PTR MINERALS LTD — Interim / Quarterly Report 2007

Mar 8, 2007

Petratherm Ltd

ABN 106 806 884

Half Year Report

for the half year ended 31 December 2006

Contents to Half Year Report

Directors' Report
Auditor's Independence Declaration
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2. ISSUED CAPITAL
3. SEGMENT INFORMATION
4. CONTINGENT LIABILITIES
5. SUBSEQUENT EVENTS
Directors' Declaration
Independent Review Report

Directors' Report

The directors of Petratherm Ltd submit their report for the half-year ended 31 December 2006.

The names of the company's directors in office during the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Mr Derek Carter, Chairman Mr Terry Kallis, Managing Director Dr Lloyd Taylor, Non-Executive Director Dr Richard Hillis, Non-Executive Director Mr Richard Bonython, Non-Executive Director Mr Simon O'Loughlin, Non-Executive Director

Review of Operations

SUMMARY

During the six months to 31 December 2006, the Company made substantial progress in the development of its flagship Paralana Geothermal Energy Project. This included the successful Phase-2 drilling of 1807 metres and confirmation of expectation of commercial temperatures of around $200^{\circ}$ C at a target depth of 3600 metres.

Concurrently the Company critically examined the economics of the project, identifying a clear and comprehensive path to commercialization from small to very large scale generation development. A key component of that commercialization path was achieved with the Memorandum of Understanding for the supply of electricity to Heathgate Resources' Beverley Uranium Mine.

Joint Venture discussions and negotiations for the Paralana Project were undertaken during the period and a \$30 million deal was struck with Beach Petroleum Limited at the end of January 2007.

The Company continued to examine new opportunities to expand its portfolio of projects through the judicious application of its exploration model both in Australia and overseas. This resulted in the Federal Government endorsed project in China to assess several geothermal energy prospects and the securing of tenements in Spain announced after the reporting period.

Post the reporting period, the Company also announced a \$5 million Federal Government grant to commercialize its HEWI model at the Paralana Project.

CORPORATE HIGHLIGHTS

The Company completed the independent and comprehensive pre-feasibility study and economic model for the Paralana Geothermal Energy Project in South Australia. Concurrently, the Company revised its Strategic Business Plan, conducted a detailed competitor analysis and developed a clear commercialisation path for the Paralana Project

• A landmark Memorandum of Understanding for the supply of power to Heathgate Resources' Beverley Uranium Mine was established on 1 November 2006 at a signing ceremony witnessed by SA Mineral Resources Minister, the Honourable Paul Holloway.
• Petratherm announced, also on 1 November 20006, that it was successful in obtaining Project endorsement from the Asia Pacific Partnership on Climate and Clean Development (AP6) to undertake a study to "Identify high prospect geothermal energy projects in China".
• Joint Venture opportunities for geothermal exploration and development at Paralana $\bullet$ were pursued during the period resulting in the \$30 million Joint Venture deal with Beach Petroleum that was announced subsequent to the reporting period.
• The Company successfully completed a placement of 6,500,000 fully paid ordinary shares at 32 cents, in November 2006, raising \$2,080,000 before expenses. The funds are being applied to engineering and well design for the deep well at the Paralana geothermal, plus procurement of associated long lead-time drilling resources and materials, and ongoing working capital.
• Petratherm relocated to at 105-106 Greenhill Road. Unley in Adelaide SA, to $\bullet$ accommodate the growing needs of the Company.
• At the end of the half year the Company held \$3,071,000 in cash.

OPERATIONS HIGHLIGHTS

• Following the very successful phase 2 drilling campaign at Paralana geothermal. temperature measurements taken from the well at the end of August confirmed the Paralana Thermal Province as one of Australia's leading geothermal resources.
• Independent economic modelling studies indicate the Paralana resource could potentially support both small scale (7.5 MW to 30 MW) and large-scale base-load power (260 to 520 MW) generation, in the short and long term, respectively.
• Planning and preparatory work is under way for the drilling of the first deep around 3.5 to 4.0 kilometres - production well at Paralana. This is the first step to establishing the underground heat exchanger within the insulating rock, i.e. Petratherm's HEWI Model.
• An exceptionally high heat flow of 129 milliwatts per square metre $(mW/m²)$ was established in December 2006 at the Paralana Geothermal Site, providing further confidence in the economic viability of the thermal resource.
• The Company secured a new geothermal exploration licence (GEL 254) to cover the full extent of the thermal resource at Paralana. This new tenement brings the Company's tenure position at Paralana to aproximately 2000 square kilometres.

Auditor's independence declaration

The auditors' independence declaration is set out on page 6 and forms part of the directors'
report for the half-year ended 31 December 2006.

Signed in accordance with a resolution of directors.

UKA.

Mr Terry Kallis
Managing Director

6 March 2007

Grant Thornton

AUDITOR'S INDEPENDENCE DECLARATION TO THE DIRECTORS OF PETRATHERM LIMITED & CONTROLLED ENTITY

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Petratherm Limited for the half-year ended 31 December 2006, I declare that, to the best of my knowledge and belief, there have been:

• $(a)$ no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• $(b)$ no contraventions of any applicable code of professional conduct in relation to the audit.

GRANT THORNTON South Australian Partnership Chartered Accountants Ś⊿ GRAY Partner Signed at $Od$ = $\sqrt{2}$ day of $M_{c}$

Level 1 67 Greenhij Road Wayville SA 5034 GPO Box 1270 Adelaide SA 5001 DX 275 Adelaide T (08) 8372 5666 F (08) 8372 6677 E info@gtsa.com.au W www.granthornton.com.au

Grant Thornton South Australian Partnership ABN 27-244-906-724

2007

Consolidated Income Statement FOR THE HALF YEAR ENDED 31 DECEMBER 2006

	Consolidated
	Note	Hall year ended 31 Dec 2006	Half year ended 31 Dec 2005 \$
Revenue from ordinary activities Impairment of non-current assets Employee benefits expense Depreciation expense Other expenses		48,714 (386, 721) (5.623) (313, 835)	56,066 (7, 560) (110, 580) (2,326) (192, 016)
Loss before income tax expense		(657, 465)	(256, 416)
Income tax expense		(36.023)
Loss for the period		(693,488)	(256,416)
Loss attributable to members of the parent entity		(693, 488)	(256, 416)
Earnings per share: Basic earnings per share Diluted earnings per share		Cents (1.57) (1.57)	Cents (0.73) (0.73)

The income statement is to be read in conjunction with the notes to the consolidated interim financial report.

Consolidated Balance Sheet

AS AT 31 DECEMBER 2006

	Consolidated
Note	នា ខេតតកើត។ 2006 8	30 June 2006 \$
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets	3,060,301 38,129 19:490	2,554,246 125,249 11,452
TOTAL CURRENT ASSETS	3,117,920	2,690,947
NON-CURRENT ASSETS Property, plant and equipment Exploration and evaluation assets	49.921 3,240,581	32,321 3,012,967
TOTAL NON-CURRENT ASSETS	3,290,502	3,045,288
TOTAL ASSETS	6,408,422	5,736,235
CURRENT LIABILITIES Trade and other payables Short-term provisions	87,730 37.515	756,938 33,189
TOTAL CURRENT LIABILITIES	125,245	790,127
NON-CURRENT LIABILITIES Long-term provisions Other non-current liabilities	43.068 140 000	38,109 140,000
TOTAL NON-CURRENT LIABILITIES	183,068	178,109
TOTAL LIABILITIES	308,313	968,236
NET ASSETS	6,100,109	4,767,999
EQUITY $\boldsymbol{2}$ Issued Capital Retained earnings Reserves TOTAL EQUITY	8,085,487 (2.109.013) 123,635 6,100,109	6,089,542 (1,415,525) 93,982 4,767,999

The balance sheet is to be read in conjunction with the notes to the consolidated interim financial report.

Consolidated Statement of Changes in Equity FOR THE HALF YEAR ENDED 31 DECEMBER 2006

		Consolidated
		Share Capital Ordinary	Retained Earnings	Reserves	Total
	Note	s	S		\$
Balance at 1 July 2005		3,986,786	(579, 914)	64.755	3,471,627
Loss attributable to members of the parent entity Balance at 31 December 2005		3,986,786	(256, 416) (836, 330)	64,755	(256, 416) 3,215,211
Balance at 1 July 2006 Loss attributable to members of the parent entity		6.089.542	(1.415, 525) (693, 488)	93.982	4,767,999 (693, 488)
Shares issued via placement Transaction costs (net of tax)		2,080,000 (84,055)			2,080,000 (84.055)
Cost of share based payment Balance at 31 December 2006		8,085,487	1922 - Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro A (2.109.013)	29.653 123.635	29,653 6.100,109

The statement of changes in equity is to be read in conjunction with the notes to the consolidated interim financial report.

Consolidated Cash Flow Statement FOR THE HALF YEAR ENDED 31 DECEMBER 2006

	Consolidated
	Half year ended 31 Dec 2006	Half year ended 31 Dec 2005 \$
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers
Payments to suppliers and employees Interest received	(701.411) 54,791	(337, 485) 69,032
NET CASH USED IN OPERATING ACTIVITIES	(646, 620)	(268, 453)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Government exploration related grants	2.362 (24, 788)	(5,340) 148,544
Payments for exploration activities	(784, 821)	(1, 113, 532)
NET CASH USED IN INVESTING ACTIVITIES	(807, 247)	(970, 328)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares	2,080,000
Transaction costs of issue of shares	(120.078)
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,959,922
Net increase/(decrease) in cash and cash equivalents	506.055	(1,238,781)
Net foreign exchange differences Cash at the beginning of the reporting period	2,554,246	2,670,150
CASH AT THE END OF THE REPORTING PERIOD	3.060.301	1,431,369

The cash flow statement is to be read in conjunction with the notes to the consolidated interim financial report.

Notes to the Financial Statements FOR THE HALF YEAR ENDED 31 DECEMBER 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting entity $a_z$

Petratherm Ltd (the "Company") is a company domiciled in Australia. The consolidated interim financial report of the Company as at and for the six months ended 31 December 2006 comprises the Company and its subsidiaries (the "consolidated entity").

The consolidated annual financial report of the consolidated entity as at and for the year ended 30 June 2006 is available upon request from the Company's registered office.

$\mathbf{b}$ . Statement of compliance

The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reporting and the Corporations Act.

The consolidated interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the consolidated entity as at and for the vear ended 30 June 2006.

Significant accounting policies C.

The accounting policies applied by the consolidated entity in this consolidated interim financial report are the same as those applied by the consolidated entity in its consolidated financial report as at and for the year ended 30 June 2006.

Notes to the Financial Statements FOR THE HALF YEAR ENDED 31 DECEMBER 2006

2. ISSUED CAPITAL

	Consolidated
	As at
	31 Dec 06	30 Jun 06
	S	\$
Fully paid ordinary shares	8,085,487	6,089,542
	6.085.487	6,089,542
	Half year ended
	31 Dec 06
	Number	S.
Ordinary shares
Balance at beginning of financial year	43,375,001	6,089,542
Share Placement issued on 6 December 2006 Transaction costs on shares issued	6,500,000	2,080,000 (84,055)
Balance at end of financial year	49,875,001	8,085,487

3. SEGMENT INFORMATION

Industry & Geographical Segment

The Group operates in the mining exploration sector solely within Australia.

4. CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

Notes to the Financial Statements FOR THE HALF YEAR ENDED 31 DECEMBER 2006

5. SUBSEQUENT EVENTS

On the 30^th January 2007 Petratherm announced a new geothermal joint venture with Beach Petroleum Limited.

Petratherm Ltd on the 20^th February 2007 announced that it has been offered a \$5 million Renewable Energy Development Initiative (REDI) Grant by the Commonwealth Government to help accelerate the development of South Australia's Paralana "Hot Rock" or Geothermal Energy Project.

Directors' Declaration

In accordance with a resolution of the directors of Petratherm Ltd, I state that:

In the opinion of the directors:

• (a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
• (i) give a true and fair view of the financial position as at 31 December 2006 and the performance for the half-year ended on that date of the consolidated entity; and
• (ii) comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and
• (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of directors.

V f.M.

Mr Terry Kallis Managing Director

6 March 2007

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF PETRATHERM LIMITED & CONTROLLED ENTITY

Scope

Report on the financial report

We have reviewed the accompanying interim financial report of Petratherm Limited and Controlled Entity, which comprises the consolidated interim balance sheet as at 31 December 2006, and the income statement, statement of changes in equity and cash flow statement for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors' declaration.

Directors' responsibility for the Financial Report

The directors' of the company are responsible for the preparation and fair presentation of the interim financial report in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the interim financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' responsibility

Our responsibility is to express an opinion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the interim financial report in not presented fairly, in all material respects, in accordance with the Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. As auditor of Petratherm Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Level 1 67 Greenhill Road Wavville SA 5034 GPO Box 1270 Adelaide SA 5001 DX 275 Adelaide T 8181 8372 6666 F (08) 8372 6677 E info@etsa.com.au W www.grantinornfor.com.au

Grant Thornton South Australian Partnership ABN 27 244 906 724

Grant Thornton

Conclusion

$\overline{a}$

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Petratherm Limited is not in accordance with the Corporations Act 2001, including:

• giving a true and fair view of the consolidated entity's financial position as $\mathbf{L}$ at 31 December 2006 and of its performance for the half-year ended on that date; and
• ii. complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 200.1

GRANT THORNTON South Australian Partnership Chartered Accountants

JGRAY $\overline{\mathbb{R}}$ artner

Signed at $\alpha$ da long L

this 6 day of $M \propto L$

2007

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