coalbank Daily Closing Share Price and Traded Volumes

(Source: Capital IQ, ASX announcements and RSM analysis)

5.20 On 15 July 2016, Coalbank announced that the Company had entered into an agreement to subscribe for shares representing a 25% interest in Utilitas for consideration of $1 million. Treasure Wheel provided the $1 million funding for the investment. The funds have been advanced as the unsecured loan, which will be converted to the Second Convertible Note in the event the Proposed Transaction is approved.
5.21 On 25 July 2016, Coalbank announced the investment in Utilitas had been delayed subject to the completion of the legal due diligence.
5.22 On 17 August 2016, Gregory Baynton, a former substantial shareholder, disposed of 72,064,899 shares.
5.23 On 19 August 2016, the Company announced it had completed the acquisition of a 25% interest in Utilitas for $1 million.
5.24 On 15 September 2016, the Company responded to the ASX’s query (regarding the increase in Coalbank’s share price from a low of $0.003 on 5 September 2016 to a high of $0.012 on 15 September, together with a significant increase in the volume of shares traded), stating that the Company was not aware of any information that it had not announced to the market which would explain the recent trading in securities.

6. Valuation Methodologies

6.1 In assessing the value of Coalbank prior to and after the approval of the relevant resolutions, we have considered a range of valuation methodologies. RG 111 proposes that it is generally appropriate for an expert to consider using the following methodologies:
the discounted cash flow (“DCF”) method and the estimated realisable value of any surplus assets;
the application of earnings multiples to the estimated future maintainable earnings or cash flows added to the estimated realisable value of any surplus assets;

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6. Valuation Methodologies (Cont.)

the amount which would be available for distribution on an orderly realisation of assets;
the quoted price for listed securities; and
any recent genuine offers received.
6.2 We consider that the valuation methodologies proposed by RG 111 can be split into three valuation methodology categories, as follows:
Market Based Methods;
Income Based Methods; and
Asset Based Methods.

Market Based Methods

6.3 Market based methods estimate the fair market value by considering the market value of a company’s securities or the market value of comparable companies. Market based methods include:
the quoted price for listed securities; and
industry specific methods.
6.4 The recent quoted price for listed securities method provides evidence of the fair market value of a company’s securities where they are publicly traded in an informed and liquid market.
6.5 Industry specific methods usually involve the use of industry rules of thumb to estimate the fair market value of a company and its securities. Generally rules of thumb provide less persuasive evidence of the fair market value of a company than other market based valuation methods because they may not account for company specific risks and factors.

Income Based Methods

6.6 Income based methods estimate value by calculating the present value of a company’s estimated future stream of earnings or cash flows. Income based methods include:
discounted cash flow methods; and
capitalisation of future maintainable earnings (“FME”).
6.7 The DCF technique has a strong theoretical basis, valuing a business on the net present value of its future cash flows. It requires an analysis of future cash flows, the capital structure and costs of capital and an assessment of the residual value or the terminal value of the company’s cash flows at the end of the forecast period. This method of valuation is appropriate when valuing companies where future cash flow projections can be made with a reasonable degree of confidence.
6.8 The capitalisation of future maintainable earnings methodology is generally considered a short form DCF, where an estimation of the FME of the business, rather than a stream of cash flows is capitalised based on an appropriate capitalisation multiple. Multiples are derived from the analysis of transactions involving comparable companies and the trading multiples of comparable companies.

Asset Based Methods

6.9 Asset based methodologies estimate the fair market value of a company’s securities based on the realisable value of its identifiable net assets. Asset based methods include:
orderly realisation of assets method;
liquidation of assets method; and
net tangible assets on a going concern basis.
6.10 The value achievable in an orderly realisation of assets is estimated by determining the net realisable value of the assets of a company which would be distributed to security holders after payment of all liabilities, including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner. This technique is particularly appropriate for businesses with relatively high asset values compared to earnings and cash flows.

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6. Valuation Methodologies (Cont.)

6.11 The liquidation of assets method is similar to the orderly realisation of assets method except the liquidation method assumes that the assets are sold in a shorter time frame, reflecting a distressed liquidation value. The liquidation of assets method will result in a value that is lower than the orderly realisation of assets method, and is appropriate for companies in financial distress or when a company is not valued on a going concern basis.
6.12 The net tangible assets on a going concern method estimates the market values of the net tangible assets of a company but unlike the orderly realisation of assets method, it does not take into account realisation costs. Asset based methods are appropriate when companies are not profitable, a significant proportion of the company’s assets are liquid, or for asset holding purposes.

Valuation of Coalbank’s exploration tenements

6.13 SRK Consulting (Australasia) Pty Ltd (“SRK”) has prepared a report providing an independent technical assessment and valuation of the exploration permits and authorities to prospect held by Coalbank. For the purposes of this Report, we have relied upon the valuation of Coalbank’s exploration permits and authorities to prospect provided by SRK in our assessment of the valuation of the Company. A copy of SRK’s report is set out in Appendix 5.

Selection of Valuation Methodologies

Valuation of Coalbank prior to the Proposed Transaction (Resolutions 6 and 7)

Net assets on a going concern basis

6.14 In valuing a share in Coalbank prior to the Proposed Transaction, we have utilised the net assets on a going concern methodology and relied upon the net book value of assets and liabilities as set out in Coalbank’s audited consolidated statement of financial position at 30 June 2016, and the valuation of Coalbank’s 100% interest in the Tambo East 2, Alpha South West, Tambo, Barcoo River-Blackall, Blackall South Corner, Charleville South, Augathella East and Morven South Projects as set out in SRK’s report (refer to Appendix 5).

Quoted Price of Listed Securities

6.15 As a secondary method of valuing a Coalbank share prior to the Proposed Transaction, we have also considered the quoted price for listed securities methodology. In accordance with RG 111, we have assessed the value of Coalbank’s shares on the basis of a 100% controlling interest.
6.16 Prices at which a company's shares have been traded on the ASX can, in the absence of low liquidity or unusual circumstances, provide an objective measure of the value of the company, excluding a premium for control.
6.17 Notwithstanding the low liquidity of Coalbank’s traded shares, we have considered the quoted market price by considering the historical VWAP of a Coalbank share and the volatility of the share price, prior to the announcement of the Proposed Transaction.

Valuation of Coalbank after the approval of the relevant resolutions

6.18 We have also selected the net assets on a going concern basis in our assessment of the value of a share in Coalbank after the approval of the relevant resolutions. Our assessment of the value of a share in Coalbank after the approval of the relevant resolutions is also based on the audited consolidated statement of financial position at 30 June 2016, and adjusted for the pro forma terms of the Proposed Transaction, as set out in paragraph 7.4.
6.19 As the approval of Resolution 6 will result in the decrease of Non-Associated Shareholders' interest in Coalbank from 45.84% to 40.36%, and the approval of Resolution 7 may result in the decrease of Non-Associated Shareholders’ interest in Coalbank from 45.84% to 14.93% (in the event the Second Convertible Note is converted up to the maximum permitted number of shares contemplated in Resolution 7), in accordance with RG 111, we have ascribed a discount for lack of control to the value of a share in Coalbank after the approval of the relevant resolutions.

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7. Valuation of Coalbank

7.1 The basis of our evaluation of “fairness” is to compare the Fair Value of a Coalbank share prior to, and after the approval of the relevant resolutions.

Valuation of a Coalbank Share Prior to the Proposed Transaction (on a controlling basis)

7.2 Our assessment of the Fair Value of a Coalbank share prior to the Proposed Transaction (on a controlling basis) is set out in the table below.

	As at 30-Jun-16 *Audited* $	Ref	Low High Preferred $ $ Unaudited Pro Forma Prior to the Proposed Transaction Assessed Value	Low High Preferred $ $ Unaudited Pro Forma Prior to the Proposed Transaction Assessed Value	Low High Preferred $ $ Unaudited Pro Forma Prior to the Proposed Transaction Assessed Value
Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Plant and equipment Investments Exploration and evaluation assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Other financial liabilities Total non-current liabilities Total liabilities NET ASSETS Number of shares on issue Assessed Value per share (controlling basis)	932,756 116,327	7.4	212,724 116,327	212,724 116,327	212,724 116,327
	1,049,083		329,051	329,051	329,051
	5,456 28,849 15,389,119 174,796	7.4 7.4 - 7.20	5,456 1,028,881 12,600,000 174,796	5,456 1,028,881 20,100,000 174,796	5,456 1,028,881 16,600,000 174,796
	15,598,220		13,809,133	21,309,133	17,809,133

	16,647,303		14,138,184	21,638,184	18,138,184
	198,615 3,620,000	7.4	198,615 3,900,000	198,615 3,900,000	198,615 3,900,000
	3,818,615		4,098,615	4,098,615	4,098,615
	1,500,000		1,500,000	1,500,000	1,500,000
	1,500,000		1,500,000	1,500,000	1,500,000

	5,318,615		5,598,615	5,598,615	5,598,615
		3.2 7.21-7.23
	11,328,688		8,539,569	16,039,569	12,539,569
	982,051,715		982,051,715 $0.0087	982,051,715 $0.0163	982,051,715 $0.0128

Table 8 – Assessed Fair Value of Coalbank prior to the Proposed Transaction (controlling basis)

7.3 The assessment of the Fair Value of a Coalbank share prior to the Proposed Transaction is based on the pro forma consolidated balance sheet of the Company as at 30 June 2016.
7.4 Coalbank’s statement of financial position at 30 June 2016 has been adjusted for the following:
the additional loan of $280,000 received from Treasure Wheel on 15 August 2016 bringing the total loan to $1.9 million;
the $1 million investment in a 25% interest in Utilitas;
we have excluded all capitalised exploration assets disclosed at 30 June 2016 of $15.4 million, and included the independent third party valuation performed by SRK of the Tambo East 2, Alpha South West, Tambo, Barcoo River-Blackall, Blackall South Corner, Charleville South, Augathella East and Morven South Projects (collectively, “the Coalbank Projects”); and

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7. Valuation of Coalbank (Cont.)

SRK has assessed a valuation of a 100% interest in the Coalbank Projects to be in the range of $12.6 million to $20.1 million, with a preferred valuation of $16.6 million.
7.5 SRK has utilised several methods including the Geoscientific Rating, Multiples of Exploration Expenditure and Comparable Transactions methodologies to value Coalbank’s exploration tenements. We note EPC1418 Tambo East 2 has not been valued as SRK was advised that Coalbank intends to surrender this permit.

Geoscientific Rating Methodology

7.6 The table below sets out the range of values attributed to Coalbank’s exploration tenements by SRK using the Geoscientific Rating method. This method was used to value the coal tenements, as set out below:

	Interest %	Low $' million	High $' million	Preferred $' million
EPC1418 Tambo East 2 EPC1625 Alpha South West 2 EPC1632 Tambo EPC1719 Barcoo River-Blackall EPC1993 Blackall South Corner ATP1072 Charleville South ATP1095 Augathella East ATP1098 Morven South	100% 100% 100% 100% 100% 100% 100% 100%	- 0.086 0.023 0.013 n/a n/a n/a n/a	- 0.389 0.163 0.045 n/a n/a n/a n/a	- 0.208 0.075 0.024 n/a n/a n/a n/a
Total		0.122 0.597 0.307

Table 9 – Geoscientific Rating method (Source: SRK report, Appendix 5)

7.7 As set out in the table above, SRK has assessed the value of ECP1625, EPC1632 and EPC1719 using the Geoscientific Rating method to be in the range of $0.122 million to $0.597 million, with a preferred value of $0.307 million.
7.8 The Geoscientific Rating method assesses the relevant technical aspects of a property through the use and ranking of appropriate factors applied to a Base Acquisition Cost (BAC). The factors include Off-Property, OnProperty, Geology and Anomaly aspects. The BAC represents the average cost incurred to identify, apply for and retain a unit area of the exploration licence of title.

Multiples of Exploration Expenditure Methodology

7.9 The table below sets out the range of values attributed to Coalbank’s exploration tenements by SRK using the Multiples of Exploration Expenditure method. This method is unable to value tenements where there has been little exploration expenditure, in the case of Coalbank, only the EPC1719 Barcoo River-Blackall and EPC1993 Blackall South Corner tenements have been valued using this method.

	Interest %	Low $' million	High $' million	Preferred $' million
EPC1418 Tambo East 2 100% EPC1625 Alpha South West 2 100% EPC1632 Tambo 100% EPC1719 Barcoo River-Blackall 100% EPC1993 Blackall South Corner 100% ATP1072 Charleville South 100% ATP1095 Augathella East 100% ATP1098 Morven South 100% Total	100% 100% 100% 100% 100% 100% 100% 100%	n/a n/a n/a n/a n/a n/a 12.250	n/a n/a n/a n/a n/a n/a 15.200	n/a n/a n/a n/a n/a n/a 14.250
		12.250 15.200 14.250

Table 10 – Multiples of exploration expenditure method (Source: SRK report, Appendix 5)

7.10 The multiples of exploration expenditure method uses historical cost and an assessment of prospectivity from recent exploration undertaken by Coalbank. The cost basis valuation is commonly used as an applicable method

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7. Valuation of Coalbank (Cont.)

for exploration areas in which no resource has been identified. This method of valuation of exploration properties includes consideration of the effectiveness of multiples of exploration expenditure that relates to reasonably recent exploration and representing a reasonably continuous ongoing exploration programme. Effective exploration expenditure provides an indication of the value of a property, which can then be adjusted to provide a valuation of a property. The multiples of exploration expenditure is reviewed for its relevance and effectiveness in terms of currently perceived prospectivity as a result of that expenditure, then factored by a prospectivity enhancement multiplier (“PEM”), which is usually in the range of 0.5 and 3.0, to derive a valuation.

7.11 The selection of the appropriate PEM is a matter of experience and judgement. SRK has applied a scale of PEM ranges to the exploration expenditure as follows:
0.5-1.0 – where work to date or historic data justifies the next stage of exploration;
1.0-2.0 – where strong indications of potential for economic mineralisation have been identified; and
2.1-3.0 – where quality intersections or exposures are indicative of economic resources present.
7.12 As set out in further detail in SRK’s report, the valuation range assessed using the multiples exploration expenditure method was derived as follows:
SRK considered the most recent five years of exploration to be relevant and appropriate to reflect both the cost and the prospectivity of work carried out, and to provide an informed basis on which to progress effective future exploration;
SRK has applied a discount of 20% for the first five years of expenditure to reflect both direct exploration costs attributable to the amount and proportion of work completed, and current market environment to complete similar on-ground exploration work; and
includes a PEM of 2.5-3.0 for each Project reflecting the impact that exploration has had on the prospectivity of each tenement area.
7.13 Under the Multiples of Exploration Expenditure method, EPC1719 Barcoo River-Blackall and EPC1993 Blackall South Corner tenements have been valued using this method, in the range of $12.25 million to $15.20 million, with a preferred value of $14.25 million.

Comparable Transactions Methodology

7.14 The table below sets out the range of values attributed to Coalbank’s exploration tenements by SRK using the Comparable Transactions method.

	Interest %	Low $' million	High $' million	Preferred $' million
EPC1418 Tambo East 2 100% EPC1625 Alpha South West 2 100% EPC1632 Tambo 100% EPC1719 Barcoo River-Blackall 100% EPC1993 Blackall South Corner 100% ATP1072 Charleville South 100% ATP1095 Augathella East 100% ATP1098 Morven South 100% Total	100% 100% 100% 100% 100% 100% 100% 100%	- 0.123 0.035 1.080 11.840 0.736 0.183 0.606	- 0.411 0.115 1.620 17.670 1.258 0.312 1.037	- 0.267 0.075 1.350 14.760 1.045 0.259 0.861
		14.603 22.423 18.617

Table 11 – Comparable Transactions method (Source: SRK report, Appendix 5)

7.15 As set out in the table above, SRK has assessed the value of the Coalbank Projects using the comparable transactions method to be in the range of $14.6 million to $22.4 million, with a preferred value of $18.6 million.
7.16 Comparable transactions method using unit area yardsticks use a value determined by reference to either actual transactions for the property in question or to recent transactions for projects considered to be similar to those under review. Comparable transactions are converted to a value per unit area ($/km[2] ) of ownership in a tenement licence area.

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7. Valuation of Coalbank (Cont.)

7.17 The valuation range using unit area yardsticks from comparable transactions was based on SRK’s assessment of appropriate unit area based on a number of transactions in Queensland, Australia that occurred between 2008 and 2012.

SRK Independent Technical Specialist Report Valuation Summary

7.18 Based on the methodologies utilised, SRK considers the following appropriate for each project:
Tambo Project (EPC1632 and EPC1625) – primary methodology is the Geoscientific Rating with a benchmark of comparable transactions;
Blackall Project (EPC1719 and EPC1993) – SRK has equally considered the Multiples of Exploration method and Comparable Transaction method. The two methods provided a reasonable correlation for the valuation of the two tenements; and
Gas Project (ATP1072, ATP1095 and ATP1098) – SRK has valued these using a combination of Comparable Transactions as well as other market considerations. The range is considered to be from $nil (representing the scenario that the tenures are handed back to the government due to the inability to meet the outstanding work commitments) to $2.6 million (based on the high end of the Comparable Transactions range with a preferred valuation of $1.3 million.
7.19 The table below sets out the range of values attributed to Coalbank’s exploration tenements by SRK using the methods described above.

	Interest %	Low $' million	Low $' million	High $' million	Preferred $' million
EPC1418 Tambo East 2 EPC1625 Alpha South West 2 EPC1632 Tambo EPC1719 Barcoo River-Blackall EPC1993 Blackall South Corner ATP1072 Charleville South ATP1095 Augathella East ATP1098 Morven South	100% 100% 100% 100% 100% 100% 100% 100%	-		-	-
			0.130 0.540 0.310
		- 12.500		2.600 17.000	1.300 15.000
Total		12.630 20.140 16.610

Table 12 – Summary of valuation (Source: SRK report, Appendix 5)

7.20 Based on the above, SRK has assessed the valuation of the Coalbank Projects to be in the range of $12.6 million to $20.1 million, with a preferred valuation of $16.6 million.
7.21 The table below sets out a summary of the assessed value per share of Coalbank prior to the Proposed Transaction.

	Ref	Low $	High $	Preferred $
Net assets at 30 June 2016 Pro forma adjustments Additional cash received as unsecured loan Unsecured loan received Investment in Utilitas Cash paid for investment Deduct capitalised exploration and evaluation assets Add valuation of Coalbank Projects Pro Forma net assets Number of shares on issue Assessed Fair Value per share	5.13 7.4 7.4 7.4 7.4 7.4 7.4 7.23	11,328,688 280,000 (280,000) 1,000,032 (1,000,032) (15,389,119) 12,600,000	11,328,688 280,000 (280,000) 1,000,032 (1,000,032) (15,389,119) 20,100,000	11,328,688 280,000 (280,000) 1,000,032 (1,000,032) (15,389,119) 16,600,000
		8,539,569	16,039,569	12,539,569
		982,051,715 $0.0087	982,051,715 $0.0163	982,051,715 $0.0128

Table 13 – Summary Assessed Value of a Coalbank share on a Net Assets Basis (Prior to the Proposed Transaction)

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7. Valuation of Coalbank (Cont.)

7.22 We are not aware of any other indicators that the book value of assets and liabilities of Coalbank differ materially from their fair market value.
7.23 Based on the above, our assessed value of a Coalbank share prior to the Proposed Transaction is in the range of $0.0087 to $0.0163, with a preferred value of $0.0128.
7.24 The value of a Coalbank share prior to the Proposed Transaction as set out in Table 13 is the value of a Coalbank share on a controlling basis. The net assets on a going concern methodology applied represents the value of a controlling shareholding. Accordingly, we consider the value generated under the net assets on a going concern basis to incorporate a premium for control and no further premium is considered necessary to assess the value of Coalbank prior to the Proposed Transaction.

Quoted Price of Listed Securities

7.25 In order to provide a cross-check to the valuation of a Coalbank share under the net assets on a going concern basis we have also considered the fair value based on the quoted market price.
7.26 The assessment only reflects trading prior to the announcement of the Proposed Transaction in order to avoid the influence of any movement in share price that occurred as a result of the announcement.
7.27 The table below sets out a summary of Coalbank’s VWAP for the 5, 10, 30, 60, 90, 180 and 365 calendar days prior to 15 July 2016, when the Proposed Transaction was first announced.

	Trading days	High $	Low $	Value $	Volume Traded	VWAP $	Volume traded as % of issued shares
Calendar days prior to 15 July 2016 5 days 10 days 30 days 60 days 90 days 180 days 365 days	1 2 5 9 11 18 37	0.002 0.002 0.002 0.002 0.002 0.003 0.004	0.001 0.001 0.001 0.001 0.001 0.001 0.001	8,856 9,864 11,200 13,950 15,950 42,862 69,462	8,856,270 9,360,270 10,396,020 11,871,020 13,871,020 27,326,830 36,949,440	0.0010 0.0011 0.0011 0.0012 0.0011 0.0016 0.0019	0.90% 0.95% 1.06% 1.21% 1.41% 2.78% 3.76%

Table 14 – VWAP of Coalbank’s shares prior to 15 July 2016 (Source: ASX)

7.28 As set out in the table above, the VWAP of Coalbank’s shares has remained relatively consistent, ranging from $0.0010 to $0.0019 over the previous 365 days prior to the announcement of the Proposed Transaction.
7.29 Shares were only traded for 37 days in 365 calendar days prior to 15 July 2016 and comprised 3.76% of the weighted issued share capital for the period.
7.30 RG 111.69 indicates that for the quoted market share price methodology to represent a reliable indicator of fair value, there needs to be an active and liquid market for the shares.
7.31 The following characteristics may be considered to be representative of a liquid and active market:
regular trading in the company’s securities;
approximately 1% of a company’s securities are traded on a weekly basis;
the bid/ask spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of the company; and
there are no significant but unexplained movements in the share price.
7.32 Notwithstanding the historically low liquidity of the Company’s shares, Coalbank complies with the full disclosure regime required by the ASX. As a result, the market is fully informed about the performance of Coalbank.

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7. Valuation of Coalbank (Cont.)

Premium for control

7.33 Based on the analysis of recent trading in Coalbank’s shares, we have assessed the value of a Coalbank share on a minority interest basis, to be $0.0011 (based on the 5 – 60 day VWAP as shown in Table 14 above), being the quoted price of a Coalbank share prior to the announcement of the Proposed Transaction.
7.34 The value above is indicative of the value of a marketable parcel of shares assuming a shareholder does not have control of Coalbank. In the case of a Section 611 acquisition, RG 111 states that the independent expert should calculate the value of a target’s shares as if 100% control were being obtained. Therefore, in our assessment of the fair value of a Coalbank share, we should include a premium for control.
7.35 Obtaining control of an entity usually provides the acquirer with a number of advantages including the following:
access to potential synergies;
control over decision making and strategic direction;
access to underlying cash flows; and
control over dividend policies.
7.36 In the case of publicly traded securities, given the advantages control of an entity provides an acquirer, they are usually expected to pay a premium to the quoted market price to achieve control, which is often referred to as a control premium. A control premium is the amount or a percentage by which the pro rata value of a controlling interest exceeds the pro rata value of a non-controlling interest in a business enterprise, to reflect the premium a buyer will pay to acquire control in a business enterprise. Consequently, earnings multiples for listed companies do not reflect the market value of a controlling interest in the company, as they are derived from market prices which usually represent the buying and selling of non-controlling portfolio holdings (small parcels of shares).
7.37 RSM has conducted a study of 345 takeovers and schemes of arrangements involving companies listed on the ASX over the 7 years ended 30 June 2012 (“RSM Control Premium Study 2013”). In determining the control premium, we compared the offer price to the closing trading price of the target company 20, 10 and 2 trading days pre the date of the announcement of the offer. Where the consideration included shares in the acquiring company, we used the closing share price of the acquiring company on the day prior to the date of the offer.
7.38 The findings are summarised below, showing the average control premium 20 days, 10 days and 2 days pre the date of the announcement of the offer.

	Number of Transactions	20 days pre	10 days pre	2 days pre
Average control premium - all industries Average control premium - Metals & Mining	345 96	35.3% 35.5%	29.3% 32.9%	26.5% 30.2%

Table 15 – Control Premium Study (Source: RSM Control Premium Study 2013)

7.39 On the basis of the above, we consider that premium for control in the range of 30% to 35% is appropriate in assessing the value of a share in Coalbank on a controlling basis.
7.40 The table below sets out our assessment of the value of a Coalbank share on a controlling basis utilising the quoted price of listed securities methodology.

	Ref	Low	High
Quoted market price (non-controlling basis) Control premium Value of a Coalbank share (controlling basis)	7.33 7.39	$0.0011 30.0%	$0.0011 35.0%
		$0.0014	$0.0015

Table 16 – Assessed Fair Value of a Coalbank share – Quoted Price of Listed Securities method

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7. Valuation of Coalbank (Cont.)

Valuation Summary (Prior to the Proposed Transaction)

7.41 A summary of our assessed values of a Coalbank share prior to the Proposed Transaction is set out in the table below.

	Ref	Low	High	Preferred
Net assets on a going Concern basis - primary method Quoted price of listed securities - cross check	Table 13, 7.23 Table 16	$0.0087 $0.0014	$0.0163 $0.0015	$0.0128 $0.0015

Table 17 – Valuation of a share in Coalbank prior to the Proposed Transaction (controlling basis)

7.42 We note the following with regards to Coalbank’s recent trading history:
The liquidity of Coalbank shares has historically been low. In the previous 12 months prior to the Proposed Transaction, only 3.76% of the total share capital was traded as set out in Table 14 above; and
The bid/ask spread is often used to measure market efficiency. For the period 1 January 2016 to 15 July 2016, the closing bid/ask spread of Coalbank averaged 50% of the mid-point price. On the basis that, over a comparable time period, all stocks trading on the ASX had an average bid/ask spread of 0.239%[1] , we consider the bid/ask spread of Coalbank to be large.
7.43 Based on the above, we have relied upon the net assets on a going concern valuation methodology as we consider that the trading market for Coalbank’s shares is not sufficiently liquid and therefore, its share price may not be a reliable indicator of value as the market for those shares may not be fully efficient.
7.44 We have therefore assessed the Fair Value of a Coalbank share on a controlling basis prior to the Proposed Transaction, utilising the net assets on a going concern basis, to be in the range of $0.0087 to $0.0163, with a preferred value of $0.0128.

1 Equity market data for the quarter ending 30 June 2016 – ASIC

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7. Valuation of Coalbank (Cont.)

Valuation of a Coalbank Share after the approval of Resolution 6 (on a controlling basis)

7.45 Our assessment of the Fair Value of a Coalbank share after the approval of Resolution 6 (on a 100% controlling basis) is set out in the table below.

	As at 30-Jun-16 *Audited* $	Ref	Low High Preferred $ $ Pro Forma After approval of Resolution 6 Assessed Value	Low High Preferred $ $ Pro Forma After approval of Resolution 6 Assessed Value	Low High Preferred $ $ Pro Forma After approval of Resolution 6 Assessed Value
Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Plant and equipment Investments Exploration and evaluation assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Other financial liabilities Total non-current liabilities Total liabilities NET ASSETS Number of shares on issue Assessed value per share (controlling basis)	932,756 116,327	7.46	212,724 116,327	212,724 116,327	212,724 116,327
	1,049,083		329,051	329,051	329,051
	5,456 28,849 15,389,119 174,796	7.46 7.46	5,456 1,028,881 12,600,000 174,796	5,456 1,028,881 20,100,000 174,796	5,456 1,028,881 16,600,000 174,796
	15,598,220		13,809,133	21,309,133	17,809,133

	16,647,303		14,138,184	21,638,184	18,138,184
	198,615 3,620,000	7.47	198,615 1,900,000	198,615 1,900,000	198,615 1,900,000
	3,818,615		2,098,615	2,098,615	2,098,615
	1,500,000		1,500,000	1,500,000	1,500,000
	1,500,000		1,500,000	1,500,000	1,500,000

	5,318,615		3,598,615	3,598,615	3,598,615
		7.47
	11,328,688		10,539,569	18,039,569	14,539,569
			1,115,385,048 $0.0094	1,115,385,048 $0.0162	1,115,385,048 $0.0130

Table 18 – Assessed Fair Value of a Coalbank share after the approval of Resolution 6 (controlling basis)

7.46 The assessment of the Fair Value of a Coalbank share after the approval of Resolution 6 (on a controlling basis) is also based on the pro forma balance sheet of the Company at 30 June 2016. As set out in paragraph 7.4, Coalbank’s pro forma balance sheet has also been adjusted for the additional loan of $280,000, the additional investment in Utilitas of $1,000,032 and the value of the Coalbank Projects as assessed by SRK, consistent with our adjustments in our assessment of the value of a Coalbank share prior to the Proposed Transaction.
7.47 In our assessment of the Fair Value of a Coalbank share after the approval of Resolution 6 (on a controlling basis), we have adjusted for the issue of 133,333,333 new fully paid ordinary shares at an issue price of $0.015 per share, to convert and extinguish the liability of the First Convertible Note.

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7. Valuation of Coalbank (Cont.)

Valuation of a Coalbank Share after the approval of Resolution 6 (on a non-controlling basis)

7.48 In the event Resolution 6 is approved, Treasure Wheel will obtain a 59.64% interest in Coalbank.
7.49 Therefore, in accordance with RG 111, we have reflected a discount for lack of control in our assessment of the Fair Value of a Coalbank share on a minority interest basis after the approval of Resolution 6 to account for the expected dilution of Non-Associated Shareholders’ interest in Coalbank as a result of the issue of shares to convert the First Convertible Note.
7.50 A discount for a minority interest (non-controlling interest) is the inverse of control premium. For the purposes of this Report, we have adopted the inverse of the control premium of 30.0% to 35.0% in our assessment of a discount for lack of control, consistent with the control premium adopted in valuing a Coalbank share prior to the Proposed Transaction using the quoted price of listed securities methodology. We have therefore adopted a discount of 23.1% to 25.9% (rounded) when assessing the value of a Coalbank share on a minority interest basis after the conversion of the First Convertible Note.
7.51 The table below sets out our assessment of the value of a Coalbank share on a minority interest basis after the conversion of the First Convertible Note.

	Ref	Low High Preferred $ $ $ After the approval of Resolution 6 Assessed Value Pro Forma	Low High Preferred $ $ $ After the approval of Resolution 6 Assessed Value Pro Forma	Low High Preferred $ $ $ After the approval of Resolution 6 Assessed Value Pro Forma
Assessed value per share (controlling basis) Discount for lack of control Assessed value per share (non-controlling basis)	Table 18 7.50	$0.0094 -25.9%	$0.0162 -23.1%	$0.0130 -24.5%
		$0.0070	$0.0124	$0.0098

Table 19 – Assessed Fair Value of a Coalbank share after the approval of Resolution 6 (non-controlling basis)

7.52 Based on the above, our assessed value of a Coalbank share after the conversion of the First Convertible Note (on a non-controlling basis) as set out in Table 19, is in the range of $0.0070 to $0.0124, with a preferred valuation of $0.0098 per share.

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7. Valuation of Coalbank (Cont.)

Valuation of a Coalbank Share after the approval of Resolution 7 (on a controlling basis)

7.53 Our assessment of the Fair Value of a Coalbank share after the approval of Resolution 7 (on a 100% controlling basis), and as if both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval, is set out in the table below.

	As at 30-Jun-16 *Audited* $	Ref	Low High Preferred $ $ Pro Forma After the approval of Resolution 7 Assessed Value	Low High Preferred $ $ Pro Forma After the approval of Resolution 7 Assessed Value	Low High Preferred $ $ Pro Forma After the approval of Resolution 7 Assessed Value
Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Plant and equipment Investments Exploration and evaluation assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Other financial liabilities Total non-current liabilities Total liabilities NET ASSETS Number of shares on issue Assessed value per share (controlling basis)	932,756 116,327	7.54	212,724 116,327	212,724 116,327	212,724 116,327
	1,049,083		329,051	329,051	329,051
	5,456 28,849 15,389,119 174,796	7.54 7.54	5,456 1,028,881 12,600,000 174,796	5,456 1,028,881 20,100,000 174,796	5,456 1,028,881 16,600,000 174,796
	15,598,220		13,809,133	21,309,133	17,809,133

	16,647,303		14,138,184	21,638,184	18,138,184
	198,615 3,620,000	7.55	198,615 -	198,615 -	198,615 -
	3,818,615		198,615	198,615	198,615
	1,500,000		1,500,000	1,500,000	1,500,000
	1,500,000		1,500,000	1,500,000	1,500,000

	5,318,615		1,698,615	1,698,615	1,698,615
		7.55
	11,328,688		12,439,569	19,939,569	16,439,569
			1,486,189,107 $0.0084	1,486,189,107 $0.0134	1,486,189,107 $0.0111

Table 20 – Assessed Fair Value of a Coalbank share after the approval of Resolution 7 (controlling basis)

7.54 The assessment of the Fair Value of a Coalbank share after the approval of Resolution 7 (on a controlling basis) is also based on the pro forma balance sheet of the Company at 30 June 2016. As set out in paragraph 7.4, Coalbank’s pro forma balance sheet has also been adjusted for the additional loan of $280,000, the additional investment in Utilitas of $1,000,032 and the value of the Coalbank Projects as assessed by SRK, consistent with our adjustments in our assessment of the value of a Coalbank share prior to the Proposed Transaction.
7.55 The following adjustments have been included in our assessment of the Fair Value of a Coalbank share after the approval of Resolution 7 (on a controlling basis):
the issue of 133,333,333 new fully paid ordinary shares at an issue price of $0.015 per share, to convert and extinguish the liability of the First Convertible Note; and

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7. Valuation of Coalbank (Cont.)

the issue of 370,804,059 shares assuming the immediate conversion of the Second Convertible Note of $1.9 million to shares once the note is issued. This is based on the 10 day VWAP of $0.0056 per share at 17 October 2016. We note that under the terms of the agreement, the Second Convertible Note can only be converted 12 months from the date the note is issued. We have utilised the 10 day VWAP to the most recent available date, being 17 October 2016, for the following reasons:
notwithstanding the recent volatility of Coalbank’s shares, the 10 day VWAP to 17 October 2016 takes into account the market’s reaction to the Proposed Transaction;
the 10 day VWAP at 17 October 2016 provides a more dilutive scenario than using our assessed value per share as set out in Table 17 above; and
we consider that the 10 day VWAP is reflective of the Company’s historic share price that has been traded below the Company’s underlying net asset value.

Valuation of a Coalbank Share after the approval of Resolution 7 (on a non-controlling basis)

7.56 In the event Resolution 7 is approved, Treasure Wheel may obtain a 69.71% interest in Coalbank, assuming the Second Convertible Note is converted to shares at the 10 day VWAP of $0.0056 as set out above, and up to an 85.07% interest in the event the Second Convertible Note is converted up to the maximum permitted number of shares contemplated in Resolution 7.
7.57 Therefore, in accordance with RG 111, we have reflected a discount for lack of control in our assessment of the Fair Value of a Coalbank share after the approval of Resolution 7.
7.58 We have adopted a discount of 23.1% to 25.9% (rounded) when assessing the value of a Coalbank share on a minority interest basis after the approval of Resolution 7 (inclusive of the approval of Resolution 6), consistent with our assessment in the event that only Resolution 6 is approved.
7.59 The table below sets out our assessment of the value of a Coalbank share on a minority interest basis, after the approval of Resolution 7and as if both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval.

	Ref	Low High Preferred $ $ $ After the approval of Resolution 7 Assessed Value Pro Forma	Low High Preferred $ $ $ After the approval of Resolution 7 Assessed Value Pro Forma	Low High Preferred $ $ $ After the approval of Resolution 7 Assessed Value Pro Forma
Assessed value per share (controlling basis) Discount for lack of control Assessed value per share (non-controlling basis)	Table 20 7.58	$0.0084 -25.9%	$0.0134 -23.1%	$0.0111 -24.5%
		$0.0062	$0.0103	$0.0084

Table 21 – Assessed Fair Value of a Coalbank share after the approval of Resolution 7 (non-controlling basis)

7.60 Based on the above, our assessed value of a Coalbank share after the approval of Resolution 7 (on a noncontrolling basis) as set out in Table 21, is in the range of $0.0062 to $0.0103, with a preferred valuation of $0.0084 per share.
7.61 The lowest conversion price has been assumed in the NOM as $0.001 per share (calculated based on the share conversion formula referenced at paragraph 3.10). If the Second Convertible Note of $1.9 million were to be converted at $0.001 per share, 1,900,000,000 shares would be issued. In the event Resolution 7 is approved and the shares were converted at $0.001, Treasure Wheel would obtain an 85.07% interest in Coalbank, being the maximum dilutive impact contemplated under Resolution 7.

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7. Valuation of Coalbank (Cont.)

7.62 Consistent with the NOM, Table 22 includes analysis of the potential dilutive impact of various conversion prices:

	Number of shares based on 10 day VWAP $0.0056 (before 8.5% discount)	%	Number of shares based on conversion at $0.0128	%	Number of shares based on conversion at $0.0100	%	Number of shares based on conversion at $0.0070	%	Number of shares based on conversion at $0.0020	%	Number of shares based on conversion at $0.0010	%
Prior to Resolution 7 Shares held by Treasure Wheel (or associates) Total shares held by Non-Associated Shareholders Total shares on issue prior to Resolution 7	531,906,361 450,145,354	54.16% 45.84%	531,906,361 450,145,354	54.16% 45.84%	531,906,361 450,145,354	54.16% 45.84%	531,906,361 450,145,354	54.16% 45.84%	531,906,361 450,145,354	54.16% 45.84%	531,906,361 450,145,354	54.16% 45.84%
	982,051,715	100.00%	982,051,715	100.00%	982,051,715	100.00%	982,051,715	100.00%	982,051,715	100.00%	982,051,715	100.00%

Shares currently held by Treasure Wheel (or associates)	531,906,361		531,906,361		531,906,361		531,906,361		531,906,361		531,906,361
Shares issued to Treasure Wheel upon conversion of the First Convertible Note (Resolution 6) Shares issued to Treasure Wheel upon conversion of the Second Convertible Note (Resolution 7) Total shares held by Non-Associated Shareholders Total potential shares on issue after the conversion of the First Convertible Note and the Second Convertible Note	133,333,333 370,804,059 450,145,354	69.71% 30.29%	133,333,333 148,437,500 450,145,354	64.38% 35.62%	133,333,333 190,000,000 450,145,354	65.52% 34.48%	133,333,333 271,428,571 450,145,354	67.54% 32.46%	133,333,333 950,000,000 450,145,354	78.21% 21.79%	133,333,333 1,900,000,000 450,145,354	85.07% 14.93%
	1,486,189,107	100.00%	1,263,822,548	100.00%	1,305,385,048	100.00%	1,386,813,619	100.00%	2,065,385,048	100.00%	3,015,385,048	100.00%

Table 22 – Sensitivity Analysis of the effect of the approval of Resolution 7

8. Is the Proposed Transaction Fair

Resolution 6

8.1 In assessing whether we consider Resolution 6 to be fair to the Non-Associated Shareholders, we have valued a share in Coalbank prior to and after the approval of Resolution 6 to determine whether a Non-Associated Shareholder would be better or worse off, should Resolution 6 be approved. Our assessed values are summarised in the table below.

	Low $	High $	Preferred $
Fair Value per share prior to Resolution 6 (on a controlling basis) $0.0087 $0.0163			$0.0128
Fair Value per share after the approval of Resolution 6 (on a non-controlling basis)	$0.0070	$0.0124	$0.0098

Table 23 – Valuation Summary of Resolution 6

8.2 In accordance with RG111, we have assessed the value of a share in Coalbank on a 100% controlling basis prior to the approval of Resolution 6, and then on a minority interest basis after the approval of Resolution 6 to account for the expected dilution of Non-Associated Shareholders' interest in Coalbank as a result of the issue of shares to convert the First Convertible Note. We note, however, that Treasure Wheel, currently holds a 54.16% interest in Coalbank and, therefore, can already be considered to hold a controlling interest prior to the Proposed Transaction.
8.3 The above comparison is depicted graphically in the figure below.

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Chart 4 – Valuation Summary of Resolution 6

30 | Financial Services Guide and Independent Expert’s Report

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8. Is the Proposed Transaction Fair (Cont.)

8.4 In our opinion, as the Fair Value of a Coalbank share at the preferred level in the event Resolution 6 is approved, is less than the Fair Value of a Coalbank share at the preferred level prior to the approval of Resolution 6, we consider Resolution 6 to be not fair to the Non-Associated Shareholders of Coalbank.

Resolution 7

8.5 The approval of Resolution 7 is conditional on the approval of Resolution 6. In assessing whether we consider Resolution 7 to be fair to the Non-Associated Shareholders, we have valued a share in Coalbank prior to both Resolutions, and after the approval of Resolution 7 (inclusive of Resolution 6), to determine whether a NonAssociated Shareholder would be better or worse off, should Resolution 7 be approved. Our assessed values are summarised in the table below.

	Low $	High $	Preferred $
Fair Value per share prior to Resolutions 6 and 7 (on a controlling basis) $0.0087 $0.0163			$0.0128
Fair Value per share on issue of the shares after the approval of Resolutions 6 and 7, and as if both the First Convertible Note and Second Convertible Note are converted to shares following Shareholder approval (on a non-controlling basis)	$0.0062	$0.0103	$0.0084

Table 24 – Valuation Summary of Resolution 7

8.6 In accordance with RG111, we have assessed the value of a share in Coalbank on a 100% controlling basis prior to Resolutions 6 and 7, and then on a minority interest basis after the approval of Resolutions 6 and 7, and as if both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval . We note, however that Treasure Wheel currently holds a 54.16% interest in Coalbank and, therefore, can already be considered to hold a controlling interest prior to the Proposed Transaction.
8.7 The above comparison is depicted graphically in the figure below.

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Chart 5 – Valuation Summary of Resolution 7

8.8 In our opinion, as the Fair Value of a Coalbank share at the preferred level in the event Resolution 7 is approved and both the First Convertible Note and the Second Convertible Note are converted to shares following Shareholder approval, is less than the Fair Value of a Coalbank share at the preferred level prior to Resolution 7, and in the absence of any other relevant information, we consider Resolution 7 to be not fair to the NonAssociated Shareholders of Coalbank.

9. Is the Proposed Transaction Reasonable

9.1 RG 111 establishes that an offer is reasonable if it is fair. It might also be reasonable if, despite not being fair, there are sufficient reasons for the security holders to accept the offer in the absence of a higher bid.
9.2 In our assessment of whether the relevant Resolutions are reasonable, we have also considered the following:
the future prospects of Coalbank if the Resolutions do not proceed;
alternative offers and sources of funds; and

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9. Is the Proposed Transaction Reasonable (Cont.)

other commercial advantages and disadvantages to the Non-Associated Shareholders as a consequence of the Resolutions proceeding.

Future Prospects of Coalbank if Resolution 6 and Resolution 7 does not proceed

9.3 As at 30 June 2016, the Company disclosed a cash position of $932,756. If both Resolution 6 and Resolution 7 are not successful, Coalbank will be required to pursue alternative investment proposals and raise funds in the short to medium term to fund ongoing operations. Coalbank will be required to pursue alternative investment proposals and raise funds in the short to medium term to fund ongoing operations, as well as to repay the First Convertible Note and the unsecured loan to Treasure Wheel.
9.4 The Company has yet to generate operating revenue. Coalbank’s audited financial statements for the year ended 30 June 2016 included an emphasis of matter in the independent auditor’s report, that stated that Coalbank’s operations for the 2016 financial year indicated that the ability of the Company to continue as a going concern is dependent on the future successful raising of necessary funding through equity, reliance on the financial support of Treasure Wheel, and the conversion of the First Convertible Note in accordance with Resolution 6.
9.5 In the event that Coalbank is unable to raise sufficient funds in the short to medium term, the Company may not be able to continue as a going concern.

Advantages and Disadvantages

9.6 In assessing whether the Non-Associated Shareholders are likely to be better off if the Proposed Transaction proceeds than if it does not, we have compared various advantages and disadvantages that are likely to accrue to the Non-Associated Shareholders.

Advantages of Resolution 6

9.7 The conversion of the First Convertible Note will fully extinguish the $2 million loan payable. The First Convertible Note is repayable 18 months from the Advance Date (13 November 2013), which means the Note is repayable in full, unless converted to equity. Coalbank does not currently have sufficient cash to repay the loan.
9.8 The fixed conversion price of the First Convertible Note is at 1.5 cents per share which is higher than Coalbank’s current share price of circa 0.5 cents as at the date of this report; the conversion of the First Convertible Note is therefore less dilutive than if the conversion were to occur at the current share price.

Disadvantages of Resolution 6

9.9 Resolution 6 is not fair .
9.10 Non-Associated Shareholders’ interest in Coalbank will be diluted from 45.84% to 40.36% on conversion of the First Convertible Note.
9.11 The dilution of Non-Associated Shareholders’ interests reduces the ability of existing shareholders to influence the strategic direction of the Company, including acceptance or rejection of takeover or merger proposals.
9.12 Notwithstanding the historically low liquidity of Coalbank’s shares, the increase in voting power of Treasury Wheel may further reduce the liquidity of Coalbank’s shares.

Advantages of Resolution 7

9.13 The unsecured loan related to the proposed Second Convertible Note of $1.9 million was advanced to Coalbank to fund the acquisition of a 25% equity interest in Utilitas and to support the Company’s operating costs. The approval of Resolution 7 will allow the deferment of the loan payable. If Resolution 7 is not approved, the loan will be repayable on demand. Coalbank does not currently have sufficient cash to repay the loan.
9.14 The Second Convertible Note may be redeemed or converted to shares at any time after 12 months from the issue of the Note, at the 10 day VWAP, less a discount of 8.5%, preceding a conversion notice provided by Treasure Wheel to Coalbank. Notwithstanding the dilution, this allows Coalbank time to seek alternative sources of funding and to delay the repayment of the unsecured loan for at least 12 months.

Disadvantages of Resolution 7

9.15 Resolution 7 is not fair .

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9. Is the Proposed Transaction Reasonable (Cont.)

9.16 Non-Associated Shareholders’ interest in Coalbank may be diluted from 45.84% to 14.93% if the Second Convertible Note is converted up to the maximum permitted number of shares contemplated under Resolution 7. Based on the conversion of the Second Convertible Note using the 10 day VWAP of $0.0056 to 17 October 2016, the last day prior to the date of this Report, Non-Associated Shareholders may be diluted from 45.84% to 30.29% after the approval of Resolution 7, and assuming the Second Convertible Note is converted to shares at a VWAP of $0.0056.
9.17 The dilution of Non-Associated Shareholders’ interests reduces the ability of existing shareholders to influence the strategic direction of the Company, including acceptance or rejection of takeover or merger proposals.
9.18 Notwithstanding the historically low liquidity of Coalbank’s shares, the increase in voting power of Treasury Wheel may further reduce the liquidity of Coalbank’s shares.
9.19 In the event the Company’s share price declines from current prices, Non-Associated Shareholders may be further diluted in the event the Second Convertible Note is converted to shares.

Alternative Proposals

9.20 We have been advised that the Board of Directors has sought alternative sources of funds but has not received any alternative funding offers. The Board has assessed that in current market conditions, alternative offers of funding are unlikely.
9.21 We are not aware of any alternative proposals at this time that would offer the Non-Associated Shareholders a premium over the terms offered by Resolution 6 and Resolution 7.

Response of the Market to the Announcement of the Proposed Transaction

9.22 The table below sets out the VWAP of the Coalbank share price and volumes traded in the 60 days prior to the announcement of the Proposed Transaction, and the 95 days after the announcement on 15 July 2016 to 17 October 2016.

	Trading days	High $	Low $	Value $	Volume Traded	VWAP $	Volume traded as % of issued shares
Calendar days prior to 15 July 2016 60 days Calendar days after 15 July 2016 95 days	9 45	0.002 0.010	0.001 0.001	13,950 2,781,393	11,871,020 530,424,960	0.0012 0.0052	1.21% 54.01%

Table 25 – VWAP of Coalbank shares after the announcement of the Proposed Transaction

9.23 Volume of shares traded increased significantly in the period after the announcement of the Proposed Transaction, with the largest volume traded comprising 92,064,899 shares traded by one individual. The 95 day VWAP of $0.0052, in the period after the announcement from 15 July 2016, has increased by $0.0040 above the 60 day VWAP (an increase of 333%), prior to the announcement of the Proposed Transaction of $0.0012.
9.24 We consider that the market has reacted favourably to the announcement of the Proposed Transaction.
9.25 Given the significant increase in the share price as a result of the announcement of the Proposed Transaction, we consider that there is a risk that the share price will fall to historical levels disclosed prior to the announcement in the event that the Proposed Transaction is not approved.

Conclusion on Reasonableness

9.26 In our opinion, the position of the Non-Associated Shareholders if Resolution 6 is approved is more advantageous than the position if it is not approved. Therefore, in the absence of any other relevant information and/or a superior offer, we consider that Resolution 6 is reasonable for the Non-Associated Shareholders of Coalbank.
9.27 In our opinion, the position of the Non-Associated Shareholders if Resolution 7 is approved is more advantageous than the position if it is not approved. Therefore, in the absence of any other relevant information and/or a superior offer, we consider that Resolution 7 is reasonable for the Non-Associated Shareholders of Coalbank.

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9. Is the Proposed Transaction Reasonable (Cont.)

9.28 An individual shareholder’s decision in relation to the Proposed Transaction may be influenced by his or her individual circumstances. If in doubt, shareholders should consult an independent advisor.

Yours faithfully

RSM CORPORATE AUSTRALIA PTY LTD

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GLYN YATES Director

ANDREW GILMOUR Director

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APPENDICES

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APPENDIX 1 – Declarations and Disclosures

Declarations and Disclosures

RSM Corporate Australia Pty Ltd holds Australian Financial Services Licence 255847 issued by ASIC pursuant to which they are licensed to prepare reports for the purpose of advising clients in relation to proposed or actual mergers, acquisitions, takeovers, corporate reconstructions or share issues.

Qualifications

Our report has been prepared in accordance with professional standard APES 225 “Valuation Services” issued by the Accounting Professional & Ethical Standards Board.

RSM Corporate Australia Pty Ltd is beneficially owned by the partners of RSM Australia Pty Ltd (RSM Australia) a large national firm of chartered accountants and business advisors.

Mr Glyn Yates and Mr Andrew Gilmour are directors of RSM Corporate Australia Pty Ltd. Both Mr Yates and Mr Gilmour are Chartered Accountants with extensive experience in the field of corporate valuations and the provision of independent expert’s reports for transactions involving publicly listed and unlisted companies in Australia.

Reliance on this Report

This report has been prepared solely for the purpose of assisting the Non-Associated Shareholders of Coalbank Limited in considering the Proposed Transaction. We do not assume any responsibility or liability to any party as a result of reliance on this report for any other purpose.

Reliance on Information

Statements and opinions contained in this report are given in good faith. In the preparation of this report, we have relied upon information provided by the Directors and management of Coalbank and we have no reason to believe that this information was inaccurate, misleading or incomplete. However, we have not endeavoured to seek any independent confirmation in relation to its accuracy, reliability or completeness. RSM Corporate Australia Pty Ltd does not imply, nor should it be construed that it has carried out any form of audit or verification on the information and records supplied to us.

The opinion of RSM Corporate Australia Pty Ltd is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.

In addition, we have considered publicly available information which we believe to be reliable. We have not, however, sought to independently verify any of the publicly available information which we have utilised for the purposes of this report.

We assume no responsibility or liability for any loss suffered by any party as a result of our reliance on information supplied to us.

Disclosure of Interest

At the date of this report, none of RSM Corporate Australia Pty Ltd, RSM, Mr Glyn Yates, Mr Andrew Gilmour, nor any other member, director, partner or employee of RSM Corporate Australia Pty Ltd and RSM Australia has any interest in the outcome of the Proposed Transaction, except that RSM Corporate Australia Pty Ltd are expected to receive a fee of approximately $21,000 based on time occupied at normal professional rates for the preparation of this report. The fees are payable regardless of whether Coalbank Limited receives Shareholder approval for the Proposed Transaction, or otherwise.

Consents

RSM Corporate Australia Pty Ltd consents to the inclusion of this report in the form and context in which it is included with the Explanatory Memorandum to be issued to Shareholders. Other than this report, none of RSM Corporate Australia Pty Ltd, RSM Australia or RSM Australia Partners has been involved in the preparation of the Notice of General Meeting and Explanatory Statement. Accordingly, we take no responsibility for the content of the Notice of General Meeting and Explanatory Statement as a whole.

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APPENDIX 2 – Sources of Information

In preparing this Report we have relied upon the following principal sources of information:

Drafts and final copies of the Notice of Meeting for Coalbank;
Coalbank audited financial statements for the three years ended 30 June 2016;
A copy of the Independent Technical Report providing a valuation of Coalbank’s exploration assets, prepared by SRK Consultants Pty Ltd;
Current share and options registers of Coalbank;
ASX announcements of Coalbank; and
Discussions with Management of Coalbank.

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APPENDIX 3 – Industry Overview

Black Coal Mining

The company operates in the Black Coal Industry in Australia[2. ] According to IBISWorld, companies operating in this industry primarily produce coking coal and steaming coal for steelmaking and fuel respectively. Industry revenue is estimated to total $41.3 billion in 2015-16, indicating an annualised decline rate of 5.6% for the five years from 2011 to 2016. This fall was a consequence of dynamic overseas demand, as weak steel production and growth of energy alternatives was overshot by global demand. The high Australia dollar also made coal less affordable and contributed to the volatility of global prices.

IBISWorld expects the industry’s revenue to grow at an annualised rate of 3.6% for the next five years to 2020-21, reaching $50.0 billion. Improvements in efficiency and productivity amid weak domestic and global prices will likely benefit industry revenue. Profitability is projected to increase in this period as a result of increasing domestic coal prices and reduction of the cost related to wages.

The key external drivers of the industry include:

domestic price of black coal;
demand from fossil fuel electricity generation;
trade-weighted index; and
public concerns over environmental issues.

The biggest issue facing industry generators is the steaming coal market, which is forecasted to generate the least amount of revenue of any product in the industry. Global oversupply and growing concerns around steaming coal’s environmental impact is set to reduce domestic and global prices and demand.

The key success factors within the industry include:

proximity to key markets;
access to highly a skilled workforce;
economies of scale;
access to black coal reserves; and
production of premium goods and services.

The industry’s key players are BHP Billiton Limited (market share of 11.6%), Glencore Coal Investments Australia Pty Ltd (market share of 10.4%), Rio Tinto Plc – Rio Tinto Limited (market share of 9.2%), Mitsubishi Development Pty Ltd (market share of 9.0%) and Anglo American Australia Limited (market share of 7.8%). BHP Billiton Limited is ASX Listed, Rio Tinto has a dual listing on the London Stock Exchange and ASX and Anglo American Australia is a 100% owned subsidiary of Anglo American plc who are also listed on the London Stock Exchange.

The chart below sets out the number of businesses by location:

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

New South
Wales, 41%
Queensland,
46%
Victoria, 5%
Western
Tasmania,1% Australia, 5%
South Australia, 2%
----- End of picture text -----

2 IBISWorld Industry Report B0601 – Black Coal Production in Australia, April 2016

38 | Financial Services Guide and Independent Expert’s Report

APPENDIX 4 – Glossary of Terms and Abbreviations

Term	Definition
Act or Corporations Act	Corporations Act 2001
ASIC	Australian Securities & Investments Commission
ASX	Australian Securities Exchange
ATP	Authority to Prospect for Petroleum
Cash flow	Cash that is generated over a period of time by an asset, group of
	assets, or business enterprise. It may be used in a general sense to
	encompass various levels of specifically defined cash flows. When the
	term is used, it should be supplemented by a qualifier (for example,
	"discretionary" or "operating") and a specific definition in the given
	valuation context
Company or Coalbank	Coalbank Limited
Control	The power to direct the management and policies of a business
	enterprise
Control premium or premium for	An amount or a percentage by which the pro rata value of a controlling
control	interest exceeds the pro rata value of a non-controlling interest in a
	business enterprise, to reflect the power of control
Directors	The directors of Coalbank
Discount rate	A rate of return used to convert a future monetary sum into present value
Discounted Cash Flow Method	A method within the income approach whereby the present value of
(DCF)	future expected net cash flows is calculated using a discount rate
EPC	Exploration Permit for Coal
Equity	The owner's interest in property after deduction of all liabilities
Fair Value or Fair Market Value	The amount for which an asset could be exchanged, or a liability settled,
	between knowledgeable, willing parties in an arm’s length transaction
First Convertible Note	The Note issued to Treasure Wheel on 13 November 2013 for $2 million
FME	Future maintainable earnings
FOS	Financial Ombudsman Service
FSG	Financial Services Guide
Going concern	An ongoing operating business enterprise
Management	Management of Coalbank

39 | Financial Services Guide and Independent Expert’s Report

Term	Definition
NOM	Notice of General Meeting and Explanatory Statement to shareholders
	for the General Meeting of Coalbank to be held in September 2016
Non-Associated Shareholders	The shareholders of the Company not associated with Treasure Wheel
	and its associates
Non-controlling interest or	An assessment of the fair value on an equity interest, which assumes the
minority interest	holder or holders do not have control of the entity in which the equity is
	held
PAT	Profit after tax
PEM	Prospective enhancement multiplier
Proposed Transaction	Resolution 6 and Resolution 7 as set out in the NOM
Report or IER	This Independent Expert’s Report
RG 111	ASIC Regulatory Guide 111 Content of Expert Reports
RG 112	ASIC Regulatory Guide 112 Independence of Experts
RSM	RSM Financial Services Pty Ltd
Second Convertible Note	The Note to be issued if Resolution 7 is approved. The Note will convert
	$1.9 million of unsecured loans from Treasure Wheel into the Second
	Convertible Note
Shares	Fully paid ordinary shares in Coalbank
$	Australian Dollars
Treasure Wheel	Treasure Wheel Global Limited, a company associated with the
	Coalbank Chairman, Anthony Chan and another Director, Daniel Chan
Utilitas	Utilitas Pty Limited
VALMIN Code	Code for the Technical Assessment and Valuation of Mineral and
	Petroleum Assets and Securities for Independent Expert Reports
VWAP	Volume Weighted Average Share Price

40 | Financial Services Guide and Independent Expert’s Report

APPENDIX 5 – Independent Technical Specialist Report of the Exploration Tenements held by Coalbank Limited

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Independent Technical Assessment and Valuation of the Coal and Gas Assets of Coalbank Limited

Report Prepared for

RSM Corporate Australia Pty Ltd

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Report Prepared by

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SRK Consulting (Australasia) Pty Ltd Project Number CBL001 August 2016

SRK Consulting

Page i

Independent Technical Assessment and Valuation of the Coal and Gas Assets of Coalbank Limited

RSM Corporate Australia Pty Ltd

Coalbank Limited

Level 21, 55 Collins Street West MELBOURNE VIC 3000

Level 6, 344 Queen Street BRISBANE QLD 4000

SRK Consulting (Australasia) Pty Ltd

1/1 Balbu Close, BERESFIELD NSW, 2322

e-mail: [email protected] website: srk.com.au

Tel: +61 02 4922 2100 Fax: +61 02 4922 2101

SRK Project Number CBL001

August 2016

Compiled by

Dr Bryce Healy Principal Consultant Email: [email protected]]

Peer Reviewed by

Jeames McKibben Principal Consultant

Contributing Authors:

Mathew Davies; Dr Bruce McConachie; Lucas McLean-Hodgson; Anargul Kushkarina

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Executive Summary

RSM Corporate Australia Pty Ltd (RSM) has commissioned SRK to prepare an independent technical assessment and valuation report of Coalbank Limited’s (Coalbank) coal and gas assets located in southern Queensland. The Report has been undertaken under the guidelines of the VALMIN Code (2015 Edition), which incorporates the JORC Code.

Summary of principal objectives

SRK has prepared an independent technical assessment and valuation of Coalbank’s exploration permits and authorities to prospect located in southern Queensland. SRK understands that this report is to be attached as an appendix to RSM’s Independent Expert’s Report in relation to the proposed issue of shares and convertible notes to a company associated with the Coalbank Chairman, Mr Anthony Chan. The Report has been undertaken under the guidelines of the VALMIN Code (2015 Edition), which incorporates the JORC Code, and complies with the technical property information required under various securities laws of Australia.

While the VALMIN Code 2015 states that decisions as to which valuation methodology is used are the responsibility of the Expert or Specialist, where possible, SRK considers a number of valuation methods. The aim of this approach is to compare the results achieved using different methods to select a preferred value within a valuation range. This reflects the uncertainty in the data and interaction of the various assumptions inherent in the valuation.

The valuation is current at 20 July 2016 and monetary amounts are in Australian dollars (A$) as specified throughout the Report.

SRK has selected the most appropriate valuation technique for the assets, based on the development stages of the projects and the amount of available information. This SRK Valuation Report expresses an opinion regarding the value of the mineral assets. It does not comment on the ‘fairness and reasonableness’ of any transaction between the project’s owners and any other parties.

In accordance with the VALMIN Code, mineral assets comprise all property including but not limited to real property, intellectual property, mining and exploration tenements held or acquired in connection with the exploration of, the development of and the production from those tenements together with all plant, equipment and infrastructure owned or acquired for the development, extraction and processing of minerals in connection with those tenements.

Coalbank’s Tenure

Coal

Coalbank’s coal tenement details as at the time of reporting are summarised in Table ES-1. Tambo Coal and Gas Pty Ltd is the registered holder of Queensland permits for coal (“EPCs”) 1418, 1625, 1632, 1719 and 1993. EPCs 1993 and 1719 form the Blackall Project. EPCs 1418, 1625 and 1632 form the Tambo Project.

Table ES-1: Tenement status for Coalbank’s coal project portfolio (as at 20 July 2016)

Tenement	Holder	Project Name	Granted	Expiry	Area (km2)
EPC 1418	Tambo Coal and Gas	Tambo	21 May 2010	20 May 2020	50
EPC 1625	Tambo Coal and Gas	Tambo	29 April 2010	28 April 2020	411
EPC 1632	Tambo Coal and Gas	Tambo	29 October 2010	28 October 2020	115
EPC 1719	Tambo Coal and Gas	Blackall	28 July 2010	27 July 2020	480
EPC 1993	Tambo Coal and Gas	Blackall	17 March 2010	16 March 2020	405

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SRK has been advised by Coalbank that it intends to surrender EPC 1418 and that this permit should be excluded from this valuation assessment. SRK notes that Coalbank remains to submit the surrender documentation and as such EPC 1418 is still registered to the Company on the Queensland Department of Natural Resources and Mines tenure datasite.

Gas

Coalbank’s gas tenement details as at the time of reporting are summarised in Table ES-2. Surat Gas Pty Ltd is the registered holder and sole beneficial owner of Queensland authorities to prospect (“ATPs”) 1072, 1095 and 1098.

Table ES-2: Tenement status for Coalbank’s gas project portfolio (as at 20 July 2016)

Tenement	Holder	Granted	Expiry	Area (Subblock)	DNRM Area (km2)
ATP 1072	Surat Gas Pty Ltd	24 Sep 2010	31 Jan 2017	2,175	6,525
ATP 1098	Surat Gas Pty Ltd	26 May 2010	31 May 2019	1,792	5,376
ATP1095	Surat Gas Pty Ltd	26 May 2010	31 May 2019	540	1,620

Tambo Project

SRK has applied two methods (Geoscientific Rating and Comparative Transactions) to provide an opinion on the market value for the Tambo Project EPCs (EPC 1632 and 1625) in Queensland, Australia.

SRK initially considered the Geoscientific Rating method as the primary valuations approach and a comparable transaction method to benchmark the geological valuation approaches. The valuation summary is provided in Table ES-3:

Table ES-3: Valuation Summary for the Tambo Project

Valuation Methodology		Valuation
	Low (A$)	High (A$)	Preferred (A$)
Geoscientific	109,000	552,000	283,000
Comparable Transactions	158,000	526,000	342,000
Specialist Opinion	130,000	540,000	310,000

Blackall Project

SRK has applied two methods (Multiples of Exploration and Comparative Transactions) to provide an opinion on the market value for the Blackall Project EPCs (EPC 1719 and 1993) in Queensland, Australia. SRK applied the Geoscientific Method to value the remaining exploration potential within EPC 1719 only and considers the value of that exploration potential determined from that method to be immaterial to the final valuation opinion.

SRK has equally considered the Multiples of Exploration method and the Comparable Transaction method as the primary valuation approach. The valuation summary is provided in Table ES-4. In determining the final specialist opinion, SRK note good correlation between the two preferred valuation ranges.

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Table ES-4: Valuation Summary for the Blackall Project

Valuation Methodology		Valuation
	Low (A$)	High (A$)	Preferred (A$)
Multiples of Exploration	12,250,000	15,200,000	14,250,000
Comparable Transactions	12,920,000	19,290,000	16,110,000
+ Geoscientific Rating (EPC1719)	13,000	45,000	24,000
Specialist Opinion	12,500,000	17,000,000	15,000,000

In consideration of the final estimate of fair market value of Coalbank’s assets SRK has adopted a valuation range positioned to the varying levels of technical and geological uncertainties across the assets. SRK has not applied market premiums or discounts to the technical valuation to arrive at the market value. The final valuation is provided in Table ES-5.

Table ES-5: Summary of SRK’s Valuation of Coalbank’s coal assets as of 20 July 2016

Project	Owner	Low Value (A$M)	High Value (A$M)	Preferred Value (A$M)
Coalbank’s Coal Assets	CBQ	12.6	17.5	15.3

With regard to Coalbank’s gas tenements, after reviewing the available historical data, SRK considers the market approach to be the most suitable for valuation. Based on a combination of comparable transactions and other market considerations, SRK has estimated the value of a 100% interest in Coalbank’s three petroleum ATPs likely to reside in the range A$0 (representing the scenario that these tenures are handed back to the government due to the inability to meet the outstanding work commitments) to A$2.6 M (top end of the comparable transaction range), with a preferred value of A$1.3 M..

SRK notes that any errors between tables are due to rounding.

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	Executive Summary ..................................................................................................................................... ii	Executive Summary ..................................................................................................................................... ii
	Disclaimer.................................................................................................................................................... ix
	List	of Abbreviations.....................................................................................................................................x
1	Introduction and Scope of Report...............................................................................1
	1.1	Background.........................................................................................................................................1
	1.2	Coalbank’s Queensland Tenure .........................................................................................................1
		1.2.1 Coal .........................................................................................................................................1
		1.2.2 Gas..........................................................................................................................................2
	1.3	Tenements Status and Compliance....................................................................................................3
2	Program Objectives and Work Program.....................................................................4
	2.1	Program objectives .............................................................................................................................4
	2.2	Scope of Work.....................................................................................................................................4
	2.3	Reporting Standard.............................................................................................................................4
	2.4	Key Sources of Data ...........................................................................................................................4
	2.5	Effective Date......................................................................................................................................4
	2.6	Indemnities..........................................................................................................................................4
	2.7	Verification, Validation and Reliance ..................................................................................................5
	2.8	Work Program.....................................................................................................................................5
		2.8.1 Legal Matters...........................................................................................................................5
	2.9	Limitations, Reliance on Information, Declaration and Consent.........................................................6
		2.9.1 Limitations ...............................................................................................................................6
		2.9.2 Reliance on Information ..........................................................................................................6
		2.9.3 Statement of SRK Independence............................................................................................6
		2.9.4 Consent ...................................................................................................................................6
		2.9.5 Consulting Fees ......................................................................................................................7
3	Coal Projects – Surat / Eromanga Basin ....................................................................8
	3.1	Blackall Project....................................................................................................................................8
		3.1.1 Introduction..............................................................................................................................8
		3.1.2 Location access and infrastructure .........................................................................................8
		3.1.3 Tenure ...................................................................................................................................10
		3.1.4 History ...................................................................................................................................10
		3.1.5 Geology .................................................................................................................................13
		3.1.6 Coal Resource.......................................................................................................................18
		3.1.7 Potential.................................................................................................................................21
	3.2	Tambo Project...................................................................................................................................21
		3.2.1 Location, access and infrastructure ......................................................................................21
		3.2.2 Tenure ...................................................................................................................................22

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		3.2.3 Geology .................................................................................................................................22
		3.2.4 History ...................................................................................................................................22
		3.2.5 Potential.................................................................................................................................24
4	Gas	Project .................................................................................................................25
	4.1	Available Data...................................................................................................................................29
5	Coal Market Analysis .................................................................................................34
6	Valuation .....................................................................................................................35
	6.1	Valuation Objective ...........................................................................................................................35
	6.2	Valuation Methodology .....................................................................................................................35
	6.3	Coal Valuation...................................................................................................................................36
		6.3.1 Geoscientific Rating (or modified Kilburn approach).............................................................36
		6.3.2 Multiple of Exploration Expenditures.....................................................................................41
		6.3.3 Comparable Transactions (of buy-ins or acquisitions)..........................................................42
		6.3.4 Other Considerations ............................................................................................................55
		6.3.5 Comparative Valuation Summary (Blackall Project) .............................................................56
	6.4	Gas Valuation....................................................................................................................................57
		6.4.1 Comparable Transactions .....................................................................................................57
		6.4.2 Actual transactions ................................................................................................................59
		6.4.3 Summary...............................................................................................................................59
7	Valuation Summary....................................................................................................60
	7.1	Tambo Project...................................................................................................................................60
	7.2	Blackall Project..................................................................................................................................60
	7.3	Gas Project .......................................................................................................................................61
8	References..................................................................................................................62

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List of Tables

Table	1-1:	Tenement status for Coalbank’s coal project portfolio (as at July 2016).....................................2
Table	1-2:	Summary of details of ATPs ........................................................................................................2
Table	1-3:	ATP work commitments and proposed expenditures ..................................................................3
Table	3-1:	Blackall Project tenement status................................................................................................10
Table	3-2:	Exploration in the Blackall Area .................................................................................................10
Table	3-3:	Coal Quality data for EER’s Idalia EPC1398 .............................................................................18
Table	3-4:	Summary of Inverness Coal Resource ......................................................................................19
Table	3-5:	Tambo Project tenement status .................................................................................................22
Table	3-6:	Historic bore holes in the Tambo area.......................................................................................23
Table	4-1:	Summary of wells drilled within ATPs 1072, 1095 and 1098.....................................................30
Table	6-1:	Modified coal property rating criteria..........................................................................................38
Table	6-2:	Geoscientific Rating factors and Technical Value for the three EPCs, based on granted permit
		status, using an A$500/km2 BAC...............................................................................................40
Table	6-3:	Geoscientific Rating factors and technical value for the three EPCs, using an A$500/km2
		BAC)...........................................................................................................................................41
Table	6-4:	Multiple of exploration expenditure valuation.............................................................................42
Table	6-5:	Generic probabilities used in assessing the value of JV agreements .......................................43
Table	6-6:	Surat and Galilee Basin - early stage coal exploration transactions .........................................47
Table	6-7:	Surat Basin recent coal exploration transactions – implied permit values (A$).........................48
Table	6-8:	Galilee Basin recent coal exploration transactions – implied permit values (A$) ......................48
Table	6-9:	Area based comparative transaction summary and SRK preferred $/km² ranges ....................49
Table	6-10:	Comparable transaction valuation of the Tambo Project EPCs.................................................50
Table	6-11:	Recent Galilee and Eromanga Basin transactions summary ....................................................53
Table	6-12:	Factored A$/Exploration Target or Resource tonne analysis for key Galilee and Eromanga Basin
		comparative transactions ...........................................................................................................54
Table	6-13:	Galilee Project implied value (A$/t) versus Resource size ........................................................55
Table	6-14:	Valuation Summary of Blackall Project......................................................................................56
Table	6-15:	Comparable transaction valuation for a 100% interest in EPCs 1719 & 1993 ..........................56
Table	6-16:	Comparable transactions for petroleum acreage with no associated historical production or
		Reserves or Contingent Resources...........................................................................................58
Table	6-17:	SRK’s estimate of a 100% interest in Coalbank’s ATPs............................................................59
Table	7-1:	Valuation Summary for the Tambo Project................................................................................60
Table	7-2:	Valuation Summary for the Blackall Project...............................................................................60

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List of Figures

Figure	3-1:	Location of Coalbank’s Blackall and Tambo Projects with respect to existing infrastructure......9
Figure	3-2:	Drill hole location and cumulative coal thickness at the Inverness deposit ...............................12
Figure	3-3:	Stratigraphy of the Eromanga Basin..........................................................................................14
Figure	3-4:	Geology of the Blackall Project area..........................................................................................15
Figure	3-5:	Cross-section through the Inverness Deposit............................................................................17
Figure	4-1:	Location map of ATP 1072, 1095 and 1098 ..............................................................................25
Figure	4-2:	Location map of ATP 1072, 1095 and 1098 with available drill holes, seismic lines and petroleum
		pipeline.......................................................................................................................................26
Figure	4-3:	Stratigraphy of the area of interest.............................................................................................27
Figure	4-4:	Regional framework ...................................................................................................................28
Figure	4-5:	PW87-96 seismic line showing conventional oil and gas leads, ATP 1072...............................28
Figure	4-6:	Location of available wells and 2D seismic lines within ATP 1072 and ATP 1098....................30
Figure	4-7:	Location of available stratigraphic wells within ATP 1095 .........................................................31
Figure	4-8:	Vitrinite reflectance versus depth...............................................................................................33
Figure	5-1:	Australian thermal coal...............................................................................................................34
Figure	6-1:	Location of comparable transactions in the Surat and Clarence-Moreton Basins.....................45
Figure	6-2:	Location of comparable transactions in the Galilee and Eromanga Basins ..............................46
Figure	6-3:	Galilee/ Eromanga transaction comparatives – development curve (Yardstick method)..........51
Figure	6-4:	Correlation between implied multiplier (A$/t) and deposit size (Total Resource - JORC).........55

List of Appendices

Appendix A: Base Acquisition Costs Appendix B: Yardstick Methodology

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Disclaimer

The opinions expressed in this Report have been based on the information supplied to SRK Consulting (Australasia) Pty Ltd (SRK) by Coalbank Limited (Coalbank). The opinions in this Report are provided in response to a specific request from RSM Corporate Services Pty Ltd (RSM) to do so. SRK has exercised all due care in reviewing the supplied information. Whilst SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them. Opinions presented in this Report apply to the site conditions and features as they existed at the time of SRK’s investigations, and those reasonably foreseeable. These opinions do not necessarily apply to conditions and features that may arise after the date of this Report, about which SRK had no prior knowledge nor had the opportunity to evaluate.

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List of Abbreviations

Abbreviation	Meaning / Definition
%	percent
~	approximately
<	less than
>	greater than
2D	2-dimensional
3D	3-dimensional
A$	Australian dollars
adb	Air dried basis (coal quality test)
AIG	Australian Institute of Geoscientists
ASX	Australian Securities Exchange
ATP	Authority to Prospect
AusIMM	Australasian Institute of Mining and Metallurgy
AMC	Agricola Mining Consultants Pty Ltd
BAC	Base Acquisition Cost
BMR	Bureau of Mineral Resources
CBQ	Coalbank Limited
CV	Calorific Value (coal quality test)
DCF	Discounted Cash Flow
E	east
EB	Expenditure Base
EER	East Energy Resources Limited
EPC	Exploration Permit Coal
EV	Enterprise Value
FC	Fixed Carbon (coal quality test)
GRM	Geological Risk Method
GSQ	Geological Survey of Queensland
IER	Independent Expert Report
IRTM	Interactive Resource and Tenure Maps
IM	Inherent Moisture (coal quality test)
IND	Indicated Resource Category
INF	Inferred Resource Category
ITR	Independent Technical Report
JORC Code 2004	Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), 2004.
JORC Code 2012	Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), 2012.
JV	Joint Venture
k	thousand

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Abbreviation	Meaning / Definition
km / km²	kilometre / square kilometres
m	metre
M	million
MAAPG	Member of the American Association of Petroleum Geologists
m3	cubic metre
MEAS	Measured Resource Category
MEE	Multiples of Exploration Expenditure
MEG	Metals Economics Group
MLA	Mining Licence Application
MPESA	Member of the Petroleum Exploration Society of Australia
MRICS	Member of the Royal Institution of Chartered Surveyors
Mt	million tonnes
N	north
OC	Open-cut
PEM	Prospectivity Enhancement Multiplier
PROB	Probable Reserve Category
PROV	Proven Reserve Category
QA/QC	quality assurance / quality control
QDEX	Queensland Digital Exploration Reports System
RA	Restricted Area
RSM	RSM Corporate Australia Pty Ltd
RoMax	A measure of coal rank through vitrinite reflectance
S	south
SAMVAL	South African code for reporting of Mineral Asset Valuation
SG	specific gravity
SPE	Society of Petroleum Engineers
SRK	SRK Consulting (Australasia) Pty Ltd
Stantons	Stanton International Securities
T	tonne
TGC	Tambo Coal & Gas Pty Ltd
TM	Total Moisture (coal quality test)
TM	Trademark
TS	Total Sulphur (coal quality test)
UG	Underground
US$	United States dollars
VALMIN Code 2015	Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets. The VALMIN Code is the code adopted by The Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. It is binding upon all members of these Institutes.
VM	Volatile Matter (coal quality test)
W	west
Abbreviation	Meaning / Definition

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Abbreviation	Meaning / Definition
%	percent
~	approximately
<	less than
>	greater than
3D	3-dimensional
A$	Australian dollars
ASX	Australian Securities Exchange
AusIMM	Australasian Institute of Mining and Metallurgy
BAC	base acquisition cost
DCF	discounted cash flow
E	east
EPC	Exploration Permit Coal
ITR	Independent Technical Report
JORC Code 2004	Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), 2004.
JORC Code 2012	Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), 2012.
k	thousand
km / km²	kilometre / square kilometres
m	metre
M	million
m3	cubic metre
MEE	Multiples of Exploration Expenditure
MEG	Metals Economics Group
MLA	Mining Licence Application
Mt	million tonnes
N	north
QA/QC	quality assurance / quality control
QDEX	Queensland Digital Exploration Reports System
S	south
SG	specific gravity
SRK	SRK Consulting (Australasia) Pty Ltd
T	tonne
TM	Trademark
US$	United States dollars
VALMIN Code 2015	Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets. The VALMIN Code is the code adopted by The Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. It is binding upon all members of these Institutes.
W	west

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1 Introduction and Scope of Report

1.1 Background

RSM Corporate Australia Pty Ltd (RSM) has been engaged by Coalbank Limited (Coalbank or the Company) to prepare an Independent Expert’s Report (IER) in relation to a proposed transaction involving the proposed issue of shares and convertible notes to a company associated with Coalbank’s Chairman, Mr Anthony Chan. In order to complete the IER, RSM has requested SRK Consulting (Australasia) Pty Ltd (SRK) to prepare an independent technical assessment and valuation of Coalbank’s exploration permits and authorities to prospect located in central Queensland. SRK understands that this report is to be attached as an appendix to RSM’s IER.

As defined in the VALMIN Code, mineral assets comprise all property including (but not limited to) tangible property, intellectual property, mining and exploration Tenure and other rights held or acquired in connection with the exploration, development of and production from those Tenures. This may include the plant, equipment and infrastructure owned or acquired for the development, extraction and processing of Minerals in connection with that Tenure.

For this valuation, all projects were classified according to the development stage categories (VALMIN Code 2015):

Early Stage Exploration Projects – Tenure holdings where mineralisation may or may not have been identified, but where Mineral Resources have not been identified;
Advanced Exploration Projects Tenure holdings where considerable exploration has been undertaken and specific targets have been identified that warrant further detailed evaluation, usually by drill testing, trenching or some other form of detailed geological sampling. A Mineral Resource estimate may or may not have been made, but sufficient work will have been undertaken on at least one prospect to provide both a good understanding of the type of mineralisation present and encouragement that further work will elevate one or more of the prospects to the Mineral Resources category;
Pre-Development Projects – Tenure holdings where Mineral Resources have been identified and their extent estimated (possibly incompletely) but where a decision to proceed with development has not been made. Properties at the early assessment stage, properties for which a decision has been made not to proceed with development, properties on care and maintenance and properties held on retention titles are included in this category if Mineral Resources have been identified, even if no further work is being undertaken;
Development Projects Tenure holdings for which a decision has been made to proceed with construction or production or both, but which are not yet commissioned or operating at design levels. Economic viability of Development Projects will be proven by at least a Pre-Feasibility Study; and
Production Projects – Tenure holdings - particularly mines, wellfields and processing plants that have been commissioned and are in production .

1.2 Coalbank’s Queensland Tenure

1.2.1 Coal

Coalbank’s coal tenure details as at the time of reporting are summarised in Table 1-1. All tenements are registered to Tambo Coal and Gas Pty Ltd, a 100% owned subsidiary company of Coalbank.

Tambo Coal and Gas Pty Ltd is the registered holder of Queensland Exploration Permits for Coal (“EPC”) 1418, 1625, 1632, 1719 and 1993. EPCs 1993 & 1719 form the Blackall Project. EPCs 1418, 1625 and 1632 form the adjoining Tambo Project.

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The location of Coalbank’s EPCs is shown in Figure 3-1.

Table 1-1: Tenement status for Coalbank’s coal project portfolio (as at July 2016)

Tenement	Registered Holder	Project Name	Granted	Expiry	Area (km2)
EPC 1418	Tambo Coal and Gas	Tambo	21 May 2010	20 May 2020	50
EPC 1625	Tambo Coal and Gas*	Tambo	29 April 2010	28 April 2020	411
EPC 1632	Tambo Coal and Gas*	Tambo	29 October 2010	28 October 2020	115
EPC 1719	Tambo Coal and Gas*	Blackall	28 July 2010	27 July 2020	480
EPC 1993	Tambo Coal and Gas*	Blackall	17 March 2010	16 March 2020	405

Note:* jointly held with Coalbank: Source Queensland MinesOnlineMaps

1.2.2 Gas

Surat Gas Pty Ltd, wholly owned subsidiary of Coalbank, currently holds three granted Authorities to Prospect (ATPs) for petroleum 1072, 1095 and 1098 located in southeast Queensland, Australia.

Table 1-2: Summary of details of ATPs

ATP	Date lodged	Date approved	Expiry date	Operator	Native title status	Area (km²)
ATP 1072	27/09/2010	24/01/2013	31/01/2019	Surat Gas Pty Ltd	Native Title Excluded	6,642.0
ATP 1095	27/09/2010	26/05/2015	31/05/2019	Surat Gas Pty Ltd	Right To Negotiate Agreement	1,663.6
ATP 1098	27/09/2010	26/05/2015	31/05/2019	Surat Gas Pty Ltd	Right To Negotiate Agreement	5,471.0

Source IRTM

The work program commitments for each ATP are presented in Table 1-3.

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Table 1-3: ATP work commitments and proposed expenditures

Year	ATP 1072P	ATP 1095P	ATP 1098P
1	Geological and geophysical studies 80 km seismic processing 2,800 m of drilling (4 wells 700 m deep) $1.52M	Geological and geophysical studies 2,700 m of drilling (3 wells 900 m deep) $2.055M	Geological and geophysical studies 80 km seismic reprocessing 2,800 m of drilling (4 wells 700 m deep) $1.52M
2	Geological and geophysical studies 120 km 2D seismic 2,100 m of drilling (3 wells 700 m deep) $2.36M	Geological and geophysical studies 100 km 2D seismic 4,500 m of drilling (5 wells 900 m deep) $3.92M	Geological and geophysical studies 120 km 2D seismic 2,100 m of drilling (3 wells 700 m deep) $2.36M
3	Geological and geophysical studies 3,500 m of drilling (5 wells 700 m deep) $2.69M	Geological and geophysical studies 6,300 m of drilling (7 wells 900 m deep) 5.335M	Geological and geophysical studies 3,500 m of drilling (5 wells 700 m deep) $2.69M
4	Geological and geophysical studies 4,900 m of drilling (7 wells 700 m deep) $2.99M	Geological and geophysical studies 8,100 m of drilling (9 wells 900 m deep) $6.085M	Geological and geophysical studies 4,900 m of drilling (7 wells 700 m deep) $2.99M

1.3 Tenements Status and Compliance

SRK has not independently verified ownership and the current standing of the tenements and is not qualified to make legal representations in this regard. Instead, SRK has relied on information provided by Coalbank and validated this tenement information against summary information available through the Queensland Government’s IRTM website.

SRK has prepared this Report and the associated valuation on the understanding the tenement portfolio outlined below is currently in good standing. SRK has not attempted to establish the legal status of tenements with respect to Native Title or potential environmental and access restrictions.

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2 Program Objectives and Work Program

2.1 Program objectives

This Report and associated valuation has been prepared by SRK under instructions from RSM. This Report complies with the technical property information required under various securities laws of Australia.

2.2 Scope of Work

SRK has prepared a Technical Assessment Report under the guidelines of the JORC and VALMIN Codes. The VALMIN Code incorporates the JORC Code for the reporting of Exploration Results, Mineral Resources and Ore Reserves.

As per the VALMIN Code, a first draft of the report will be supplied to Coalbank to check for material accuracy before the final report is issued. SRK’s scope of work is limited to the second draft of the report after a round of edits by Coalbank. The final report will be issued following review of any client comments by the project team.

The valuation is current at 20 July 2016 and monetary amounts are in Australian dollars (A$) as specified throughout the Report.

SRK has selected the most appropriate valuation technique for the assets, based on the development stages of the projects and the amount of available information. This Report expresses an opinion regarding the value of the mineral assets. It does not comment on the ‘fairness and reasonableness’ of any transaction between the project’s owners and any other parties.

2.3 Reporting Standard

This Report has been prepared to the standard of, and is considered by SRK to be a Technical Assessment and Valuation Report prepared under the guidelines of the VALMIN Code 2015. It should be noted that the authors of this Report are Members of either the Australasian Institute of Mining and Metallurgy (AusIMM) or the Australian Institute of Geoscientists (AIG) and, as such, are bound by both the VALMIN and JORC Codes.

Where SRK has relied on Mineral Resource estimates for its valuation, SRK has quoted the Competent Person for these resources and has obtained their consent to do so.

2.4 Key Sources of Data

Data and information on the assets used to prepare this report are referenced throughout the report.

2.5 Effective Date

The effective date (Effective Date) of this report is deemed to be 20 July 2016.

2.6 Indemnities

As recommended by the VALMIN, Coalbank has agreed to provide SRK with an indemnity (letter dated 1 July 2016) under which SRK is to be compensated for any liability and/or any additional work or expenditure resulting from any additional work required:

which results from SRK's reliance on information provided by Coalbank or to Coalbank not providing material information; or
which relates to any consequential extension workload through queries, questions or public hearings arising from this Report.

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2.7 Verification, Validation and Reliance

Coalbank has confirmed in writing to SRK that full disclosure has been made of all material information and that to the best of its knowledge and understanding, the information provided by it, was complete, accurate and true and not incorrect, misleading or irrelevant in any material aspect. SRK has no reason to believe that any material facts have been withheld.

The report herein is dependent upon technical inputs as provided by Coalbank and was taken in good faith by SRK. SRK has not independently verified Mineral Resources estimates by means of recalculation.

2.8 Work Program

The Project commenced in early July 2016, with a review of existing remote electronic company data and other information sourced by SRK from literature and company websites as well as using subscription databases such as SNL database services. SRK consultants worked through the relevant databases, compiled the report and completed research on comparable market transactions to assist with the valuation.

SRK notes that the VALMIN Code 2015 recommends that a site inspection be completed should it be ‘likely to reveal information or data that is material to the report’. Coalbank has advised SRK that site visits to the most advanced exploration projects are not considered material, due to the stage of exploration. Therefore, a site visit was not undertaken for this project.

As per the VALMIN Code 2015, a first draft of the report was supplied to Bruce Patrick, Chief Operating Officer of Coalbank to check for material accuracy on 15 July 2016. The final report was supplied to Coalbank on 20 July 2016.

SRK has conducted a review and assessment of the available technical information for Coalbank’s projects, which included the following:

Access to key Coalbank personnel for discussion and enquiry;
A review of its Mineral Resource estimates, including the methodologies applied in determining such estimates and classifications; and
A review of Technical Reports and supporting documentation prepared by Coalbank.

This report has been prepared based on a technical review by a team of consultants sourced from SRK’s offices in Australia. Details of the qualifications and experience of the consultants who have carried out the work in this report, who have extensive experience in the mining industry and are members in good standing of appropriate professional institutions, are set out below.

Bryce Healy, Principal Consultant (Geology), PhD (Geology), MAIG – Geological and Structural Exploration and Evaluation, Independent Technical Reviews, Valuation and Reporting
Mathew Davies, Senior Consultant (Geology), BSc (Hons), MAusIMM – Mineral and Coal Exploration, support for Independent Technical Reviews, Valuation and Reporting
Bruce McConachie, Principal Consultant (Geology) PhD, MAppSc, BAppSc, MAAPG, MPESA, MSPE, MAusIMM – CSG Exploration, Independent Technical Reviews, Valuation and Reporting Jeames McKibben, Principal Consultant (Project Evaluation), BSc(Hons), MBA, MAusIMM(CP), MAIG, MRICS – Project Management and Peer Review

2.8.1 Legal Matters

SRK has not been engaged to comment on any legal matters.

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2.9 Limitations, Reliance on Information, Declaration and Consent

2.9.1 Limitations

SRK’s opinion contained herein is based on information provided to SRK by Coalbank throughout the course of SRK’s investigations as described in this report, which in turn reflect various technical and economic conditions at the time of writing.

This report includes technical information, which requires subsequent calculations to derive subtotals, totals, averages and weighted averages. Such calculations may involve a degree of rounding and consequently introduce an error. Where such errors occur, SRK does not consider them to be material.

As far as SRK has been able to ascertain, the information provided by Coalbank was complete and not incorrect, misleading or irrelevant in any material aspect.

2.9.2 Reliance on Information

SRK believes that its opinion must be considered as a whole and that selecting portions of the analysis or factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the opinions presented in this report. The preparation of such a report is a complex process and does not lend itself to partial analysis or summary.

SRK’s effective date for the Report is based on information provided by Coalbank throughout the course of SRK’s investigations, which in turn reflect various technical-economic conditions prevailing at the date of this report.

SRK assumes no obligation or undertaking to advise any person of any change in circumstances, which comes to its attention after the date of this review, revise or update the report or opinion.

2.9.3 Statement of SRK Independence

Neither SRK nor any of the authors of this Report have any material present or contingent interest in the outcome of this Report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of SRK.

SRK has no prior association with Coalbank or RSM in regard to the mineral assets that are the subject of this Report. SRK has no beneficial interest in the outcome of the technical assessment being capable of affecting its independence.

Whilst employed by Xstract Mining Consultants Pty Ltd, Mr McKibben has previously been involved in a number of assignments for Coalbank during the period 2010 to 2014, including public and internal technical assessments and valuations of the Tambo and Blackall coal projects. Mr McKibben considers himself to be independent for the purposes of this assignment and has restricted his activities to project management and internal peer review.

2.9.4 Consent

SRK consents to this report being included, in full, in RSM documents in the form and context in which the technical assessment is provided, and not for any other purpose. SRK provides this consent on the basis that the technical assessments expressed in the Summary and in the individual sections of this Report are considered with, and not independently of, the information set out in the complete Report.

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2.9.5 Consulting Fees

SRK’s estimated fee for completing this Report is based on its normal professional daily rates plus reimbursement of incidental expenses. The fees are agreed based on the complexity of the assignment, SRK’s knowledge of the assets and availability of data. The fee payable to SRK for this engagement is estimated at approximately A$20,000. The payment of this professional fee is not contingent upon the outcome of the Report.

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3 Coal Projects – Surat / Eromanga Basin

3.1 Blackall Project

3.1.1 Introduction

The Blackall Project is Coalbank’s most advanced project and the main focus for the Company’s recent exploration activities. These activities have successfully delineated a significant coal resource at the Inverness deposit.

The Blackall Project lies at the north western end of Coalbank’s Surat/Eromanga tenement grouping (Figure 3-1).

3.1.2 Location access and infrastructure

Coalbank’s Blackall Project is centred 20 km southeast of the town of Blackall, approximately 110 km northeast of Charleville and 680 km west-north west of Brisbane in southwestern Queensland. The project lies immediately east of East Energy Resources Limited’s (“EER”) Blackall resource and southwest of Waratah Coal Limited’s China First Project and GVK-Hancock’s Alpha project.

Access to the project is along the sealed Landsborough Highway, which connects Blackall to Tambo and then Roma. Secondary access is via a series of minor roads from the highway including Pentwyn Road, Romulus Road and Ravensbourne Road. Unsealed local roads and farm tracks are used for exploration purposes.

Any future coal production from Coalbank’s Surat/Eromanga tenement group has the option of being exported through ports at Gladstone, Dalrymple Bay, Abbot Point or Hay Point. The existing Central Line lies 110 km to the northeast and a proposed link connecting the Galilee Basin to the existing rail network lies a further 30 km to the north (Figure 3-1).

The Blackall Project has access to an existing rail easement (although no line currently exists) along the Blackall-Jericho rail corridor and is approximately 112 km to the existing Central Rail Line, which offers connections to Emerald and Gladstone, as well as the proposed Galilee Rail infrastructure planned to connect to Abbot Point.

Blackall is the administrative centre of the Blackall-Tambo district and has a population of approximately 1,400. It offers a range of services include council chambers, a hospital and medical facilities, education facilities, accommodation and emergency services. Regular scheduled flights connect Blackall to Brisbane.

The topography of the project area is generally flat with elevations ranging from 280 to 320 m above sea level. The project is drained by the Barcoo River and its tributaries, specifically Boree Creek, a seasonal, braided, north west-flowing creek system which bounds the Inverness coal deposit to the north.

The dominant industry in the area is grazing.

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Figure 3-1: Location of Coalbank’s Blackall and Tambo Projects with respect to existing infrastructure

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3.1.3 Tenure

The Blackall Project consists of two granted Exploration Permits for Coal (“EPC”), EPC1993 (Blackall South Corner) and EPC1719 (Barcoo River – Blackall Rail).

EPC1993 was granted jointly to Lodestone and Tambo Coal & Gas Pty Ltd (“TCG”) on 17 March 2010 for a term of four years. EPC1719 was granted jointly to Lodestone and TCG on 28 July 2010 for a five-year term. Lodestone formally changed its name to Coalbank in June 2010. TCG is a wholly owned subsidiary of Coalbank.

Table 3-1: Blackall Project tenement status

Tenement / Name	Status	Granted	Expiry	Area (km2)
EPC1719 / Barcoo River – Blackall Rail	Granted	28 July 2010	27 July 2020	480
EPC1993 / Blackall South Corner	Granted	17 March 2010	16 March 2020	405

Source IRTM

These tenures cover predominantly pastoral areas and lies to the west of the bulk of cropping land regarded as strategic to the State. Other than public road easements, all land in the region is privately owned.

Coalbank has negotiated an Aboriginal Cultural Heritage Management Agreement with the Bidjara People to facilitate the handling of Cultural Heritage matters associated with proposed exploration over both the Blackall and Tambo Project areas. In conjunction with Coalbank field personnel, Cultural Heritage Field Officers from the Bidjara People carried out field based cultural heritage inspections of the potential exploration sites prior to any ground disturbing activities taking place. These inspections indicated that there were few items or objects of Aboriginal Cultural Heritage within the proposed disturbance areas, and those that were present were easily mitigated. Native Title is excluded from the Blackall EPC’s.

3.1.4 History

Numerous water bores drilled since the early 1900s record coal intercepts within the EPCs.

Historical data relevant to the Blackall Project area consist of two petroleum bores, Swaylands #1 and Brynderwin #1 bore. Swaylands #1 bore was completed in the 1960s and intersected the Winton Formation in the northeast of EPC1993 within Coalbank’s current Inverness deposit.

Other relevant exploration conducted in the area is summarised in Table 3-2.

Table 3-2: Exploration in the Blackall Area

Period	Tenure	Key Activities	Comment
1974 to 1975	EPC154 (Blackall)	38 holes	Several thin, banded seams encountered in the Winton Formation. Coals of poor quality, very low rank, with high ash, low volatile and poor specific energy values. Coal seam believed to be discontinuous laterally and multi-split.
Current	EPC1149 (Blackall)		East Energy’s has reported significant coal resources within the Winton Formation of EPC1149, as well as the recently acquired EPC1398 and EPC1399.

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In October 2009, Lodestone commissioned a 1:100,000 scale photogeological study over its Eromanga and Surat Basin holdings, including EPC1993 and EPC1719. The objective of the study was to investigate the local stratigraphy and structure of the Eromanga/Surat Basins with a view to providing data for ongoing exploration in the region. The study was carried out using threedimensional (“3D”) stereoscopic images prepared from detailed satellite imagery and topographic data. This photogeological study supported the contention that coal-bearing strata in the study area may be the lateral equivalent of the Walloon Coal Measures and may be thicker than previously understood. This interpretation provided the stimulus for Lodestone’s (and Coalbank’s) subsequent exploration activities.

In late August 2011, the Company commenced drilling south of Blackall. Initial drilling confirmed the presence of coal seams in EPC1993. In total, 35 drill holes were completed of which four were cored and sampled for coal analysis. Thirty-four drill holes were geophysically logged. This drilling included a deeper hole reaching 293 metres to establish stratigraphic relationships with respect to the known regional stratigraphy, and a north-south drill section along strike, with each hole confirming the presence of Winton Formation coal seams.

In early 2012, Coalbank initiated a drilling program at Blackall designed to provide further geological data to support the declaration of the company’s maiden JORC Code compliant coal resource. A total of 76 drill holes were completed of which 17 were cored and sampled. Seventy-three drill holes were geophysically logged.

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Figure 3-2: Drill hole location and cumulative coal thickness at the Inverness deposit Source: Competent Persons Report Blackall Coal Project (2015).

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3.1.5 Geology

Regional Geology

The Blackall Project is located within the southeast Eromanga Basin. The Eromanga Basin is continuous with the Surat Basin across the Nebine Ridge. Both the Eromanga and Surat Basins are components of the Great Artesian Basin, which is a Jurassic-Cretaceous intra-cratonic basin that covers 1.7 million km[2] of Eastern Australia. These basins unconformably overlay the Permian Bowen, Galilee and Gunnedah Basins.

The Eromanga and Surat Basins contain sediments of fluvial and fluvial-lacustrine origin deposited during the late Triassic to the early Cretaceous, followed by fluvial sedimentation in the early-middle Cretaceous. A number of sedimentation cycles have been recognised in both basins. The thickest sedimentation occurred in the Taroom Trough with up to 2,500 m of sedimentary rocks deposited.

The Jurassic and Cretaceous stratigraphy of the Eromanga Basin is shown in Figure 3-3.

In the Eromanga Basin, the Birkhead Formation is correlative with the Walloon Coal Measures within the Injune Creek Group (Swarbrick, 1973). Although coal seams up to 1.5 m are previously reported from the Birkhead Formation, they are generally much thinner than their Walloon equivalents. No coal from the Birkhead Formation has been mined to date.

Above the Walloon Coal Measures there is a sedimentary succession containing sandstones, siltstones, mudstones and thin banded coal seams. Coal has been recorded in the Westbourne, Orallo, and Bungil Formations, as well as at the top of the Hooray Sandstone and in the Winton Formation.

Lenticular coal seams, up to 5 m thick, occurring within a broader (24 m) package of coal, carbonaceous shale, siltstone and minor sandstone, have also been reported at shallow depths in the early Cretaceous Winton Formation of the Eromanga Basin.

The coal resources in the Eromanga Basin are low rank, high ash, low volatile and poor specific energy.

Local Geology

Exxon (1970) assigned the mudstone and sandstone units of the Blackall Project area to the Cretaceous Allaru Mudstone, Mackunda Formation and Winton Formation of the Cretaceous Rolling Downs Group (Figure 3-3).

No igneous intrusions are reported within the project area at the current drill hole spacing.

Regional dip of the strata within the Blackall area is west-southwest. A broad north-north west trending syncline is present throughout the 25 km strike length of the Inverness coal deposit. Coal seams are relatively flat-lying so minor variations in the base of weathering, seam dip and topography cause the seams to sub-crop locally, particularly for the upper seams (D, E and F).

Based on drilling to date, the depth of weathering in drill holes ranges from 10 m to 36 m, averaging 20 m. A thin veneer of soil generally 0.5 m to 1.5 m and occasionally up to 3 m thick blankets the Inverness deposit. There is no evidence of Tertiary cover, although thin ironstone and lensoidal calcified sandstone bands, both generally less than 1 m thick and laterally discontinuous are evident in places.

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Figure 3-3: Stratigraphy of the Eromanga Basin

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Figure 3-4: Geology of the Blackall Project area

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Coal Seams

Coal seams within the Blackall Project occur within the Winton Formation along the western half of EPC1993 and extend north into EPC1719. The underlying Mackunda Formation and Allaru Mudstone both crop out to the east of the Inverness coal deposit. The base of the Winton Formation appears to be gradational with the underlying Mackunda Formation and is characterised by a change to green sandstone. The base of the Winton Formation has been defined below the lowermost seam identified (A Seam). All reported coal seams within COALBANK’s Blackall project lie within the Winton Formation.

Quaternary alluvium (sand and gravel) is restricted to channels associated with the Barcoo River system and was intersected in several drill holes. These holes are located in the north west of EPC1993 and a small adjacent area in EPC1719. No Tertiary-aged rocks were encountered in the area.

The coal-bearing stratigraphy of the Winton Formation is characterised by a fine-grained sandstone, siltstone and claystone sequence grading to carbonaceous claystone and coal. The coal measures are approximately 100 m thick.

Coal seams sub-crop in th (Figure 3-5). In the west of the tenement, seams flatten at the base of the syncline. On the eastern . Further

The majority of the Inverness deposit lies in the west of EPC1993. The northern limits of the deposit extend into the western area of EPC1719. Six coal seams have been encountered within the Inverness deposit. These seams are named in ascending stratigraphic order, A to F. Each seam comprises between three and nine individual plies that vary in thickness and depth in relation to each other and to each seam. The seams have been divided into 33 plies ranging in thickness from 0.1 m to 1.8 m. Most plies deteriorate to carbonaceous mudstone or lense out occasionally.

Johnson (2012) described each seam from youngest to oldest (i.e. F to A seam) as follows:

F Seam contains five plies and is the uppermost seam in the Winton Formation. The F Seam is located mainly in the central part of the deposit along a broad synclinal axis. The five plies do not merge and the seam does not coalesce with the underlying E Seam. Cumulative coal thicknesses for F Seam range from 0 m to 2.7 m, averaging 1.1 m thick. F Seam generally thickens from south to north. Average interburden thickness between the F Seam and underlying E Seam is 12.5 m.
E Seam is the thickest, most laterally continuous seam, containing up to nine plies and is considered the most significant. Individual plies grade to carbonaceous claystone in discrete locations. E21 to E32 plies are often coalesced, as are E41 to E5. Cumulative coal thicknesses for E Seam range from 0 m to 4.6 m, averaging 2.1 m. E Seam generally thickens towards the east. Average interburden thickness between E Seam and underlying D Seam is 6.2 m.
D Seam contains eight plies and is the second most significant seam in the Inverness deposit. In general, the uppermost plies D4 and D5 coalesce and separate from the lower plies. The lower D Seam plies are generally thinner and less persistent. Cumulative coal thicknesses for D Seam range from 0 m to 4.3 m, averaging 2 m. D Seam generally thickens from south to north. Average interburden thickness between D Seam and underlying C Seam is 9.5 m. The remaining seams beneath D Seam are consistently thinner with interburden between seams thickening.
C Seam contains four plies. The geophysical character of C Seam varies along strike, often deteriorating significantly and pinching out. Locally the C Seam can exceed 1 m. Cumulative coal thicknesses for C Seam range from 0 m to 2.1 m, averaging 1 m. C Seam generally thickens from north to south. Average interburden thickness between the C Seam and underlying B Seam is 14.6 m.

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B Seam contains four plies. The B Seam rarely outcrops due to its depth and is intersected throughout the deposit. B11 and B12 plies are the most continuous and often coalesce. Cumulative coal thicknesses for B Seam range from 0 m to 1.7 m, averaging 0.7 m. B Seam is generally consistent but thickens in the south. Average interburden thickness between the B Seam and underlying A Seam is 26.6 m.
A Seam is the lowermost seam containing three plies, which rarely coalesce. The A Seam is laterally discontinuous and only intersected in 27 drill holes. Cumulative coal thicknesses for A Seam range from 0 m to 1.8 m, averaging 0.4 m. A Seam is thicker towards the centre of the deposit and absent further north.

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Figure 3-5: Cross-section through the Inverness Deposit

Source: Competent Persons Report Blackall Coal Project (2015).

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Coal Quality

Raw coal quality data (air dried basis) for the 2011 and 2012 drill holes located in the Blackall Project were converted to a constant moisture basis of 25% to represent In Situ Moisture, based on current Moisture Holding Capacity analysis. Inherent Moisture, Raw Ash, Volatile Matter, Fixed Carbon, Calorific Value, Total Sulphur and In Situ Density were loaded into the Minex Borehole database (at 25% moisture).

This low rank sub-bituminous coal is characterised by RoVmax values in the range 0.4% to 0.5% with volatile content of approximately 40% (daf). These coal quality parameters, together with the high moisture content, indicate that the Cretaceous aged coal seams of the Winton Formation are at a significantly lower coal rank than the better known Jurassic aged Walloon coals of the Surat Basin. An average Hardgrove Grindability Index of 45 indicates a moderately hard coal, somewhat less hard than typical Walloon coals.

Coalbank has not completed any washability tests on the Inverness coals to date, however EER recently announced product data for its Idalia tenements, EPC1399 and EPC1398, which lie immediately west and some 50 km south from COALBANK’s Inverness deposit. SRK has reviewed EER’s ASX announcement dated 23 January 2013, and considers the data for EPC1398 to be the more reliable (Table 3-3). Importantly, only 40 of the total 53 samples tested in EPC1398 were tested and it is unclear as how selectively samples were chosen for testing.

Table 3-3: Coal Quality data for EER’s Idalia EPC1398

	Samples	Product yield (%)	TM (%ar)	IM (%adb)	Ash (%adb)	VM (%adb)	FC (%adb)	TS (%db)	CV Kcal/kg (gar)	CV Kcal/ (adb)
RAW Avg	53		30.1	16.8	21.8	26.9	34.5	0.6	3,570	4,250
F1.6	40	73		14.1	14.1	29.5	40.4	0.6	4.167	4,773

Source: East Energy Resources Limited ASX announcement 23 January 2013

Given the low rank nature of the Inverness coals, it is likely to show a high propensity for spontaneous combustion.

3.1.6 Coal Resource

Coalbank released its maiden resource statement for the Inverness deposit to the ASX on 20 June 2012. The resource was updated in 2015 to comply with the 2012 JORC Code and this update was outlined in Coalbank’s 2015 annual report. The resource consists of shallow, low to medium ash, low to moderate sulphur and low calorific value sub-bituminous coal and is summarised in Table 3-4.

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Table 3-4: Summary of Inverness Coal Resource

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Source: Competent Persons Report Blackall Coal Project (2015).

The Resource Statement is based on information compiled by Mr Rowan Johnson, who is a member of the Australasian Institute of Mining and Metallurgy and is a senior geologist employed by McElroy Bryan Geological Services Pty Ltd. Mr Johnson has more than 30 years’ experience as a geologist and more than 15 years’ experience in the estimation of coal resources. This experience qualifies him as a Competent Person for the purpose of resource reporting as defined in the 2012 edition of the JORC Code.

Geological data

The geological model is based on 109 drill holes comprising 88 non-core holes and 21 core holes. A total of 19 holes had coal quality data. Drill holes are nominally 2 km apart, although in some areas particularly along Ravensbourne road, the borehole spacing has been reduced to 1 km. Cored holes are generally 2 km to 4 km apart.

All holes were geophysically logged.

Coal core was sampled on a ply basis. Roof and floor dilution samples were taken generally within 0.15 m to 0.25 m of the seam. Core holes were re-drilled if a minimum core recovery of 95% for each seam was not achieved.

Geological database and model

Select geological data was loaded into a Minex Borehole database (drill hole collar survey, seam intersections, lithological data, base of weathering and raw coal quality). Coal seams were correlated and depth corrected using both 1:20 and 1:100 scale geophysical logs. When all data was loaded into the model, validation of seam correlation was undertaken.

A geological model was developed with all coal plies modelled for structure and, where data was available, for raw coal quality. A base of weathering grid was developed, based on visual base of weathering observed in drill holes.

The topography, base of weathering and all seam structure models were generated using a 100 m by 100 m grid mesh. All coal quality grids were modelled using inverse distance with a factor power of two as the gridding method on a 500 m by 500 m grid mesh. All seams were clipped to the base of weathering.

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The computer model was constructed using seam structure and coal quality grids to undertake the resource estimate. A minimum thickness of 10 cm was used for all plies in the resource estimation. No mining assumptions were applied to the model.

The geological model and databases are suitable for resource estimation and limited to the extent of geophysically logged holes within the tenement.

Resource Estimation

Derived regressed In situ Density grids (based on In situ Moisture of 25%) were used for the resource estimate. Seam thickness grids (limited to below the base of weathering) and In Situ Density grids were used to estimate in situ coal tonnages (i.e. coal resources).

Where density data was insufficient to generate grids, default values were determined. Default values for plies were: E5 – 1.42, B12 – 1.43, A2 – 1.38, A12 – 1.38, A11 – 1.38.

Resources were estimated within vertical sided resource polygons. The resource estimate did not include coal or ply thicknesses less than 0.10 m.

Resource polygons were vertical sided if terminated at a lease boundary or drill hole. Occasionally plies ‘pinch out’ (e.g. reduction in thickness from 1 m to 0 m between two drill holes. A cut-off of 10 cm was used).

Manual checks of all model outputs were undertaken.

Manual estimation of coal resources was within approximately 10% of the computer model output.

Limits and classification

As part of the resource estimation process, the total resource area was divided into discrete blocks for each seam. Coal resources were estimated for each of these blocks. The following list details limits and assumptions used to define resource areas. Seam resource blocks were divided by tenement, EPC1993 and EPC1719. For each seam, resource exclusion zones were based on the following considerations:

A minimum coal ply thickness of 10 cm was applied.
The eastern sub-crops of seams A-F delineate the eastern limit.
Seams A-F sub-crop elsewhere within the deposit.
Last line of drill holes in which the seam was intersected, where drill hole spacing assures sufficient confidence.

Areas outside EPC1993 and EPC1719 were excluded.

An ash cut-off of 40% has been used to exclude all non-coal lithologies from tonnage estimates.
Relative Density was obtained from coal quality laboratory results and adjusted to an in situ basis at 25% moisture in accordance with the Preston Sanders equation.
Environmental features or existing infrastructure were not used to excise resources thereby allowing mining studies to determine the economic limits.

Once resource polygons were defined the status of coal resources within each polygon was classified either as:

Measured Resources - where the geological data points based on detailed and reliable exploration, sampling and testing information support a reasonable level of confidence in seam thickness, continuity, coal quality and structure of seams.
Indicated Resources - where the geological data points contributed to a reasonable level of confidence in seam thickness and continuity and some coal quality.

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Inferred Resources - where there was a paucity of coal quality data within the area and drill hole spacing was only sufficient to delineate seam thicknesses to a low level of confidence.

Based on the current drill hole spacing, all resource polygons reported were classified as Inferred Resources. Inferred Resources for each seam are:

F Seam – 52 Mt
E Seam – 313 Mt
D Seam – 459 Mt
C Seam – 235 Mt
B Seam – 176 Mt
A Seam – 57 Mt.

Inferred Resources for each EPC are:

EPC1993 – 1,184 Mt
EPC1719 – 108 Mt.

Resources have also been categorised in 50 m depth increments from base of weathering (“BOW”) to a depth of 150 m. Inferred Resources for each depth increment are:

BOW to 50 m – 825 Mt
50 to 100 m – 424 Mt
100 to 150 m – 42 Mt.

3.1.7 Potential

Exploration to date by Coalbank has demonstrated that the project area hosts large tonnages of low rank sub-bituminous coal. The Inverness deposit represents the Company’s most advanced project and appears capable of being upgraded in terms of its resource confidence through further infill drilling. However, given the coal’s low rank and high inherent moisture content, its future development is likely to require an infrastructure solution. While several infrastructure options occur in relative proximity to the project, the deposit is unlikely to be viable should considerable transportation be required.

3.2 Tambo Project

3.2.1 Location, access and infrastructure

The Tambo Project lies 200 km north of Charleville and 225 km southeast of Longreach and extends over approximately 50 km strike of prospective coal sub crop length southwestern Queensland (Figure 3-1). Coalbank’s Blackall project is located to the west. There are no coal mines or gas production areas within the project area but extensive resources of both commodities have been defined to the southeast and north.

Sealed roads provide access from Brisbane to Charleville in the south of the project area, and to Alpha in the north. The Landsborough Highway provides access to the western portion of the Tambo project, with other unsealed gravel roads and station tracks providing secondary access.

The Yaraka rail line extends NE from the edge of the adjacent Blackall Project to the west and connects to the Central Line which runs E-W ~85 km to the north of the project and provides access to the port at Gladstone. Qantas Airways provides scheduled daily commercial flights between Brisbane and Roma/ Charleville.

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3.2.2 Tenure

The Tambo project comprises three granted EPCs, covering an area of approximately 576 km[2] (Figure 3-1).

Table 3-5: Tambo Project tenement status

Tenement / Name	Status	Granted	Expiry	Area (km2)
EPC1418 / Tambo East 2	Granted	21 May 2010	20 May 2020	50
EPC1625 / Alpha South West 2	Granted	29 April 2010	28 April 2020	411
EPC 1632 / Tambo	Granted	29 October 2010	28 October 2020	115

3.2.3 Geology

The Tambo Project covers an area of more than 570 km[2] over the western extent of the Surat Basin. The mid to late Jurassic Injune Creek Group is recognised in the basin, in particular, the coal-bearing Walloon Coal Measures of the Surat Basin is considered to be economically important.

There are several coal seam groups identified within the Walloon Coal Measures. The Juandah Coal Measures generally contains five groups of coal seams. In descending stratigraphic order these are the Kogan, Macalister (Upper and Lower), Wambo, Iona and Argyle seam groups. Within the Taroom Coal Measures, three groups are recognised, being the Auburn, Bulwer, and Condamine.

Whilst coal seam groups can be identified over many kilometres it is not generally possible to correlate individual seams over significant distances. These seams are highly variable in thickness and known to thin and split over hundreds of meters. Similarly, these seams and plies can rapidly coalesce and form relatively thick coal intervals with minimal clastic partings. Between depocentres, the seams may still exist but are thin and separated by various thicknesses of lithic sediments.

All of the known coal resources in the Surat Basin are sub-bituminous to bituminous and are of thermal quality. They are generally of moderate ash, high volatile, moderate energy.

Surat coals typically show improved quality characteristics after washing.

3.2.4 History

The Tambo Coal Project area lacks any previous coal exploration activity. Much of the region had Restricted Area status (as part of RA 55) and hence was not available for coal exploration. Historical coal tenements in the Project area are mostly confined to the western parts of the Surat Basin, and to the Rolleston-Springsure Shelf region to the north.

Table 3-6 briefly summarises exploration results obtained from relevant historical coal tenements that covered (more or less) equivalent stratigraphic intervals to those of the Tambo Project.

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Table 3-6: Historic bore holes in the Tambo area

Period	Tenure	Key Activities	Comment
1974 to 1982	EPC151 (Injune)	200 holes	Defined Bymount deposit, elsewhere coal seams generally thin (<2.5 m), banded, dirty and limited in lateral extent
1979 to 1984	EPC259 (Merivale)	227 holes drilled and geophysically logged	Defined Munya and Ninderra deposits. Many coal horizons intersected but mostly thin and banded, with considerable variations over short lateral distances.
1979 and 1981	EPC263 (Forest Vale)	66 holes	Intersected coal seams within the Taroom and/or Juandah Coal Measures with reported thickness of 30 to 40 m and number of thin (to 2 m) coal seams in Juandah and 55 m thickness but only to 1 m thick in Taroom.
1980	EPC288 ‘Lucky Downs’	24 holes up to 180 m deep	Only rocks of the Westbourne to Orallo Formations were encountered. Some coal seams up to 1.8 m thick were intersected in the drilling but most were less than 0.8 m thick.
1980 and 1981	EPC314 ‘Redford’	31 holes	Seven holes intersected minor coal seams, up to a maximum thickness of 0.7 m.
2005 to 2008	EPC937		No new work

In the very few stratigraphic bores drilled by the Geological Survey of Queensland (“GSQ”) and Bureau of Mineral Resources (“BMR”) in the region, coal has been reliably recorded and it is mostly thin. These were fully-cored holes (from surface), and provide high quality, reliable and accurate descriptions of the sections penetrated, and are also geophysically logged.

The drilling of petroleum exploration wells has occurred across Coalbank’s Tambo Project area from the late 1920s up to 2004. These usually penetrate deep into the rock section and have significant datasets. Open file records for a number of wells located in or surrounding the Tambo Coal Project. Wells and stratigraphic bores with information relevant to Coalbank’s coal exploration tenure include:

Allendale 1
Bindango 1
Birkhead 1
Brynderwin 1
Boree 2
Eldorado 1
Mungallala 1 and 2
Inverness 2
Swaylands 1
Valetta 1

Evaluation by Coalbank

Since acquiring the project tenements, Coalbank has compiled the relevant water bore data for the area, as well as any GSQ/BMR stratigraphic borehole data and open file drilling results from the area.

In addition, the company has completed a 1:100,000 scale photo-geological study to investigate the local stratigraphy and structure of the Eromanga/Surat Basins with a view to providing data for ongoing coal exploration in the region.

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3.2.5 Potential

At this stage, no coal resource has been identified within Coalbank’s remaining Tambo tenements.

However, the general absence of previous coal exploration and the occurrence of coal intercepts within water bores, including some substantial (i.e. greater than 10 m) intervals in isolated boreholes, and within Coalbank’s recent exploration drilling programs in the project tenements suggest there is potential for coal discoveries in the Tambo Project. This view is further supported by the proximity of the Tambo permits to other third-party held coal resources

Ongoing exploration will require substantial drilling and evaluation.

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4 Gas Project

Coalbank’s gas interests comprise three ATPs located in the Eromanga Basin between Roma and Charleville, in southern Queensland. ATP 1072 and 1098 are conjoining tenures, whilst APT 1095 lies to the northeast of this tenure block. Both ATP 1072 and ATP 1098 are traversed by the Moomba to Wallumbilla gas pipeline.

Figure 4-1 and Figure 4-2 show the location of Coalbank’s ATPs and relevant exploration.

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Figure 4-1: Location map of ATP 1072, 1095 and 1098

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Figure 4-2: Location map of ATP 1072, 1095 and 1098 with available drill holes, seismic lines and petroleum pipeline

ATP 1072 was granted in January 2013 with an area of over 6,642 km² (Table 1-2). The permit is located approximately 65 km south-southeast of Charleville. It is underexplored and has sparse geological-geophysical data as follows:

Three stratigraphic drill holes: GSQ Wyandra 1 (1982) and BMR Charleville 6 and 7 (1981).

Three regional seismic lines, South-East Queensland 1984 line BMR84-14 (Bureau of Mineral Resources), Wyandra line PW87-96 (Phoenix Oil and Gas NL), and Y81A line Y81A-1111 (Esso Australia Ltd) that intersect the permit.

ATP 1095 was granted in May 2015 with an area of over 1,664 km². The authority is located approximately 80 km north west of Mitchell. The permit only contains the Mitchell 5 and 6 stratigraphic drill holes drilled by BMR in 1965.

ATP 1098 was granted in May 2015 with an area of over 5,471 km². The authority is located approximately 115 km southeast of Charleville. The permit is also underexplored and contains the following geological-geophysical data:

Four petroleum wells, namely Alba 1 drilled by American Overseas Petroleum Ltd in 1965; Crichton 1, Lowood 1 and Maryvale 1 drilled by Orion Oil Company in 1966. An additional stratigraphic drill hole is located on the permit boundary – BMR Mitchell 1 (1972)
Two regional seismic lines, South-East Queensland 1984 line BMR84-14 (Bureau of Mineral Resources) and Y81A line Y81A-1111 (Esso Australia Ltd) that intersect the permit.

To date, Coalbank has not commenced exploration on any of its petroleum tenures.

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ATP 1072 overlies the Nebine Ridge and the Jurassic-Cretaceous succession in the east being assigned to the Surat Basin and in the west of the Eromanga Basin. In the western part of the permit the latest Carboniferous-Middle Triassic Galilee Basin and the Devonian Adavale Basin are present (Figure 4-3). ATPs 1095 and 1098 overlie part of the eastern Eromanga Basin and western Surat Basin.

Petroleum prospectivity is limited in these area as mature source rocks do not occur in the Jurassic succession. Four petroleum wells drilled in ATP 1098 recorded no hydrocarbons.

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Figure 4-3: Stratigraphy of the area of interest Source: Surat Gas, 2015

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Figure 4-4 presents the results of a geophysical seismic line (PW87-96) showing conventional oil and gas lead mapped by MBA Petroleum Consultants (MBA) within ATP 1072. MBA note the Devonian to Carboniferous Drummond Basin equivalents dip in a manner that could allow hydrocarbon migration upwards into structures into the overlying Eromanga Basin sequence providing oil and gas drilling targets (Surat Gas, 2011).

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Figure 4-4: Regional framework

Source: Surat Gas, 2015

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Figure 4-5: PW87-96 seismic line showing conventional oil and gas leads, ATP 1072 Source: Lodestone Energy, 2012; Seismic section by MBA Petroleum

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4.1 Available Data

The data for the three blocks comprises limited historical wells and acquired 2D geophysical seismic survey data. Table 4-1 summarises the stratigraphic and petroleum wells drilled within ATPs 1072, 1095 and 1098.

Three stratigraphic drill holes, namely GSQ Wyandra 1 (1982) and BMR Charleville 6 and 7 (1981), were completed within ATP 1072 (Figure 4-5). BMR Charleville 6 and 7 stratigraphic holes were drilled in the Southern Eromanga Basin to obtain stratigraphic, structural, petrophysical, geophysical, and geochemical information about the Toolebuc Formation and its oil shale. Ozimic (1982) named the part of the Toolebuc encountered by these holes as “Urisino Beds”. The formation did not contain oil shale in these drill holes. The Urisino Beds with a total thickness of 15.5 m intersected in BMR Charleville 6 consist of very thinly interbedded sandstone and shale with occasional breccia beds. There is abundant organic material in the form of plan remains with occasional thin bands of coal. The Urisino Beds with a total thickness of 9.7 m in BMR Charleville 7 consist of thin shale and sand interbeds with organic remains throughout. The base of the unit is very sandy, and may contain largely reworked Coreena Sandstone Member (Stephenson, 1982).

GSQ Wyandra 1 was drilled in the southeastern Eromanga Basin. It intersected a veneer of Tertiary sediments comprising rocks from three overlying basins (Eromanga Basin), (Galilee Basin) and (Adavale Basin) achieving a total depth of 1268.66 m. It was completed as a water bore.

Only two stratigraphic holes were drilled within ATP 1095 – BMR Mitchell 5 and 6 (Figure 4-6). BMR Mitchell 6, near the Maranoa Anticline, intersected a little coal in the Birkhead Formation.

Four petroleum wells, namely Alba 1 drilled by American Overseas Petroleum Ltd in 1965; Crichton 1, Lowood 1 and Maryvale 1 drilled by Orion Oil Company in 1966, are located within ATP 1098. Also, one stratigraphic drill hole located on the permit boundary – BMR Mitchell 1 (1972) exists in the permit. Lowood 1, Maryvale 1, and Crichton 1 petroleum wells were drilled to test oil and gas accumulations in the Lower Jurassic Boxvale Sandstones of the Evergreen Shale, the Upper Precipice Sandstone, and the Lower Precipice Sandstone. All three wells were dry.

In Lowood 1, 10-160 units of methane gas were detected by gas analyser from the Hooray Sandstone and Westbourne Formation (335.3-435.9 m). It was noted fresh water aquifers in this interval carry methane gas in solution. In Crichton 1, fluorescence and cut were reported from the Boxvale Sandstones of Evergreen Shale at 764.4-772.1 m. The test indicates the sandstone was tight and no flow was recorded. In Maryvale 1, fluorescence and cut were recorded from the Lower Precipice Sandstone (827.5-844.9 m), during the test 682.8 m of clear fresh water yielded (Freeman, 1967).

Alba 1 was drilled on the western side of the Nebine Ridge to test the Evergreen Shale and Precipice Sandstone. Fluorescence in Precipice cores was reported. It is concluded that the shows are residual after flushing (Freeman, 1967). Good porosity and permeability characteristics were reported in the Hutton Sandstone, Injune Creek Group and the Hooray Sandstone. But all of the sandstones in these formations are water flushed (Senior et al., 1969).

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Table 4-1: Summary of wells drilled within ATPs 1072, 1095 and 1098

Well name	Operator	Well type	Date rig released	Total depth (m)	Result	Status
*ATP 1072*
Wyandra 1	Geological Survey of Queensland	Stratigraphic	13/10/1982	1268.66	No hydrocarbons	Water bore
Charleville 6	Bureau of Mineral Resources	Stratigraphic	22/11/1981	85.20	No hydrocarbons	Plugged and abandoned
Charleville 7	Bureau of Mineral Resources	Stratigraphic	5/12/1981	151.80	No hydrocarbons	Plugged and abandoned
*ATP 1095*
Mitchell 5	Bureau of Mineral Resources	Stratigraphic	1/01/1965	62.50	No hydrocarbons	Plugged and abandoned
Mitchell 6	Bureau of Mineral Resources	Stratigraphic	1/01/1965	53.30	No hydrocarbons	Plugged and abandoned
*ATP 1098*
Alba 1	American Overseas Petroleum Limited	Petroleum exploration	31/03/1965	826.92	No hydrocarbons	Water bore
Crichton 1	Orion Oil Company	Petroleum exploration	5/08/1966	813.82	No hydrocarbons	Plugged and abandoned
Lowood 1	Orion Oil Company	Petroleum exploration	15/07/1966	769.00	No hydrocarbons	Plugged and abandoned
Maryvale 1	Orion Oil Company	Petroleum exploration	26/07/1966	844.90	No hydrocarbons	Plugged and abandoned
Mitchell 1	Geological Survey of Queensland	Stratigraphic	28/10/1972	787.00	No hydrocarbons	Plugged and abandoned

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Figure 4-6: Location of available wells and 2D seismic lines within ATP 1072 and ATP 1098

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Figure 4-7: Location of available stratigraphic wells within ATP 1095

The vitrinite reflectance values measured from the samples taken from the Augathella 1, Augathella 2/3R, Balfour 1, Charleville 1, Mitchell 1, and Wyandra 1 wells located in and adjacent to ATPs range from immature to mature levels only with reworked samples that reached over 1% Rvmax (Mitchell 1) is shown in Figure 4-7.

Conventional oil and gas exploration depends on eight independent variables to mature plays and prospects. These comprise source rock, maturity, reservoir, seal, structure, timing, migration and preservation. No detailed assessment of the conventional hydrocarbon potential is currently available for the Coalbank tenements and it is beyond the scope of this document to undertake such work, however the work to mature leads, prospects and plays could be undertaken to add value to the blocks.

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Augathella 1

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Augathella 2/3R

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Balfour 1

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Charleville 1

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Mitchell 1

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Wyandra 1

Figure 4-8: Vitrinite reflectance versus depth

Source: After Smith, 1987

Based on the available information, SRK considers oil or gas from Coalbank’s ATPs are high risk. The Devonian section is known to contain gas and oil prone source rock in the Adavale Basin however within the Coalbank tenements the play is not developed and only one conventional roll over Devonian lead has been identified (site of stratigraphic well Wyandra-1 which almost certainly was not drilled on the structural closure and cannot be considered a valid petroleum test).

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5 Coal Market Analysis

SRK carried out a limited analysis of the coal market to provide an understanding of coal price trends for consideration of the fair market value.

A chart of the thermal coal price since May 1999 is presented as Figure 5-1 and shows that the price for export thermal coal since 2000 has varied over a wide price range that has included two periods of relative pricing stability, 1999 to late 2003 and from early 2004 to early 2007. A price spike in 2007/2008 followed by a volatile but generally higher price since the 2007/2008 spike occurred up until January 2011, when compared to a moving average or longer term (e.g., 8 to 12 year period) price trend. Since January 2011, the export thermal coal price has generally fallen and by June 2016 was US$77.41 per tonne.

The coal markets continue to remain flat, and capital is largely being conserved across a range of project stages, which has led to depressed asset prices across the coal sector.

When considering an eight year period prior to the major coal price spike in 2008/09 and project to 2014, using a simple linear trend, the current export thermal price is broadly in line with this trend. This suggests that current export thermal pricing is not at a market premium.

Further, based on these general trends SRK considers it is necessary to normalise all factors to the current commodity price to account for the potential variation of value, and perception of value, over time related to the change in commodity price.

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Figure 5-1: Australian thermal coal

Coal description: 12000- btu/pound, less than 1% sulphur, 14% ash, FOB Newcastle/Port Kembla, US$ per metric tonne.

Source: http://www.indexmundi.com/commodities/?commodity=coal-australianandmonths=120

Note: The FOB Newcastle spot pricing index is preferred over the Japanese export pricing index as it is considered a more stable reflection on spot pricing change.

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6 Valuation

6.1 Valuation Objective

The objective of this work is to provide RSM with a valuation of Coalbank’s EPCs and ATPs. SRK understands that this Valuation will be included in RSM’s Independent Experts Report and as such is intended for public release.

The valuation estimated below is current at 20 July 2016 and monetary amounts are in Australian Dollars (A$) as specified throughout the Valuation section. The final value is provided in Australian Dollars (A$). The value is considered market value as defined in VALMIN Code (2015). The valuation methods used are designed to assess the exploration value of the listed assets only.

SRK has not valued Coalbank Limited, the owner of the exploration assets.

In assessing the technical aspects relevant to this Valuation, SRK has relied on information provided by Coalbank and information sourced from the public domain. All sources are appropriately referenced and listed in the bibliography.

6.2 Valuation Methodology

While the VALMIN Code states that decisions as to which valuation methodology is used are the responsibility of the Expert or Specialist, where possible, SRK considers a number of methods.

The aim of this approach is to compare the results achieved using different methods to select a preferred value within a valuation range. This reflects the uncertainty in the data and interaction of the various assumptions inherent in the valuation.

An overview of a number of methods traditionally used to value exploration properties includes:

Multiples of Exploration Expenditure (MEE)
Joint Venture Terms Method (expenditure-based)
Geoscience Ratings Methods (e.g. Kilburn – area-based)
Comparable Market Value Method (real estate-based)
Rule of Thumb Method (e.g. A$/Resource or production unit, % of an in situ value).

In addition, SRK uses the Geological Risk Method (GRM) to value exploration assets.

The valuation of exploration assets relies on the application of a number of different methodologies and the majority of these methods can be classified into three main types; income, cost or marketbased (SAMVAL, 2008; Lord et al., 2012):

The income or cash flow approach estimates the present value of future cash flows over the projected or suitable mine life of the project.
A cost or exploration expenditure approach estimates the value of the asset based on for example, past and future money spent on the project or on average expenditure cost to find and retain the Asset.
A market or real estate approach estimates the value of the asset by reviewing transactions of similar Assets between willing sellers and buyers.

An income-based method, such as a Discounted Cash Flow (DCF) model is commonly adopted for assessing the Value of a tenement or tenements containing a deposit where an Ore Reserve has been produced to accepted technical guidelines such as the JORC Code (2012). However, an incomebased method is not considered an appropriate method for deposits that are less advanced, i.e., where there is not a declared Ore Reserve and supporting mining and related technical studies.

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The Resources estimated for the Blackall project have not been incorporated into current mining studies and requires an alternative valuation methodology to an income-based method.

SRK notes for the Blackall Resources, along with the nature of the remaining permit areas, (i.e., early stage exploration projects, low confidence published Mineral Resource and no published Ore Reserve and therefore, an inherent uncertainty associated with the likelihood and the timing of any potential cash flows), that an income-based approach to valuation (e.g., Discounted Cash Flow (DCF) modelling) is not considered appropriate.

Cost and market-based approaches are the more widely adopted methods when valuing exploration assets. For the valuation of Coalbank’s coal assets, SRK initially considered the Geoscientific Rating method, which is a Cost-based approach which was then benchmarked by the appraised value method (Multiples of exploration expenditure), and a comparable transactions method, (also market-based), to benchmark the valuation approaches.

While SRK considered a similar methodology for Coalbank’s gas assets, SRK notes that to date:

no gas parameters have been developed for the Geoscientific rating method and hence the method could not be applied.
Coalbank has not commenced exploration (nor incurred any expenditures) at its ATP and hence cost based methods were unable to be applied.

As a result, SRK has had to rely exclusively on recent transactions involving similar early stage gas/oil projects in eastern Australia.

6.3 Coal Valuation

6.3.1 Geoscientific Rating (or modified Kilburn approach)

Introduction

The Geoscientific Rating method attempts to assess the relevant technical aspects of a property through the use and ranking of appropriate factors applied to a Base Acquisition Cost (BAC). The BAC represents the average cost incurred by a Tenement Holder or Explorer to identify, apply for and then retain a unit area of the exploration licence of title (Goulevitch and Eupene, 1994), including statutory expenditure costs. The BAC forms the starting value from which a technical valuation range is then estimated.

The factors used for the technical rating include Off-property, On-property, Geology and Anomaly aspects and for bulk and industrial mineral projects such as coal, have included extensions to the original method such as a Quality aspect relevant to the style of mineralisation and Infrastructure aspects. The ranking of these key factors will either enhance or reduce the intrinsic value of a property. A further factor, the Market factor, may then be considered to derive a Fair Market Value. Table 6-1 summarises the modified coal property rating criteria.

Having reviewed the technical aspects of the Assets and the various valuation methods available, SRK considers the Geoscientific Rating approach and the factors and reweighting of the factors used by Xstract in its 2009 and 2010 independent valuation work of coal properties in the Bowen Basin, as an alternate method to valuing the three EPCs that define the Tambo Project (EPC’s 1418, 1625 & 1632).

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Having reviewed the technical aspects of the Assets in relation to the Blackall Project (EPC’s 1799 & 1993), SRK also considers the Geoscientific Rating approach appropriate to value the remaining exploration potential for EPC 1799 only. SRK consider the methodology will undervalue, and is therefore an inappropriate method to apply to, the areas of contained Resources within EPC 1799 and 1993. SRK also consider the value of the exploration potential outside of the contained Resources within EPC 1993 to be immaterial to the value of the asset given the size of the tenure in relation to the Resource footprint and has therefore not chosen to value EPC1993 using the Geoscientific Method.

The Geoscientific Rating approach requires the valuer to assess and grade the relevant factors. The BAC is then sequentially multiplied by the gradings to produce a technical value or technical value range. A Market factor is then applied to arrive at a fair market range.

Valuation

The Geoscientific Rating method has some limitations such as the technical valuation may not include all relevant factors such as the accuracy of the BAC, the size of the property (small areas may be undervalued), other geological factors (depth of target mineralisation) or other non-geological technical factors such as environmental and cultural heritage considerations. For the purpose of this valuation, SRK has not undertaken an assessment of factors such as environmental, cultural heritage and also does not review sovereign risk liabilities in the Geoscientific Rating method.

Base Acquisition Cost (BAC) estimate adopted for this Valuation

SRK notes that a range of BAC values have been used in recent independent valuations of exploration projects in Australia including:

In Western Australia, A$342/km[2] and in the Northern Territory, A$360/km[2] (Snowden, 2010)
In Queensland A$478/km[2 ] and in Western Australia of A$535/km[2] (Xstract, 2009)
In Western Australia, an estimated range of A$525/km[2] to A$575/km[2] (Agricola Mining Consultants, 2011).

SRK has validated these BAC values against known current cost commitments for Queensland. These base acquisition costs are approximately A$500/ km[2] and are outlined in Appendix A.

In considering the location of the four EPCs and the range in BAC estimates for Australia, for this valuation SRK has adopted a BAC value of A$500/km[2] .

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Location/ Infrastructure Factor		Unable to access market	Located at distance to market but supporting infrastructure in development		Located at distance to market but supporting infrastructure in place	In proximity to market with appropriate infrastructure in place to access
Quality Factor (Product type)			Lignite	Thermal coal with impurities	PCI coal with impurities or Thermal coal without impurities	Soft coking coal with impurities or PCI coal without major impurities	Hard coking coal with impurities or soft coking coal without major impurities
Anomaly Factor	No seams identified			Few thin seams (at shallow depths)	Coal seams identified	Single consistently thick (>2 m) seam or multiple thin seams	Favourable aggregate seam thickness
Geological Factor		Unfavourable stratigraphy	Generally favourable stratigraphy on 25% of lease or significant igneous/ structural complexity	Generally favourable stratigraphy (50% lease) or minor igneous/ structural complexity	Generally favourable stratigraphy (70% lease)	Generally favourable stratigraphy and simple igneous/structural features
On Property Factor		Unfavourable area			No known mineralisation on lease	Indications of prospectivity (presence of coal inferred from supporting evidence in district (e.g., minor reported Resources, mapping, drilling, seismic, etc.) and/or minor workings	Prospective area (some supporting evidence on property (e.g., mapping, drilling, seismic, etc.) establishing occurrence of potentially mineable coal (±continuity, thickness, quality) and/or several old workings
Off Property Factor		Unfavourable district/basin			No known mineralisation	Indications of prospectivity (presence of coal (mapping, drilling, seismic evidence and/or minor workings	Prospective area (coal seams identified (mapping, drilling, seismic evidence; Resource target identified and/or several old/current workings in district
Rating	0.1	0.5	0.7	0.9	1.0	1.5	2.0

Location/ Infrastructure Factor
Quality Factor (Product type)	Hard coking coal without major impurities			World Class Mine
Anomaly Factor	2 or more consistently thick (>2 m) seams		Numerous thick seams
Geological Factor	Favourable stratigraphy without igneous or structural features
On Property Factor	Mineralisation identified (demonstrated continuity, thickness ±quality of coal, coal Resource identified and/or Mine or abundant workings with significant previous production	Major coal Resource identified (with demonstrated continuity, thickness and quality of coal)	Major Mine with significant historical production	World Class Mine
Off Property Factor	Mineralisation identified (along strike/down dip from identified coal Resources or mine and/or abundant workings with significant previous and/or current production)	Along strike or down dip from major mine	Along strike of world class mine
Rating	2.5	3.0	3.5	4.0

Implied A$/km (Technical Value)	945	200	505	1,413	199	650	112	33	60
Market Value (A$) Preferred			208,000			75,000			24,000
Market			1.0			1.0			1.0
Technical Value (A$)	389,000	86,000	208,000	163,500	23,000	75,000	45,000	13,000	24,000
Infra- structure	0.7	0.5	0.6	0.7	0.5	0.6	0.5	0.5	0.5
Quality	1.0	0.8	0.9	1.0	0.8	0.9	0.9	0.7	0.8
Anomaly	2.0	1.5	1.8	1.2	1.0	1.1	0.5	0.5	0.5
Geology	0.9	0.7	0.8	1.5	1.0	1.3	0.5	0.5	0.5
On Property	1.0	1.0	1.0	1.5	1.0	1.3	1	0.5	0.7
Off Property	1.5	1.0	1.3	1.5	1.0	1.3	2.0	1.5	1.7
	High	Low	Preferred	High	Low	Preferred	High	Low	Preferred
BAC (A$)	205,720			57,656			200,000
Area (km2)	411.44			115.31			400.00
Tenement	EPC 1625			EPC 1632			EPC 1719 (area outside of Resource)

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Table 6-3 presents a summary of the technical value for the three EPCs based on the Geoscientific Rating method using a BAC of A$500/km[2] .

Using the Geoscientific Rating method, the technical value for a 100% interest in the Tambo Project (EPC 1625 & 1632) lies within the range A$109,000 to A$552,000, with a preferred value of A$283,000.

Using the Geoscientific Rating method, the technical value for a 100% interest in the remaining exploration potential for EPC 1719 lies within the range A$13,000 to A$45,000 with a preferred value, taken as the high value, of A$24,000.

As a cross-check, an A$/km[2] value for each tenement has been calculated and is also presented in Table 6-2. The value is based on the Technical Preferred Value. In summary, A$/km[2] values indicate:

The Surat Basin EPCs range from A$400 to A$650/km[2] , averaging approximately A$500/km[2] for permits without exploration targets or defined Resources.

The cross-check results derived for the area-based method are compared / discussed in further detail in the comparative transactions valuation section (see Sections 6.3.3).

Table 6-3: Geoscientific Rating factors and technical value for the three EPCs, using an A$500/km[2] BAC)

A$	500/km2 BAC)
Project	EPC	Low (A$’000)	High (A$’000)	Preferred (A$’000)
Tambo	EPC 1625	86	389	208
	EPC 1632	23	163	75
Sub-total		109	552	283
Blackall	EPC 1719 (remaining exploration potential)	13	45	24
Subtotal		13	45	24

Note: Final valuation rounded to three significant figures.

6.3.2 Multiple of Exploration Expenditures

In the case of an Exploration Property, and to a lesser extent, an Advanced Exploration Property, the potential is more speculative and the valuation is dependent to a large extent on the informed, professional opinion of the valuator. Where useful previous and committed future exploration expenditure is known or can be reasonably estimated, the Multiple of Exploration Expenditure (“MEE”) method is considered to represent one of the more appropriate valuation techniques.

This method involves assigning a premium or discount to the relevant effective Expenditure Base (“EB”), represented by past and future committed expenditure, through application of a Prospectivity Enhancement Multiplier (“PEM”). This factor directly relates to the success or failure of exploration completed to date, and to an assessment of the future potential of the asset. The method is based on the premise that a ‘grass roots’ project commences with a nominal value that increases with positive exploration results from increasing exploration expenditure. Conversely, where exploration results are consistently negative, exploration expenditure will decrease along with the value.

The MEE method (also known as the Past Expenditure Method) relies on the assumption that well directed exploration adds value to a property. This is not always the case and exploration can also downgrade a property. The PEM which is applied to the effective expenditure therefore commonly ranges from 0.5 to 3.0. The PEM generally falls within the following ranges:

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0.5 to 1.0 where work to date or historic data justifies the next stage of exploration
to 2.0 where strong indications of potential for economic mineralisation have been identified
2.1 to 3.0 where quality intersections or exposures are indicative of economic Resources present.

Blackall Valuation

SRK has analysed Coalbank’s past exploration expenditure at Blackall and applied a range of prospectivity enhancement factors to estimate the current technical value.

Considered exploration spend is based on in-ground expenditure limited to the past five years.

Table 6-4 presents a summary of the rating factors and technical value for the combined EPC 1719 and EPC 1993, based on the Multiples of Exploration expenditure (MEE) Rating.

Table 6-4: Multiple of exploration expenditure valuation

Tenement	Total Exploration Spend (A$)	Productive Exploration Factor	Expenditure Base (A$)	Prospectivity Enhancement Multiplier (PEM)	Prospectivity Enhancement Multiplier (PEM)	Technical Value (A$M)	Technical Value (A$M)	Technical Value (A$M)
				Low	High	Low	High	Preferred
EPC1719/1993	$6,124,414	80%	$4,899,530	2.5	3.0	12.25	15.2	14.25
Total						12.25	15.2	14.25

Using the MEE Rating method, the technical value for a 100% interest in the combined Blackall EPCs (EPC 1719 and 1993) lies within the range A$12.25M to A$15.2M, with a mid-point value of A$14.25M.

SRK note that the MEE method can also factor future committed exploration expenditure, which is nominally a factor related to past exploration results and perceived prospectivity. In this case, future exploration expenditure could not be quantified and therefore the methodology may undervalue the more prospective tenements.

The method is also unable to value tenements where exploration budget has not allowed exploration, which is not necessarily linked to the prospectivity of the tenement. In this case, the Tambo EPCs have not been valued using the MEE method due to the limited on-ground expenditure in recent years.

6.3.3 Comparable Transactions (of buy-ins or acquisitions)

Introduction

To value exploration holdings, comparable market transactions in the east Australian black-coal bearing basins were researched. The aim of this is to arrive at a range of values per project (or per unit area that is then applied to the Assets to estimate a market value.

SRK’s method for the determination of a value for a buy in or acquisition is based on the following calculations:

Generic probabilities of the success of a buy-in (via Joint Ventures (JVs) or an acquisition) at different stages are set as shown in Table 6-5. The basis for these probabilities is the transactional data and SRK’s experience within the exploration industry. As an “optionee” begins the venture with intent to test the area, there is a high probability that the first year expenditure will be met. However, it is considered there is a lower probability in subsequent years that the expenditure will be achieved, because there is commonly a priority target generated early in the process, which can be rapidly tested.

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The overall success rate of a buy-in is moderate for coal, reflecting overall industry experience of converting Exploration Targets to Mineral Resources. SRK considers the cumulative probability of about 25% over five years to be a reasonable measure of successful completion for the coal industry.
These probabilities are then used to factor the monetary terms of the buy-in. Cash considerations and binding expenditure commitments are added to the buy-in value and are not discounted for probability.

Future expenditure is discounted at an interest rate of 5%, representing current cash interest rates.

Table 6-5: Generic probabilities used in assessing the value of JV agreements

Year 1	Year 2	Year 3	Year 4	Year 5
85%	60%	70%	80%	90%

The total implied value at the time of setting up the agreement can be determined by multiplying the probability of completion of the buy-in by the discounted value of the buy-in terms, plus any immediate cash consideration. This figure is also used to determine the unit area value for the buy-in, as input to the valuation. As with any market based method, it is important to assess the comparability of the buy-in to the project being assessed, and make a judgement as to the appropriate figures to apply in each specific example.

Valuation

Using SRK’s internal database and the SNL subscription database, transactions relating to exploration stage projects were researched over the past 7 years for Australia. SRK examined a range of comparative transactions and selected a number that have some similar characteristics to the five EPCs. The selected comparable transactions have incorporated a range of stages in project development (from greenfields exploration to advanced exploration) with open-cut development scenarios.

The selected transactions involved tenements in the Surat/Clarence-Moreton, Galilee and Eromanga Basins.

Early Exploration areas

The valuation of the permits was divided according to Development Stage Categories (VALMIN Code 2015). Most permits are:

Early Stage Exploration Projects – Tenure holdings where mineralisation may or may not have been identified, but where Mineral Resources have not been identified; or
Advanced Exploration Projects Tenure holdings where considerable exploration has been undertaken and specific targets have been identified that warrant further detailed evaluation. A Mineral Resource estimate may or may not have been made but sufficient work will have been undertaken on at least one prospect to provide both a good understanding of the type of mineralisation present and encouragement that further work will elevate one or more of the prospects to the Mineral Resource category.

Two of the exploration permits are considered to be at an early Exploration stage, where there is no definable Exploration Target or Resource. Therefore, comparable transactions are area based and depend on delineating transactions around similar prospective ground.

SRK has initially identified 18 transactions involving comparable coal exploration projects, which are summarised in Table 6-6. The location of the assets involved in those transactions and their position relative to Coalbank’s assets are shown in Figure 6-1 and Figure 6-2.

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Eight of the transactions were either a “farm in” or partial acquisition by cash ±shares (the Blackwood JV, Toowoomba Tenements, Bundaberg Tenements, Don Juan Project, West Galilee FTB, Pty Ltd, Snake Creek and Pentland Project), where a certain percentage of ownership across the parties is achieved through initial buy-in ±exploration expenditure or staged payments and performance related milestones (where milestones or performance payments include the delineation of Resources this value has been excluded from the deal). In this type of transaction there is a shared risk and in some instances, the optionee can opt out of further expenditure, this limiting risk and the agreement typically can run over a number of years (in this case 1 to 4 years). Eleven of the transactions involved an outright purchase (the Great White Nominees, MPG Surat, EPC 2580, Gayndah Project, Horse and Dogwood Creek, Evergreen Project, Burnett Project, Hughenden Project, West Galilee and FTB Pty Ltd).

These transactions have been separated into Surat/Clarence-Moreton (11) and Galilee (7) Basin transactions to account for any differential value in assets between basins.

The transactions were then analysed to arrive at a range of values on a project basis as well as on an area (A$/km[2] ) basis, which could then be applied to the exploration tenure. It is important to note that the area of the tenements is a somewhat arbitrary means of determining a value as the main value within an exploration project is the quality of the ground and not necessarily the size of the tenement area. However, it is also assumed that the buyer has not needlessly targeted or valued excessive areas of non-prospective tenements in the purchase consideration.

The analysis of the eleven coal exploration project transactions in the Surat Basin is summarised in Table 6-7 and seven coal exploration transactions for the Galilee Basin is summarised in Table 6-8.

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Figure 6-1: Location of comparable transactions in the Surat and Clarence-Moreton Basins Note: The tenure numbering relates back to the Ref No. presented in Table 6-6. This relates the assets involved in the transaction and their location with respect to the assets being valued here.

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Figure 6-2: Location of comparable transactions in the Galilee and Eromanga Basins Note: The tenure numbering relates back to the Ref No. presented in Table 6-6. This relates the assets involved in the transaction and their location with respect to the assets being valued here

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Principal Reference Source	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX	ASX
Area (km2)	2,384	1,200	1,026	840	2,706	1,914	816	440	954	594	132	5,179	6,732	6,732	7,584	16,500	1,028	4,774
Location	Callide / Eromanga	Surat / Clarence Moreton	Clarence Moreton	Surat	Clarence Moreton	Surat / Maryborough	Surat	Surat / Mulgildie	Surat / Bowen	Surat / Mulgildie	Surat	Galilee	Galilee	Galilee	Galilee	Galilee	Galilee	Galilee
Percent Ownership	0%	10%	0%	0%	50%	0%	0%	0%	50%	0%	29%	0%	20%	80%	20%	80%	49%33.85%	80%
Optionor	Great White Nominees	Pacific Environmin Ltd	Delcarmen Energy Ltd	Velarium Holdings Pty Ltd	Bundaberg Coal Pty Limited	Eastern Coal Pty Ltd	Cockatoo Coal	Subiaco Capital Pty Ltd	Bundaberg Coal Ltd & Hudson Investment Group Ltd	Burt Terence John	Coal Face Resources Pty Ltd	FTB Pty Ltd	West Galilee	West Galilee	Carpentaria Exploration Ltd	Carpentaria Exploration Ltd	Cuesta Coal Ltd	Spinifex Rural Management Pty Ltd
Percent Ownership	100%	90%	100%	100%	50%	100%	100%	100%	50%	100%	71%	100%	80%	20%	80%	20%	51%	20%
Optionee	International Coal	Blackwood Coal Pty Ltd	Mining Projects Group	Legacy Iron Ore Ltd	Hudson Resources Ltd	Wavenet International Ltd	SE QLD Coal Pty Ltd	Legacy Iron Ore Ltd	Tiaro Coal Ltd	Carabella Resources	International Coal	Carpentaria Exploration Ltd	Baru Resources	Baru Resources	The Chairman 1 Pty Ltd	Guildford Coal	QCI (Galilee) Pty Ltd (Subsidiary of Hancock)	Guildford Coal Ltd
Source Date	Dec-11	Apr-10	Feb-12	May-12	May-09	May-11	Jan-08	May-12	May-09	May-10	Sep-12	Aug-08	Aug-11	Mar-12	Feb-10	Aug 2008	Aug-12	Apr-12
Transaction Type	Cash and Shares	Cash / free carried to Bankable	Cash and Shares	Cash	Cash	Cash	Cash	Cash	Cash	Cash and Shares	Cash and Shares	Cash and Shares	Cash	Cash	Cash	Cash and Shares	Cash	Cash and Shares
Project or Company Name	Great White Nominees	Blackwood JV	MPG Surat	EPC 2580	Toowoomba Tenements	Gayndah Project	Horse and Dogwood Creek	Evergreen Project	Bundaberg Tenements	Burnett Project	Don Juan Project	Hughenden	West Galilee	West Galilee	FTB Pty Ltd - Hughenden Project (EPC 3 apps 1 granted)	FTB Pty Ltd - Hughenden Project	Snake Creek	Orion Mining Pty Ltd (Pentland Project)
Ref No.	123	188	193	136	058	104	041	135	194	073	143	052	112	130	071	118	161	134

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Table 6-7: Surat Basin recent coal exploration transactions – implied permit values (A$)

Project Name	Period (Years)	JV Commitment (A$)	Cash at purchase (A$)	Minimum Expenditure (A$)	Implied tenement value full term on project basis (A$)	Implied tenement value full term on area basis (A$/km2)
Great White Nominees	1	930,000	2,000,000	2,000,000	885,714	370
Blackwood JV	1	500,000	500,000	500,000	555,556	460
MPG Surat	1	1,000,000	500,000	50,000	952,381	930
EPC 2580	1	825,000	825,000	825,000	785,714	940
Toowoomba Tenements	1	1,500,000	1,500,000	1,500,000	3,000,000	1,110
Gayndah Project	1	3,175,000	3,175,000	3,175,000	2,725,000	1,420
EPC 796 (Horse Creek) and EPC 813 (Dogwood Creek)	1	3,000,000	3,000,000	3,000,000	3,000,000	3,680
Evergreen Project	1	2,000,000	175,000	2,000,000	2,000,000	4,550
Bundaberg Tenements	1	2,200,000	2,200,000	2,200,000	4,400,000	4,610
Burnett Project	1	4,743,000	527,000	4,743,000	4,743,000	7,980
Don Juan Project	2	1,780,000	770,000	770,000	1,188,713	9,010

Note: Implied tenement values are rounded to four significant figures on project basis, two significant figures on area basis.

Table 6-8: Galilee Basin recent coal exploration transactions – implied permit values (A$)

Project Name	Period (Years)	JV Commitment (A$)	Cash at purchase (A$)	Minimum Expenditure (A$)	Implied tenement value full term on project basis (A$)	Implied tenement value full term on area basis (A$/km2)
Hughenden	1	430,000	305,000	305,000	430,000	80
West Galilee	2	2,000,000	2,000,000	2,000,000	1,185,374	180
West Galilee	1	250,000	250,000	250,000	1,250,000	190
FTB Pty Ltd - Hughenden Project (EPC 3 apps 1 granted)	1	2,300,000	300,000	300,000	2,327,381	310
FTB Pty Ltd - Hughenden Project	1	4,000,000	1,500,000	4,000,000	20,000,000	1,210
Snake Creek	4	3,000,000	1,500,000	1,500,000	1,489,299	1,450
Orion Mining Pty Ltd (Pentland Project)	1	2,000,000	2,000,000	2,000,000	9,523,810	2,000

Note: Implied tenement values are rounded to four significant figures on project basis, two significant figures on area basis.

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Table 6-9: Area based comparative transaction summary and SRK preferred $/km² ranges

Full term Comparative Transactions (A$/km²)	Full term Comparative Transactions (A$/km²)	Full term Comparative Transactions (A$/km²)	Full term Comparative Transactions (A$/km²)	Full term Comparative Transactions (A$/km²)	SRK Preferred (A$/km²)	SRK Preferred (A$/km²)	SRK Preferred (A$/km²)
Basin		All Transactio n	Area Based	Exp. Targets	Overall Prospectivity
					Low	Moderate	High
Surat / Clarence	Low	370	370	7,980	300 - 1000	1000 - 2000	2000 - 4000
	Average	3,187	2,008	8,495
	Median	1,420	1,110	8,495
	High	9,010	4,610	9,010
Galilee	Low	80	80	1,210	100 - 300	300 - 1000	1000 - 2000
	Average	774	190	1,553
	Median	310	185	1,450
	High	2,000	310	2,000

SRK considers the nine transactions for the Surat Basin to be broadly comparable to Coalbank’s EPCs located in the western Surat Basin in terms of geological setting and exploration status at the time of transaction. The nine transactions range in value from some A$370/km[2] to approximately A$4,600/km[2 ] with an average value of around A$2,000/km[2] .

SRK also considers the six transactions for the Galilee Basin to be broadly comparable to the EPCs located in the western Surat Basin in terms of geological setting, access to infrastructure and exploration status at the time of transaction. The eight transactions range in the value from around A$80/km[2] to approximately A$310/km[2] with an average value of approximately A$190/km[2] .

SRK has elected to apply these A$/km[2] multiples to Coalbank’s permits located in the Western Surat Basin.

The area of the tenements can be a somewhat arbitrary means of determining a value as the main value within an exploration project is the quality of the ground and not necessarily the size of the tenement area. Criticism of the methodology include the propensity to overvalue large tenure and undervalue small tenure holdings (see also potential Geoscientific Rating method limitations, Section 6.3). In order to provide more control over the valuation ranges applied to differing tenure, SRK reviewed the published asset valuations to derive valuation ranges (metric per sub-block area (A$/km[2] )) for low, moderate and high prospectivity. The prospectivity assessment for each tenement was derived from the assessment outlined as part of the Geoscientific Rating valuation approach. These ranges, presented as “SRK Preferred” in Table 6-9 were then adopted in the final comparative area based valuation.

SRK has adopted a range of A$300 to A$1,000/km[2] to apply the tenement areas. This range is at the lower end of the range for early stage exploration projects in the Surat Basin reflecting a lower prospectivity in line with the assessment undertaken as part of the Geoscientific Rating valuation approach.

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Tambo Project

Using the above revisions to the A$/km[2] multiples implied by comparative transactions the resulting value for Coalbank’s mineral assets is summarised in Table 6-10.

Table 6-10: Comparable transaction valuation of the Tambo Project EPCs

EPC	Low (A$)	Preferred (A$)	High (A$)	Notes
EPC 1625	123,000	267,000	411,000	Low prospectivity
EPC 1632	35,000	75,000	115,000	Low prospectivity
Subtotal	158,000	342,000	526,000

Using a Comparative Transaction method approach only, SRK’s Preferred Value for a 100% interest in the Tambo Project EPCs (EPC 1625 & 1632) in Queensland is A$342,000 within a valuation range of A$158,000 to A$526,000.

Resources - Blackall Project

Two EPCs are considered more ‘advanced’ in their development in that they have either reported Resources. These EPCs include EPC 1719 and EPC 1993 (Blackall) in the Eromanga Basin.

To value exploration holdings containing either Reported Resources or definable Exploration Targets, SRK researched comparable market transactions (within the last eight years) involving projects in either the Eromanga or Galilee Basins. The aim of this study was to determine appropriate resource multipliers (i.e. A$/t) as paid recently by the market for similar types of assets. This range of multipliers was then applied to Coalbank’s stated Coal Resource to estimate a market value.

Where the transaction involves Resources reported in accordance with the JORC Code (2004, 2012), the prices paid for the stated Resource tonnes are factored/adjusted to a A$/t value using the coal price index at the time of transaction. The A$/t has then been internally benchmarked to adjust for the differential in value between Resource categories to achieve an Inferred A$/t and a combined Indicated/Measured A$/t value. The differential factor derived is a function of the average difference between the cost of Inferred and Indicated/Measured Resources. Transactions that involve 100% Inferred or Indicated/Measured Resources can be used and compared where for example geological, exploration, commodity, quality and mine type factors are similar as a check on the method. Currently, the factor determined is around 2.4, where Indicated/Measured Resources are around 2.4 times the price of an Inferred Resource. A more detailed explanation of this approach is outlined in Appendix B.

Galilee / Eromanga Basin Comparatives

SRK examined a range of comparative transactions and selected a number which have some similar characteristics to the Blackall project, (e.g., projects targeting the large scale open-cut potential of low rank thermal coal seams within the Betts Creek Coal Measures (or equivalents) and/or Winton Formation with a similar development potential).

SRK first selected 14 coal transactions as detailed in Table 6-11. The location of the assets involved in those transactions and their position relative to Coalbank’s assets are shown in Figure 6-2. The selected comparable transactions have incorporated a range of stages in project development (from early stage exploration to advanced exploration/feasibility stage) with open-cut scenarios. The factored A$/t analysis of these transactions is presented in Table 6-12. The range of project stages at the time of transaction across the 14 coal transactions was used by SRK to construct a project ‘development curve’ based on the stage of project and the factored A$/t for Inferred and Indicated/Measured Resource categories (Figure 6-3).

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Figure 6-3: Galilee/ Eromanga transaction comparatives – development curve (Yardstick method)

Based on the prices paid and summary transaction information regarding projects in the Galilee/Eromanga Basin, SRK notes that:

The early stage exploration projects for potential open-cut and underground projects in the Galilee/Eromanga Basins with Exploration Targets as defined in the JORC Code (2012) have implied transaction multiples ranging from less than A$0.01 to A$0.03/t , averaging A$0.009/t per Exploration Target tonne.
The early stage exploration projects (excluding the Carmichael and Alpha, Alpha West and Kevins Corner transactions) or potential open-cut projects in the Galilee/Eromanga Basin with Inferred Resources have implied transaction multiples ranging from less than A$0.01/t to A$0.04/t averaging A$0.015/t for Inferred Resources (factored and benchmarked). Additionally, this range appears linked to Resource size.
The same early stage exploration projects for potential open-cut projects with Indicated/Measured Resources have implied transaction multiples ranging from less than A$0.01/t to A$0.10/t , averaging A$0.04/t for Indicated/Measured (factored and benchmarked).

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Consideration of Eromanga Transactions

Acquisition of Idalia Coal

In January 2013, East Energy Resources Limited (EER) acquired Idalia Coal Pty Ltd from Noble Group and Majicyl Pty Ltd for A$40 million. The primary asset was the Idalia Coal Project (EPC 1398, 1399 & 1400), which lies immediately north and adjacent to EER’s Blackall project. At the time of transaction, Idalia had defined a 440 Mt Inferred Resource and drill identified an Exploration Target of between 4 billion and 4.5 billion tonnes. SRK consider that the combination of defined resources and a large exploration target skews the A$/t pricing metrics when trying to determine the implied multiple for Resources. SRK therefore consider the pricing metrics as anomalous with the price per tonne of A$0.07 for the stated Inferred Resource likely to be inflated and not in line with the general poor sentiment regarding stranded coal properties in the current economic climate.

Acquisition of 30% interest in East Energy Resources

In May 2010, Osendo Pty Ltd (a subsidiary of the Noble Group Ltd) purchased a 30% interest in EER for A$6 million. At the time of transaction, EER had defined a 1,200 Mt Inferred Resource at its Blackall Project (EPC 1149). This transaction is considered by SRK to be the most comparable to Coalbank’s Blackall Project with respect to location, geology, stated Resource size and exploration status at the time of transaction, as well as its perceived prospectivity and pathway to development. The transaction equates to an A$0.01/Inferred Resource tonne (factored to the June 2016 coal price). SRK also note that at the time of the transaction, the project had further upside with potential to establish materially more resources in the northern half of the tenement and exploratory drilling had commenced.

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Price Paid (A$M)	0.3	2.0	0.25	4.0	2.0	8.3	0.86	40.0	125.8	6.0	12.5	500	1260	515
Mine Type	OC	OC	OC	OC	OC	OC	OC / UG	OC	OC	OC	OC / UG	OC/ UG	OC / UG	OC
Stage of Exploration	Greenfields	Greenfields	Greenfields	Greenfields	Early Exploration	Greenfields	Advanced Exploration	Early to Advanced Exploration	Advanced Exploration	Development	Advanced to Development	Development	Development	Advanced Exploration
Commodity Details	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal	Thermal
Basin / Coal Measure	Galilee	Galilee	Galilee	Galilee	Galilee	Galilee	Eromanga	Eromanga	Galilee	Eromanga	Galilee	Galilee	Galilee	Galilee
Synopsis	In Sep 2009, the partial acquisition of Carpentaria Exploration Ltd’s Hughenden Project. RexCo Project Pty ltd acquire an 80% interest for A$ 0.3 million	In Aug 2011, the partial acquisition of West Galilee Exploration Pty Ltd’s West Galilee Project. Baru Resources acquires an 80% interest for A$ 2.0 million.	In Mar 2012, the partial acquisition of West Galilee Exploration Pty Ltd’s West Galilee Project. Baru Resources acquires a 20% interest for A$ 0.25 million.	In Sep 2011, the acquisition of the remaining interest in FTB (Qld) Pty Ltd from Carpentaria Exploration Ltd. Guildford Coal acquires a 20% interest for A$ 4.0 million	In Apr 2012, the partial acquisition of Orion Mining Pty Ltd (The Pentland Project) by Guildford Coal Ltd. Guildford acquire a 20% equity interest from Spinifex Rural Management Pty Ltd for A$2.0 million	In Apr 2011, the partial acquisition of a 51% equity interest in Tiaro Coal’s White mountain Project by Guildford Coal for A$ 8.5 million	In Jun 2011, the 100% acquisition of the Blackall Tenements by NSL Consolidated Ltd from an unknown vendor for A$ 0.86 million	In Jan 2013, the acquisition of Idalia Coal Pty Ltd by East Energy Resources for A$ 40.0 million.	In Dec 2008, the acquisition of Waratah Coal by Mineralogy Pty Ltd for A$ 125.8 million	In Oct 2010, the partial acquisition of East Energy Resources by Osendo Pty Ltd from Majicyl Pty Ltd. Osendo acquire a 30% interest for A$ 6 million	In Sep 2008, the partial acquisition of Alpha Coal’s South Galilee Project. Guildford acquire a 50% equity interest for A$ 12.5 million	In Aug 2010, the acquisition of Linc Energy’s Carmichael Project. Adani Mining acquires a 100% interest for A$500 million and a $2 royalty over the initial 20 years	In Sep 2011, the acquisition of a 79% interest Hancock Prospecting’s Alpha and Alpha West Projects and 100% interest in Kevin’s Corner by the GVK Group for A$1.3 Billion	In May 2009, the partial acquisition of mineralogy Pty Ltd.’s South and North Alpha Project by China Metallurgical Group. China Metallurgical acquire a 10% equity stake for A$ 515 million.
Vendor	Carpentaria Exploration Ltd	West Galilee	West Galilee	Carpentaria Exploration Ltd	Spinifex Rural Management Pty Ltd	Tiaro Coal	Unknown Vendor	Camvill Pty Ltd	Waratah Coal Inc	Majicyl Pty Ltd	Alpha Coal Pty Ltd	Linc Energy Ltd	Hancock Prospecting	Mineralogy Pty Ltd
Buyer	RexCo Project Pty Ltd	Baru Resources	Baru Resources	Guildford Coal	Guildford Coal Ltd	Guildford Coal	NSL Consolidated Ltd	East Energy Resources	Mineralogy Pty Ltd	Osendo Pty Ltd	AMCI	Adani Mining Pty Ltd	GVK Group	China Metallurgical Gp
Transaction Date	Sep-09	Aug-11	Mar-12	Sep-11	Apr-12	Apr-11	Jun-11	Jan-13	Dec-08	Oct-10	Sep-08	Aug-10	Sep-11	May-09
Project or Company Name	Hughenden Project	West Galilee Project	West Galilee Project	FTB Pty Ltd - Hughenden Project	Orion Mining Pty Ltd (Pentland Project)	White Mountain - EPC 1260	Blackall Tenements	Idalia Coal Pty Ltd	Waratah Coal	East Energy Resources	South Galilee Project	Carmichael Project	"Alpha, Alpha West, Kevin’s Corner	South & North Alpha Project (Waratah)
Ref No.	160	112	130	118	134	099	192	169	056	085	053	081	119	062

Indicated / Measured A$t	Indicated / Measured A$t							0.0024	0.18	0.04	0.03	0.02	0.10	0.16	2.42
Inferred A$/t								0.0010	0.07	0.02	0.01	0.01	0.04	0.07	1.01
Exploration Tonne A$/t		0.00079	0.00595	0.00334	0.00466	0.02266	0.02723	0.00100	0.00770	0.02489
Factor		1.09	1.59	1.41	1.67	1.39	1.61	1.57	1.22	1.63	1.38	2.53	1.38	1.67	1.17
Coal Sales Price Index (A$/t)		84.18	122.79	109.22	129.15	107.24	124.39	121.36	94.64	126.21	106.45	195.96	106.89	129.15	90.68
Reported Reserves (Mt)	Total
	PROV / PROB
Reported Resources (Mt)	Total							550	440	4355	1200	1012.2	7800	2844	4355
	INF							550	440	4,355	1200	806	7300	1600	4355
	MEAS / IND											206.2	500	2000
Reported Exploration Target (Mt)		460	265.00	265	2570	578	372	600	4500	3100					460
Project or Company Name		Hughenden Project	West Galilee Project	West Galilee Project	FTB Pty Ltd - Hughenden Project	Orion Mining Pty Ltd (Pentland Project)	White Mountain - EPC 1260	Blackall Tenements	Idalia Coal Pty Ltd	Waratah Coal	East Energy Resources	South Galilee Project	Carmichael	"Alpha, Alpha West, Kevin’s Corner	Waratah Coal
Date		Sep-09	Aug-11	Mar-12	Sep-11	Apr-12	Apr-11	Jun-11	Jan-13	Dec-08	Oct-10	Sep-08	Aug-10	Sep-11	May-09
Ref No.		160	112	130	118	134	099	192	169	056	085	053	081	119	062

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6.3.4 Other Considerations

Indicative comparable value benchmarked against deposit size

Given the higher anticipated capital costs associated with developing projects in the Galilee and Eromanga Basins, deposit size potentially becomes a key driver of asset value. SRK has interrogated various transactions on comparable deposits (i.e., similar with respects to target coal seams and likely marketed product; deposit setting, mineability and stage of development; access to market and infrastructure etc.). SRK has compared the implied multiple for A$/t Resource (undifferentiated against classification) against Resource size. The results are presented in Table 6-13 and shown in Figure 6-4. A preliminary analysis of the data suggests there is a clear trend differentiating asset value with deposit size. Typically larger Resources possess a higher A$/t multiple, which SRK considers to be reflective of the higher confidence in long term project viability and ability to overcome potentially intensive capital costs associated with infrastructure. This trend may equally apply to the asset value range within the Eromanga Basin projects.

Table 6-13: Galilee Project implied value (A$/t) versus Resource size

Project Acquisition	Total Resource (Mt)	% Inferred	A$/t Resource (INF+IND+MEAS)
South Galilee Project	589.4	68%	0.010
East Energy Resources Project*	1,200	100%	0.012
Waratah Coal’s Alpha Project	4,355	100%	0.018
Carmichael Project	7,800	93%	0.046
Alpha, Alpha West & Kevin’s Corner Project	7,682	62%	0.106

Note: East Energy Resources project is located in the Eromanga Basin for reference.

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Figure 6-4: Correlation between implied multiplier (A$/t) and deposit size (Total Resource JORC)

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SRK notes that several transactions within the Galilee Basin are linked to royalty arrangements on tonnes of coal produced (e.g., the Adani-Linc and Guilford-FTB deals). In applying the Joint Venture terms/options, it is regarded as most correct to consider only the first stage as the basis for estimating cash value equivalence at the time of the deal and that royalty payments only apply after this stage. SRK considers that it is not appropriate to apply a royalty valuation component to early stage exploration properties, as the financial outlook remains contingent on future production which at the time of the transaction is too uncertain (given the likely timeframes to production) to meaningfully value this portion of the overall consideration.

Relevant Specialists Reports

In March 2013, Agricola Mining Consultants Pty Ltd (“AMC”) prepared two reports on behalf of Stantons International Securities (“Stantons”) relating to the value of the Idalia coal deposit and EER’s Blackall coal deposit in Queensland. Importantly, these deposits lie immediately adjacent to Coalbank’s Blackall deposit. AMC reports there were no JORC Code compliant Coal Resources defined at Idalia and it considered a material inventory based on an internal estimate of coal using sparse drilling.

The implied A$/t metrics based on the valuation and reported Inferred Resources and/or “Material Inventory” (a term adopted by AMC) at the date of those valuations are shown in Table 6-14. Note for the EER Blackall deposit, the metrics are based purely on Resource tonnes without consideration given to Resource confidence.

Table 6-14: Valuation Summary of Blackall Project

Valuation Methods	Material Inventory (Mt)	Inferred (Mt)	Indicated (Mt)	Assigned Value (A$/t)
EER’s Blackall deposit		1,113	627.5	0.019
Idalia deposit	4,540			0.011

6.3.5 Comparative Valuation Summary (Blackall Project)

Based on the foregoing discussion, SRK has elected to adopt a range of A$0.01 to A$0.015/t for Coalbank’s Blackall Coal Resources. This range resides at the lower end of the implied transaction range for early stage exploration projects with Inferred Resources but is in line with trends for transactions involving projects that have a limited Resource size in this coal basin. The average is broadly comparable, albeit slightly lower than, the implied A$/t multiple derived from the EER transaction (i.e. Blackall deposit with an Inferred Resource of 1,200 Mt) which SRK considers to be reasonable given current market sentiment.

Table 6-15: Comparable transaction valuation for a 100% interest in EPCs 1719 & 1993

Total Resources (Mt)	Resource Category	A$/t Range	Low (A$M)	Preferred (A$M)	High (A$M)
108	INF	A$0.01–A$0.015	1.08	1.35	1.62
1,184	INF	A$0.01–A$0.015	11.84	14.76	17.67
			12.92	16.11	19.29

Notes: INF = Inferred Resource.* based on reasonable prospects to economically extract within a strip ratio cut-off of 20:1.

Using a Comparative Transaction method approach only, the implied market value for a 100% interest in EPCs 1719 and EPC 1993 (Blackall Project) lies within the range A$12.9M to $19.3M, with a preferred or midpoint value of A$16.1M.

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6.4 Gas Valuation

6.4.1 Comparable Transactions

After reviewing the available data, SRK considers the market approach to valuation is the most suitable approach for valuation of Coalbank’s ATPs. This view is considered reasonable given Coalbank has not carried out any exploration over the properties to date and thus there is no recent or relevant exploration expenditure able to support a cost based valuation methodology. Furthermore, given the status of exploration, it is unlikely that Coalbank will be able to derive any cashflow from the property within the foreseeable future, thereby precluding the use of income based valuation methods. As a result, SRK deems market based methods to be the most appropriate in this instance.

SRK’s estimate of value is based on recent transactions as indicated in Table 6-16. Each comparable transaction involves projects which remain in the early stages of assessment with no associated historical production or stated Reserves or Contingent Resources.

Based on available data for Coalbank’s three ATP petroleum areas, it is possible to recognise they offer limited associated petroleum prospectivity; however, significant work will be required to develop the assets and determine whether they are capable of supporting the definition of Prospective Resources.

In considering these transactions, SRK is also cognisant of spot gas prices within Australian domestic markets over the period encompassing the identified transactions. SRK notes that gas prices have been highly erratic in certain markets (i.e. Brisbane) but considerably more stable in other markets (i.e. Adelaide and Melbourne). For the purpose of this valuation, SRK has assumed a constant gas price of approximately A$4 per gigajoule over the intervening period.

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Source: Australian Energy Regulator, State of the Market, 2015.

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Additional payments subject to future spending and discovery	Nil	Nil	A$1,000,000 plus royalty (discovery of 500,000 bbl) Current Value nil	1% ORRI royalty over Reys 50% Current Value nil
Reference	Lakes Oil Annual Report 2015	Lakes Oil Annual Report 2015	Drillsearch ASX release June 2012	Oil Basins Ltd
(A$/km2)	180.62	112.80	192.85	154.45	160.18
A$/acre EV/Acre	0.73	0.46	0.78	0.63	0.65
Year	2014	2014	2013	2014	Average
Prospective Targets	Oil; Gas; CSG; Unconventional	Oil; Gas; CSG; Unconventional	Oil; Gas; CSG; Unconventional	Oil; Gas; CSG; Unconventional
Basin	Otway	Cooper/ Eromanga	Cooper/ Eromanga	Canning
Area (km2)	1,827	10,000	3,889	5,063
Blocks	PEP 167; PEP175	ATP642; ATP662	ATP917; ATP927	PEP 487 (50%)
Total Transaction Value (A$)	330,000	1,128,000	750,000	391,000
Company Acquiring	Lakes Oil	Lakes Oil	Real Energy	Rey Resources

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Based on the foregoing discussion, SRK elected to adopt a range implied by the highest and lowest transaction values (i.e. A$113 to A$193/km[2] ).

Table 6-17 provides SRK’s estimate of the current market value for a 100% interest in Coalbank’s three ATPs based on comparable transactions.

Table 6-17: SRK’s estimate of a 100% interest in Coalbank’s ATPs

Original Designation	ATP	Area (km2)	Low (A$)	High (A$)	Preferred value (A$)
PLR2010-1-3	ATP 1072	6,525	736,000	1,258,000	1,045,000
PLR2010-2-6	ATP1098	5,376	606,000	1,037,000	861,000
PLR2010-2-4	ATP1095	1,620	183,000	312,000	259,000
Total			1,525,000	2,607,000	2,165,000

6.4.2 Actual transactions

On 21 December 2012, Coalbank announced the divestment of its wholly owned subsidiary, Surat Gas Pty Ltd (Surat Gas) for a consideration of A$250,000 cash and 10 M shares in Gobi Lithium Limited (to be renamed Sierra Oil Limited), an unlisted company. At the time of the announcement, Coalbank’s Directors considered Coalbank’s shareholding in Sierra Oil would represent approximately A$1 M in value at the targeted IPO valuation. If this were the case then the implied value of Surat Gas was A$1.25 M at that time.

At the time of the transaction, Surat Gas held a single granted (ATP 1020) and three applications (ATPs 1072, 1095 and 1098) for petroleum tenure.

Subsequently, on 21 April 2015, Coalbank acquired 100% of the issued capital of Surat Gas for a total consideration of A$1 plus the assumption of creditors to the value of A$85,639.

In reviewing these transactions, SRK questions whether they are truly at “arm’s length”, but does consider them instructive with regards to value and the recent state of the market involving high risk gas assets with substantial farm-in work commitments.

6.4.3 Summary

Based on its review of Coalbank’s gas assets, SRK considers that the market would take into consideration the following:

The early stage of assessment associated with this petroleum tenure with considerable work still required to demonstrate gas potential and de-risk the project;
No significant monies have been expended (no exploration carried out) on these tenures since they were allocated by the Queensland Government;
The significant expenditure commitments relating to the tenure;
Market sentiment for early stage exploration projects given the current risk adverse nature of investors.

In light of these factors, SRK considers the current market would pay in the range A$0 (representing the scenario that these tenures are handed back to the government due to the inability to meet the outstanding work commitments) to A$2.6 M (top end of the comparable transaction range), with a preferred value of A$1.3 M.

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7 Valuation Summary

RSM Corporate Australia Pty Ltd (RSM) commissioned SRK Consulting Australia Pty Ltd (SRK) to prepare an independent technical assessment and valuation report of Coalbank Limited’s (Coalbank) coal and gas assets located in southern Queensland. This Report has been prepared under the guidelines of the VALMIN Code (2015 Edition), which incorporates the JORC Code.

While the VALMIN Code 2015 states that decisions as to which valuation methodology is used are the responsibility of the Expert or Specialist, where possible, SRK considers a number of methods. The aim of this approach is to compare the results achieved using different methods to select a preferred value within a valuation range. This reflects the uncertainty in the data and interaction of the various assumptions inherent in the valuation.

7.1 Tambo Project

SRK has applied two methods (Geoscientific Rating and Comparative Transactions) to provide an opinion on the market value for the Tambo Project EPCs (EPC 1632 and 1625) in Queensland, Australia.

Table 7-1: Valuation Summary for the Tambo Project

Valuation Methodology		Valuation A$
	Low (A$)	High (A$)	Preferred (A$)
Geoscientific	109,000	552,000	283,000
Comparable Transactions	158,000	526,000	342,000
Specialist Opinion	130,000	540,000	310,000

7.2 Blackall Project

SRK has applied two methods (Multiples of Exploration and Comparative Transactions) to provide an opinion on the market value for the Blackall Project EPCs (EPC 1719, and 1993) in Queensland, Australia. SRK applied the Geoscientific Method to value the remaining exploration potential within EPC 1719 only and considers the value of that exploration potential to be immaterial to the final valuation opinion.

SRK has equally considered the Multiples of Exploration method and the Comparable Transaction method as the primary valuation approach. The valuation summary is provided in Table 7-2. In determining the final specialist opinion, SRK notes a reasonable correlation between the two preferred valuation ranges.

Table 7-2: Valuation Summary for the Blackall Project

Valuation Methodology		Valuation A$
	Low (A$)	High (A$)	Preferred (A$)
Multiples of Exploration	12,250,000	15,200,000	14,250,000
Comparable Transactions	12,920,000	19,290,000	16,100,000
+ Geoscientific Rating (EPC1719)	13,000	45,000	24,000
Specialist Opinion	12,500,000	17,000,000	15,000,000

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7.3 Gas Project

Based on a combination of comparable transactions and other market considerations, SRK has estimated the value of a 100% interest in Coalbank’s three petroleum ATPs likely to reside in the range A$0 (representing the scenario that these tenures are handed back to the government due to the inability to meet the outstanding work commitments) to A$2.6 M (top end of the comparable transaction range), with a preferred value of A$1.3 M..

Compiled by

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Dr Bryce Healy Principal Consultant

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Dr Bruce McConachie Principal Consultant

Peer Reviewed by

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Jeames McKibben Principal Consultant

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8 References

Agricola Mining Consultants Pty Ltd, 2011. Independent Valuation of the Mineral Assets of Raisama Limited. Prepared for the KPMG Corporate Finance (Aust) Pty Ltd (January 2011).

Australian Energy Regulator, 2016. State of the Energy Market 2015.

Coalbank Limited. Various announcements to the ASX dated between 2011 to 2016 including annual, quarterly and exploration update reports and presentations.

East Energy Resources Ltd, 2009. Media Release, 23 April 2009 - East Energy confirms maiden JORC resource of over 1.2 Billion tonnes for QLD thermal coal project. Retrieved from: http://www.eastenergy.com.au/media/EER_confirms_1-2b-tonnes-JORC.pdf

East Energy Resources Ltd, 2011. Media Release, 29 April 2011 – East Energy confirms 469 Million Tonnes JORC Indicated Resource at Blackall Coal Project. Retrieved from: http://www.eastenergy.com.au/wp-content/uploads/2011/03/EER-ASX-20110501East_Energy_confirms_JORC_Indicated_Resource_at_Blackall_Coal_Project.pdf
East Energy Resources Ltd, 2013. Media Release, 23 January 2013 – East Energy Resources Ltd signs binding heads of agreement to acquire 100% of Idalia Coal Pty Ltd. Retrieved from http://www.eastenergy.com.au/wp-content/uploads/2011/03/eer-asx-20130123-HOA.pdf
Exon, N.F. (1970). Tambo, Queensland 1:250,000 Geological Sheet. Aust. Bur. Mineral Resour. Geol. Geophys., Explan. Notes, SG 55/2
Freeman R N, 1967. Final Report. Orion oil Company. 1966 Drilling Program, Morven Area, Queensland Australia
Goulevitch J and Eupene GS., 1994. Geoscience Rating for Valuation of Exploration PropertiesApplicability of the Kilburn Method in Australia and Examples of its Use. VALMIN 94. Mineral Valuation Methodologies. The Australasian Institute of Mining and Metallurgy, Mineral Industry Consultants Second Edition (1994).
Johnson, R. ,2012. Competent Person Report, Blackall Coal Project, EPC1993 and EPC1719, Inverness Deposit, Queensland, Australia as at 15 June 2012. Internal report prepared by McElroy Bryan Geological Services for COALBANK Limited.
Johnson, R. 2015. Competent Person Report, Blackall Coal Project, EPC1993 and EPC1719, Inverness Deposit, Queensland, Australia as at 15 June 2015. Internal report prepared by McElroy Bryan Geological Services for COALBANK Limited.
JORC, 2012: Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. December 2012.

Lodestone Energy, 2012. ASX Announcement. Exciting Oil and Gas Targets Identified in ATPs.

Lord D, Etheridge M, Willson M, Hall G and Uttley P, 2001. Measuring exploration success: An alternative to the discovery-cost-per-ounce method of quantifying exploration effectiveness . Society of Economic Geologists (SEG) Newsletter, Number 45.
Lord D, Williams PR, Kreuzer OP and Etheridge MA., 2012, Meaningful Market-Based Valuation of Exploration Assets. VALMIN Seminar Series 2011 – 2012.
Morley A, 2007. Evaluation of exploration projects. AusIMM Project Evaluation Conference, June 2007.

Oakley Greenwood, 2016. Gas Price Trends Review.

Ozimic S, 1982. Depositional Environment of the Oil Shale-bearing Cretaceous Toolebuc Formation and its equivalent, Eromanga Basin, Australia. In Stephenson A E, 1982. Bureau of Mineral

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Resources, Geology and Geophysics. Record 1982/25. Stratigraphic Drilling in the Cretaceous Toolebuc Formation in the Southern Eromanga Basin, 1981 – A Contribution to BMR/CSIRO NERDDC Project 78/2616.SAMVAL, 2008, The South African Code for the Reporting of Mineral Asset Valuation.

Senior B R, Ingram J A, Thomas B M, and Senior D, 1969. Bureau of Mineral Resources, Geology and Geophysics. Record 1969/13. The Geology of the Quilpie, Charleville, Toompine, Wyandra, Eulo, and Cunnamulla 1:250,000 Sheet Areas, Queensland.
Smith R J, 1987. Vitrinite Reflectance data from petroleum exploration wells, Southern Eromanga Basin, Queensland. Geological Survey of Queensland, Record, 1987/44: 7 pp.
Snowden, 2010. Independent Valuation Update for the Mineral Assets of Jupiter Mines Limited . Prepared for Ernst and Young (May 2010).
SPE, 2007. Petroleum Resources Management System (PRMS) (Society of Petroleum Engineers). American Association of Petroleum Geologists, World Petroleum Council (WPC) Society of Petroleum Evaluation Engineers (SPEE), 49 p. Society of Petroleum Engineers.
SRK, 2006. Review of the Mining and Exploration Assets of Sedimentary Holdings, SRK Consulting (Australasia) Pty Ltd, Project Ref No SHL001 (2006)
Stephenson A E, 1982. Bureau of Mineral Resources, Geology and Geophysics. Record 1982/25. Stratigraphic Drilling in the Cretaceous Toolebuc Formation in the Southern Eromanga Basin, 1981 – A Contribution to BMR/CSIRO NERDDC Project 78/2616.

Surat Gas, 2011. Technical Presentation.

Surat Gas, 2015. Information Memorandum. ATP 1072P, ATP 1095P and ATP 1098P.

Swarbrick, C.F.J. 1973 Stratigraphy and economic potential of the Injune Creek Group in the Surat Basin. Geological Survey of Queensland, Report 79
VALMIN, 2015, Australasian Code for the Public Reporting of Technical Assessments and Valuations of Mineral Assets (The VALMIN Code).
Xstract, 2009. Independent Valuation of the Mineral Assets of Bowen Energy Limited, prepared for Deloitte Corporate Finance Pty Ltd. Within Supplementary Target Statement for Bowen Energy Limited dated 18 October 2010.
Xstract, 2010. Independent Mineral Specialist Report for Lodestone Energy Limited, prepared for WHK Howarth Corporate Finance Pty Ltd. Within Notice of General Meeting dated 20 May 2010.

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Appendices

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Appendix A

Appendix A: Base Acquisition Costs

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Appendix B

Appendix B: Yardstick Methodology

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Yardstick method overview

The Yardstick Method is used in the Transaction Database to benchmark project transactions with a mix of Inferred and Indicated & Measured Resources with project transactions that are mainly Inferred or Indicated & Measured Resources. An overview of the Yardstick Method is set out below.

It is recognised by SRK and the broader resource sector industry that technical value of an Asset is linked with the confidence level in Asset Resource or the level of geological uncertainty (Figures B1 and B2). The ‘Yardstick Method’ of valuation is a recognised valuation technique which aims to address the differing value associated with increasing levels of resource confidence

(i.e. Inferred, Indicated and Measured Resource Categories).

In general, Indicated and Measured Resources are associated with projects further along the ‘development chain’ and are therefore associated with higher values per Resource tonne. Indicated and Measured Resources may be used to undertake feasibility studies and define Probable and Proven Reserves (see Figures B1 and B2). Conversely, the estimation of Ore Reserves and the undertaking of feasibility studies are considered inappropriate to undertake with only published Inferred Resources.

SRK has identified a number of comparative transactions that involve reported resources which are defined under the three recognised Resource Categories. In order to better understand the relative value of the Inferred component of those Resources, SRK has benchmarked the raw comparative transaction data using the Yardstick approach to provide a more meaningful assessment of the implied value of the Inferred Resources within EPC 890 based on comparative Inferred Resources. The Yardstick ratios adopted are based on SRK’s experience in valuation work and experience across a range of projects and commodity types. The ratio of value between Inferred and a combined Indicated / Measured Resource usually ranges between 1.5 and 3.0.

This factoring is in line with broader industry confidence levels associated with various stages of project development (see Table B1 and Table B2).

SRK has adopted a Yardstick Method using a factoring of 2.4, effectively a mid-point value, to the comparative transactions for the purpose of isolating the attributed value of the ‘Inferred’ component of Resource transacted (i.e. an Indicated Measured Resource tonnes is valued 2.4 times that of an Inferred Resource tonne). The values derived from the Yardstick Method were then compared to comparable transactions involving Inferred Resources only.

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Figure B 1: General Relationship between Exploration Results, Mineral Resources and Ore Reserves

Reference: JORC, 2004, Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves, December 2004.

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Figure B 2: Mining Project life-cycle: Project Value by development status

Reference: Xstract Group Presentation: Mining Sector Investment Performance. September 2010.

Potential precision levels at the 80% or 90% Confidence Levels for Mineral Resource and Ore Reserve estimates, for example, over a 12 month production period.

Table B 1: Accuracy levels: Example 1

Mineral Resource	Precision	Precision
	Developed	Undeveloped
Measured	±5-10%	±10-15%
Indicated	±15-25%	±25-35%
Inferred		±35-100%

Reference: Dominy, S c, Noppe, M A, Annels, A E, 2004. Errors and Uncertainty in Mineral Resource and Ore Reserve Estimation: The Importance of Getting it Right, Explor. Mining Geol., 11: 1-4, pp 77-98.

Table B 2: Accuracy levels: Example 2

able B 2: Accuracy levels: Example 2	able B 2: Accuracy levels: Example 2

Accuracy levels typically resulting from pre-development studies
Scoping or conceptual	± 30-40% (Inferred Resource Stage)
Prefeasibility	± 20-25%(Indicated Resource Stage)
Feasibility	± 10-15% (Measured Resource Stage)
Definitive	± 5-10%

Reference: West, R, 2006. Preliminary, Prefeasibility and Feasibility Studies, Chapter 11. Australian Mineral Economics Monograph 24 (The Australasian Institute of Mining and Metallurgy: Melbourne).

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Client Distribution Record

SRK Report Client Distribution Record

Project Number: CBL001

Report Title: Independent Technical Assessment and Valuation of the mineral assets of Coalbank Limited

Date Issued:

1 August 2016

Name/Title	Company
Bruce Patrick, COO	Coalbank Limited

Rev No.	Date	Revised By	Revision Details
0	15/07/2016	Dr Bryce Healy	Draft Report
1	20/07/2016	Jeames McKibben	Final report to client
2	25/07/2016	Jeames McKibben	Reissued report to client
3	01/08/2016	Jeames McKibben	Reissued report to client

This Report is protected by copyright vested in SRK Consulting (Australasia) Pty Ltd. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder, SRK.

HEAL/MCKIB/powe

CBL001_Independent Technical Assessment - Valuation - Coalbank_Rev3

1 August 2016

Coalbank Limited ABN 20 075 877 075

LODGE YOUR VOTE

ONLINE  www.linkmarketservices.com.au BY MAIL  Coalbank Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia  BY FAX +61 2 9287 0309

 BY HAND Link Market Services Limited 1A Homebush Bay Drive, Rhodes NSW 2138  ALL ENQUIRIES TO Telephone: +61 1300 554 474

X99999999999

PROXY FORM

I/We being a member(s) of Coalbank Limited and entitled to attend and vote hereby appoint:

APPOINT A PROXY

the Chairman of the OR if you are NOT appointing the Chairman of the Meeting as your proxy, please write the name of the person or Meeting (mark box) body corporate you are appointing as your proxy

or failing the person or body corporate named, or if no person or body corporate is named, the Chairman of the Meeting, as my/our proxy to act on my/our behalf (including to vote in accordance with the following directions or, if no directions have been given and to the extent permitted by the law, as the proxy sees fit) at the Annual General Meeting of the Company to be held at 11:00am on Wednesday, 30 November 2016 at Colin Biggers & Paisley Lawyers, Level 35, 1 Eagle Street, Brisbane QLD 4000 (the Meeting ) and at any postponement or adjournment of the Meeting.

Important for Resolution 1: If the Chairman of the Meeting is your proxy, either by appointment or by default, and you have not indicated your voting intention below, you expressly authorise the Chairman of the Meeting to exercise the proxy in respect of Resolution 1, even though the Resolution is connected directly or indirectly with the remuneration of a member of the Company’s Key Management Personnel ( KMP ). The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

VOTING DIRECTIONS

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the Meeting. Please read the voting instructions overleaf before marking any boxes with an T

Resolutions

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

For Against Abstain * For Against Abstain
1 Adoption of Remuneration Report 5 Appointment of Auditor
2 Re-Election of Director – 6 Approval of conversion of
Mr Daniel Chan Convertible Note
3 Re-Election of Director – 7 Approval of the conversion of debt
Mr Nick Bolkus to a convertible note
4 Approval of 10% Placement Facility
----- End of picture text -----*

- If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED

Shareholder 1 (Individual) Joint Shareholder 2 (Individual) Joint Shareholder 3 (Individual) Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director

This form should be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth).

CBQ PRX1601C

HOW TO COMPLETE THIS SHAREHOLDER PROXY FORM

YOUR NAME AND ADDRESS

This is your name and address as it appears on the Company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

APPOINTMENT OF PROXY

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If you wish to appoint someone other than the Chairman of the Meeting as your proxy, please write the name of that individual or body corporate in Step 1. A proxy need not be a shareholder of the Company.

DEFAULT TO CHAIRMAN OF THE MEETING

Any directed proxies that are not voted on a poll at the Meeting will default to the Chairman of the Meeting, who is required to vote those proxies as directed. Any undirected proxies that default to the Chairman of the Meeting will be voted according to the instructions set out in this Proxy Form, including where the Resolution is connected directly or indirectly with the remuneration of KMP.

VOTES ON ITEMS OF BUSINESS – PROXY APPOINTMENT

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

APPOINTMENT OF A SECOND PROXY

You are entitled to appoint up to two persons as proxies to attend the Meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the Company’s share registry or you may copy this form and return them both together.

LODGEMENT OF A PROXY FORM

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 11:00am on Monday, 28 November 2016, being not later than 48 hours before the commencement of the Meeting. Any Proxy Form received after that time will not be valid for the scheduled Meeting.

Proxy Forms may be lodged using the reply paid envelope or:

ONLINE



www.linkmarketservices.com.au

Login to the Link website using the holding details as shown on the Proxy Form. Select ‘Voting’ and follow the prompts to lodge your vote. To use the online lodgement facility, shareholders will need their “Holder Identifier” (Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on the front of the Proxy Form).

BY MAIL 

Coalbank Limited

C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

 BY FAX

+61 2 9287 0309

 BY HAND

delivering it to Link Market Services Limited* 1A Homebush Bay Drive Rhodes NSW 2138

During business hours (Monday to Friday, 9:00am–5:00pm)

To appoint a second proxy you must:

(a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded; and
(b) return both forms together.

SIGNING INSTRUCTIONS

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

Individual: where the holding is in one name, the holder must sign. Joint Holding: where the holding is in more than one name, either shareholder may sign.

Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

CORPORATE REPRESENTATIVES

If a representative of the corporation is to attend the Meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission in accordance with the Notice of Meeting. A form of the certificate may be obtained from the Company’s share registry or online at www.linkmarketservices.com.au.

IF YOU WOULD LIKE TO ATTEND AND VOTE AT THE ANNUAL GENERAL MEETING, PLEASE BRING THIS FORM WITH YOU. THIS WILL ASSIST IN REGISTERING YOUR ATTENDANCE.

AI assistant

PACIFIC RESOURCES LIMITED — AGM Information 2016

65638_rns_2016-10-24_0a091066-9322-49b3-9a3e-c9b220b24064.pdf

Coalbank Limited ACN 075 877 075

Notice of Annual General Meeting and Explanatory Statement

Notice of Annual General Meeting

AGENDA

Financial Reports

Resolution 1: Adoption of Remuneration Report

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Resolution 2: Re-Election of Director – Mr Daniel Chan

Resolution 3: Re-Election of Director – Mr Nick Bolkus

Resolution 4: Approval of 10% Placement Facility

Resolution 5: Appointment of Auditor

Resolution 6: Approval of conversion of Convertible Note

Resolution 7: Approval of the conversion of debt to a convertible note

NOTES

Time and Place of Meeting

Your Vote is Important

Voting Eligibility

Voting in Person

Voting by proxy

Proxy vote if appointment specifies way to vote

Transfer of non-chair proxy to chair in certain circumstances

Voting by Corporate Representative

Voting by Attorney

Notice to Persons Outside Australia

Privacy

ASIC and ASX involvement

By Order of the Board

EXPLANATORY NOTES Contents

Notes :

Consider the Company’s Annual Report

1. Resolution 1: Adoption of Remuneration Report

2. Resolution 2: Re-Election of Director – Mr Daniel Chan

3. Resolution 3: Re-Election of Director – Mr Bolkus

4. Resolution 4: Approval of 10% Placement Facility

4.1 Description of Listing Rule 7.1A

(b) Equity Securities

(A x D) – E

(e) Minimum Issue Price

4.2 Listing Rule 7.1A

4.3 Specific information required by Listing Rule 7.3A

Table 1.

4.4 Voting Exclusion

4.5 Directors’ recommendation

5. Resolution 5: Appointment of Auditor

6. Resolution 6

6.1

Background to Resolution 6

6.2 Why the first Convertible Note was issued

6.3 The Agreement giving rise to the Loan

6.4 Outstanding balance of the First Convertible Note and current Relevant Interest of Treasure Wheel

6.5 Repayment of the Loan

6.6 Effect of Resolution 6

7. Resolution 7

7.1

Background

7.2 The terms and conditions of the Second Convertible Note:

8. Key reasons why Shareholders should vote in favour of Resolutions 6 and 7

9. Reasons why Shareholders may consider not voting in favour of Resolutions 6 and 7

10. Independent Expert's Report

11. Consequences if Shareholders do not approve Resolutions 6 and 7

12. Directors' Recommendation

13. Regulatory requirements applying to Resolutions 6 and 7

13.1

ASX Listing Rules

Resolution 6: First Convertible Note

Resolution 7: Second Convertible Note

13.2 Corporations Act - Takeovers issues

13.3 Corporations Act - Related Party Issues

Resolution 6: First Convertible Note

Resolution 7: Second Convertible Note

13.4 Effect on the Company's capital structure:

13.5 Dilutionary Impact

13.6 Effect on the Company's cash and debt

14. Definitions

Annexure A - Auditor Nomination

ANNEXURE A

COALBANK LIMITED

PACIFIC RESOURCES LIMITED AGM Information 2016