AUSTRALIAN RENEWABLE FUELS LIMITED

AUSTRALIAN RENEWABLE FUELS LIMITED

ABN 66 096 782 188

SUITE 1B. LEVEL 5 SOUTH SHORE PIAZZA 85 SOUTH PERTH ESPLANADE SOUTH PERTH WA 6151

P.O. BOX 837 SOUTH PERTH WA 695!

TEL +61 8 9363 3500 $FAK$ 161893633511 E-MAIL [email protected] WEB www.arfuels.com.au

Monday 12 March 2007

ASX Release

Company Announcements Office Australian Stock Exchange Limited 10^th Floor, 20 Bond Street SYDNEY NSW 2000

Dear Sir/Madam,

RE: PROSPECTUS DATED 12 MARCH 2007

Please find attached Prospectus dated 12 March 2007.

Yours faithfully,

Am L'Empres

Max L Ger Finance Director/Company Secretary

ENDS

AUSTRALIAN RENEWABLE FUELS LIMITED

ABN 66 096 782 188

PROSPECTUS

For a pro-rata non-renounceable rights issue of 33,300,000 New Shares on the basis of 1 New Share for every 4 Shares held on the Record Date of 23 March 2007 at an issue price of \$0.35 per New Share, together with 33,300,000 free attaching New Options, each to acquire one Share at 60 cents on or before 24 April 2009, on the basis of one New Option for every New Share issued, to raise \$11,655,000. Shaw Corporate Finance Pty Ltd has agreed to fully underwrite the Rights Issue.

AND

For the issue of 9,000,000 Placement Options to Placees, each to acquire one Share at 60 cents on or before 24 April 2009.

The Rights Issue and Placement Option issue closes at 5.00pm AWST on 16 April 2007.

UNDERWRITER TO THE RIGHTS ISSUE Shaw Corporate Finance Pty Ltd ABN 25 101 193 971

IMPORTANT NOTICE

This document is important and requires your immediate attention. It should be read in its entirety. If you do not understand its contents or are in doubt as to the course you should follow, you should consult your stockbroker or professional adviser.

INDEX

Section 1	DETAILS OF THE RIGHTS ISSUE	5
Section 2	DETAILS OF THE PLACEMENT OPTIONS	11
Section 3	OPERATIONAL UPDATE, CAPITAL STRUCTURE & EFFECT OF THE RIGHTS ISSUE AND THE ISSUE OF THE PLACEMENT OPTIONS	13
Section 4	RISK FACTORS	21
Section 5	ADDITIONAL INFORMATION	28
Section 6	DEFINED TERMS	48
Section 7	DIRECTORS' RESPONSIBILITY STATEMENT & CONSENT	51

Summary of Important Dates

Announcement of Rights Issue, Placement and General Meeting	12 March 2007
Lodge Prospectus with ASIC	12 March 2007
Issue of Shares under Placement	15 March 2007
Shares quoted ex-rights	19 March 2007
Record Date to determine Entitlements	23 March 2007
Opening Date and dispatch of Prospectus	29 March 2007
Closing Date $*$	16 April 2007
Notification to ASX of undersubscriptions and Underwriter notified of number of New Securities to be subscribed for by Underwriter and Sub-Underwriters	19 April 2007
General Meeting	20 April 2007
Allotment of Placement Options, New Securities and dispatch of holding statements*	24 April 2007
*These dates are indicative only. The Directors reserve the right to vary the key dates, without prior notice and subject to compliance with the ASX Listing Rules.

IMPORTANT NOTICE

Shareholders should read this Prospectus in its entirety and, if in doubt, should consult their professional advisers before deciding whether to accept their Entitlements. This Prospectus is dated 12 March 2007. A copy of this Prospectus was lodged with the ASIC on 12 March 2007. No responsibility for the contents of this Prospectus is taken by ASIC. No applications for New Securities will be accepted nor will New Securities be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

In preparing this Prospectus regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act 2001 and that certain matters may reasonably be expected to be known to investors and professional advisers who investors may consult. No person is authorised to give any information or to make any representation in connection with the Rights Issue described in this Prospectus. Any information or representation which is not contained in this Prospectus or disclosed by the Company pursuant to its continuous disclosure obligations may not be relied upon as having been authorised by the Company in connection with the issue of this Prospectus.

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom it would not be lawful to make such an offer or invitation. The distribution of this Prospectus in jurisdictions ou restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

$\dot{\alpha}$ $\mathcal{A}$

$\mathcal{L}_{\mathcal{A}}$

$\bar{\psi}$

$\sim$

$\sim 10^{-1}$

$\pi_{\rm tot}$

$\bar{\mathcal{A}}$

$\sim$

$\cdot$

CORPORATE DIRECTORY

$\sim$

$\mathcal{L}_{\mathcal{L}}$

$\bar{z}$

DIRECTORS	Mr Alan Mulgrew (Independent Chairman, Non- Executive Director ) Mr Rob Scott (Non-Executive Deputy Chairman) Mr Darryl Butcher (Managing Director) Mr Max Ger (Executive Director) Mr Geoffrey Towner (Non-Executive Director) Mr Glyn Denison (Non-Executive Director) Mr Graham Scott (Non-Executive Director)
SECRETARY	Mr Max Ger
REGISTERED OFFICE	Suite 1B, Level 5, South Shore Piazza 85 South Perth Esplanade SOUTH PERTH WA 6151 Telephone: $+61893633500$ Facsimile: +61 8 9393 3511 Website: www.arfuels.com.au
AUDITORS	Horwath Audit (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008
SOLICITORS TO THE ISSUE	Blakiston & Crabb 1202 Hay Street WEST PERTH WA 6005
UNDERWRITER	Shaw Corporate Finance Pty Ltd Level 16 60 Castlereagh Street SYDNEY NSW 2000
SHARE REGISTRY	Computershare Investor Services Pty Limited Level 2, 45 St Georges Terrace PERTH WA 6000
	Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

BRIEF INSTRUCTIONS FOR THE RIGHTS ISSUE

For Current Shareholders

What You May Do

The number of New Shares to which you are entitled is shown on the accompanying Entitlement and Acceptance Form. You may:

$\triangleright$ Accept your Entitlement in full or part;
$\triangleright$ Apply for more than your Entitlement; or
$\triangleright$ Allow the whole of the Entitlement to lapse.

For each New Share issued to you, you will also be issued one free attaching New Option.

If You Wish To Take Up All or Part Of Your Entitlement

Complete the accompanying Entitlement and Acceptance Form in accordance with the instructions set out in the form. Forward your completed Entitlement and Acceptance Form, together with your cheque for the amount shown on the form or for such lesser amount as you wish to apply for, so as to reach the Company's share registry no later than 5:00pm AWST on 16 April 2007.

If You Wish To Take Up More Than Your Entitlement

Complete the relevant section of the accompanying Entitlement and Acceptance Form relating to participation in the Shortfall in accordance with the instructions set out in the form. Forward your completed Entitlement and Acceptance Form, together with your cheque for the amount shown on the form plus the amount payable for the additional New Shares you wish to apply for, so as to reach the Company's share registry no later than 5:00pm AWST on 16 April 2007. Applications in excess of your Entitlement will be dealt with in accordance with the Underwriting Agreement (refer to Section 5.10).

Entitlements Not Taken Up

Any New Shares not taken up by Existing Shareholders will be dealt with in accordance with the Underwriting Agreement.

Section 1 DETAILS OF THE RIGHTS ISSUE

$1.1$ The Rights Issue

The Company is inviting Existing Shareholders to subscribe for 33,300,000 New Shares at an issue price of \$0.35 each, on the basis of 1 New Share for every 4 Shares held as at the Record Date of 5:00pm AWST on 23 March 2007, together with 33,300,000 free attaching New Options, each to acquire one Share at an exercise price of 60 cents on or before 24 April 2009, on the basis of one New Option for every New Share issued.

The Rights Issue will raise approximately \$11,655,000 (less expenses of the Rights Issue estimated to be \$700,000).

Prior to the Record Date the Company proposes to complete the issue of up to 9,000,000 Shares under the Placement to Placees, at an issue price of 35 cents each, to raise \$3.15m before costs of the Placement. Each of the Placees are entitled to one free attaching Placement Option for each Share subscribed under the Placement, each to acquire one Share at 60 cents on or before 24 April 2009 and the offer of these Placement Options is contained in this Prospectus.

The Shares issued under the Placement participate in the Rights Issue. As the Placement Options will not be issued until after the Record Date, the holders, should they subsequently choose to exercise those Placement Options, will not be entitled to participate in the Rights Issue.

Holders of existing Options will not be entitled to participate in the Rights Issue unless they first exercise their Options prior to the Record Date, and the terms of their Options allow this.

As at the date of this Prospectus, 124,200,001 Shares and 5,255,000 Options (with varying exercise prices and dates, issued under the Company's Employee Share Option Plan – refer to the capital structure table set out in Section $3.4$ ) are on issue. After the issue of Shares under the Placement (but excluding the New Shares under the Rights Issue) there will be 133,200,001 Shares on issue and after the issue of the Placement Options (but excluding the New Options under the Rights Issue) there will be 14,255,000 Options on issue.

In the event that the existing Options are exercised prior to the Record Date, this Prospectus will also offer to those Shareholders a further 1,313,750 New Shares and 1,313,750 New Options.

Any New Securities not taken up by Existing Shareholders will be dealt with in accordance with the Underwriting Agreement.

Purpose of the Rights Issue $1.2$

The purpose of the Rights Issue is, after meeting the expenses of the Rights Issue, to raise funds for infrastructure development associated with the Company's two production facilities at Largs Bay and Picton, for general working capital and to retire debt (by way of share subscription under this Rights Issue) payable to Amadeus and Mr Darryl Butcher.

The following table illustrates the proposed application of funds raised from the Rights Issue.

Description	(S's)
Retirement of debt payable to Amadeus and Mr Darryl Butcher	3.9m
Infrastructure development	5.6m
Cost of the Rights Issue	0.7 _m
Working capital	1.5m
Total	11.7 _m

In December 2006 the Company loaned US\$3.5m (approximately AUD\$4.4m) to ARF Inc to finance the acquisition of the NAFTA Rights (refer to Section 5.13) and for working capital. In September 2006, when the Company entered into the agreements with Energea for the acquisition of the NAFTA Rights (refer to Section 5.13), it was agreed that after ARF Inc was incorporated, the Company would be granted the right to take up additional equity in ARF Inc. The loan has been converted by the Company into equity in ARF Inc. When the initial shares in ARF Inc were issued, ARF Inc was a wholly owned subsidiary of the Company, but at the time the Company converted its loan into equity in ARF Inc, as contemplated by the September 2006 agreement, ARF Inc had ceased to be a wholly owned subsidiary of the Company. The Company is making an application to the ASX for a waiver of Listing Rule 10.1 in the event the ASX considers it applies. If the Listing Rule applies and a waiver is not granted then the Company will seek the approval of Shareholders to ratify the debt conversion. This approval will be sought at a meeting to be called after the General Meeting.

In order to ensure the Company had the funds to lend to ARF Inc in advance of the Rights Issue, the Company borrowed from each of Amadeus and Mr Darryl Butcher, a total of \$3.9m on an unsecured but commercial basis pursuant to the Loan Agreements referred to in Section 5.11.

Under these Loan Agreements, the Company owes each of Amadeus and Mr Darryl Butcher the amount of \$2,855,565 and \$1,049,490, respectively. These debts are due and payable on the earlier of the Closing Date or 30 April 2007. Amadeus will have an entitlement to 8,566,667 New Shares and 8,566,667 New Options and Mr Darryl Butcher will have an entitlement to 3,150,000 New Shares and 3,150,000 New Options pursuant to the terms of the Rights Issue and it is their intention to take up their respective entitlements under the Rights Issue. To the extent that the Company owes money to each of Amadeus and Mr Darryl Butcher those debts will be offset against the liability of each of Amadeus and Mr Darryl Butcher to subscribe funds to take up their respective entitlements to the New Securities.

In a separate, but related transaction, the Company will seek the approval of Shareholders to convert a \$2m debt owing to Mr Darryl Butcher (see Section 5.12) into equity in the Company at the same price as that offered under the Placement and this Rights Issue and with a free attaching Option for each Share so issued. The equity

to be issued pursuant to this debt to equity conversion, will not participate in the Rights Issue.

In order to lift the funding burden for ARF Inc from the Company, and to continue to progress ARF Inc's business plan ARF Inc is seeking to raise up to US\$6.7m in the US to finance its expansion in the NAFTA Zone, with offers currently being made to potential investors. This fundraising may be from the issue of convertible notes or the issue of shares or debt in ARF Inc. ARF Inc is yet to conclude this additional raising. Subsequent to this, the Company has capitalised US\$3.5 million of its debt with ARF Inc to equity in ARF Inc, thereby removing the need for ARF Inc to raise the full US\$6.7m. If ARF Inc does not undertake the raising or raise the full amount required (being US\$6.7m less the amount of debt ARF converted to equity in ARF Inc) then ARF Inc may need to curtail its NAFTA Zone business plan or to look for alternative ways to fund the progress of that business plan or to seek finance from sources other than the Company.

$1.3$ No Entitlement Trading

The offer under the Rights Issue is non-renounceable and accordingly, Existing Shareholders may not dispose of or trade any part of their Entitlement.

1.4 Opening and Closing Dates

The Rights Issue will open for receipt of acceptances at 9:00am AWST on 29 March 2007 and will close at 5:00pm AWST on 16 April 2007, or such later date as the Directors, in their absolute discretion and subject to compliance with the Listing Rules, may determine and provided that the Company gives ASX notice of the change at least 6 Business Days prior to the Closing Date.

1.5 Brokerage and Commission

No brokerage or stamp duty will be payable by investors.

Entitlements and Acceptance 1.6

Acceptance of Entitlement in Full

If you wish to take up all of your Entitlement under the Rights Issue, please complete the Entitlement and Acceptance Form in accordance with the instructions set out on the reverse of that form. Please ensure the completed Entitlement and Acceptance Form, together with your cheque, is received by the Company's Share Registry at:

Delivered to	Or by post to
Computershare Investor Services Pty Ltd	Computershare Investor Services Pty Ltd
Level 2, 45 St Georges Terrace	GPO Box D182
PERTH WA 6000	PERTH WA 6840

not later than 5.00pm AWST on 16 April 2007 or such later date as the Directors advise. Cheques should be made payable to "Australian Renewable Fuels Limited -Rights Issue Account" and crossed "Not Negotiable".

Acceptance of More Than Your Entitlement

If you wish to apply for more than your Entitlement pursuant to the Rights Issue and participate in the Shortfall, please complete the relevant section of the Entitlement and Acceptance Form relating to participation in the Shortfall in accordance with the instructions set out on the reverse of that form and insert the number of New Shares for which you wish to apply (being more than your Entitlement as specified on the Entitlement and Acceptance Form). Please ensure the completed Entitlement and Acceptance Form and your cheque is received by the Company's Share Registry at:

Delivered to

Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace PERTH WA 6000

Or by post to Computershare Investor Services Pty Ltd

GPO Box D182 PERTH WA 6840

Partial Acceptance of Entitlement

If you wish to take up part of your Entitlement pursuant to the Rights Issue, please complete the Entitlement and Acceptance Form in accordance with the instructions set out on the reverse of that form and insert the number of New Shares for which you wish to accept the offer (being less than your Entitlement as specified on the Entitlement and Acceptance Form). Please ensure the completed Entitlement and Acceptance Form and your cheque is received by the Company's Share Registry at:

Delivered to

Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace PERTH WA 6000

Or by post to Computershare Investor Services Pty Ltd GPO Box D182 PERTH WA 6840

Non-Acceptance of Entitlement

If you do not wish to take up any part of your Entitlement under the Rights Issue, you are not required to take any action. If you decide not to accept all or part of your Entitlement, the New Shares not accepted will be dealt with in accordance with Section 1.1.

Enquiries

If you have any queries regarding your Entitlement, please contact the Company's Share Registry by telephone on (08) 9323 2000 or your stockbroker or professional adviser.

$1.7$ Issue and Allotment of New Securities

The New Securities are expected to be issued and allotted by no later than 24 April 2007. Until issue and allotment of the New Securities under this Prospectus, the acceptance money will be held in trust in a separate bank account opened and maintained for that purpose only. Any interest earned on the acceptance money will be for the benefit of the Company and will be retained by it irrespective of whether allotment of the New Securities takes place.

1.8 Issue and Allotment of Shortfall

Any Shortfall will be allocated at the discretion of the Underwriter in accordance with the Underwriting Agreement (refer to Section 5.10 of this Prospectus). Neither the Company nor the Underwriter guarantees that you will receive any New Shares (and free attaching New Options) applied for in the Shortfall under the Rights Issue.

The Shortfall will be determined within 3 Business Days of the Closing Date. New Securities issued to applicants who are allocated New Securities in the Shortfall will be issued at the same time as all of the other New Securities under the Rights Issue. If you do choose to participate in any Shortfall by completing the relevant section of your Entitlement and Acceptance Form relating to participation in the Shortfall, you will be notified of your proportion of the Shortfall (if any) at the time of dispatch of holding statements for your New Securities under the Rights Issue.

The offer of New Shares (and free attaching New Options) under the Shortfall is independent from the Right Issue and will remain open after the Closing Date for a period of time as determined between the Company and the Underwriter to allow the sub-underwriters to subscribe for the Shortfall pursuant to this Prospectus.

1.9 ASX Listing

The Company will make application to ASX within 7 days following the date of this Prospectus for official quotation of the New Securities offered pursuant to this Prospectus.

If approval is not granted by ASX within 3 months after the date of this Prospectus, the Company will not allot or issue any New Securities and will repay all application monies (where applicable) as soon as practicable, without interest.

A decision by ASX to grant official quotation of the New Securities is not to be taken in any way as an indication of ASX's view as to the merits of the Company, or the New Securities now offered for subscription.

1.10 No Issue of New Securities after 13 months

No New Securities will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

1.11 Underwriting

This Rights Issue is fully underwritten by the Underwriter. The Underwriter does not hold an Australian Financial Services Licence. The Underwriter is a wholly owned subsidiary and authorised representative of SHAW Stockbroking Limited (ABN: 24 003 221 583) being the holder of Australian Financial Services Licence Number 236048. Pursuant to the Underwriting Agreement, the Company will pay the Underwriter an underwriting commission equal to 5% of the aggregate funds raised under the Rights Issue less those funds raised through the subscription for New Shares by both Amadeus and Mr Darryl Butcher, plus 2% of the aggregate amount raised through subscription for New Shares by both Amadeus and Mr Darryl Butcher. In addition, a management fee equal to 1% of the aggregate amount of the Offer and the Placement is payable, together with the amounts referred to in the summary of the material terms of the Underwriting Agreement in Section 5.10 of this Prospectus.

1.12 Overseas Investors

The Company is of the view that it is unreasonable to make an offer under this Prospectus to Existing Shareholders outside of Australia and New Zealand having regard to:

$(a)$ the number of Existing Shareholders registered outside of Australia and New Zealand:
the number and value of the securities to be offered to Existing Shareholders $(b)$ registered outside of Australia and New Zealand; and
the cost of complying with the legal requirements and requirements of $(c)$ regulatory authorities in the overseas jurisdictions.

Accordingly, the Company is not required to make offers under the Prospectus to Existing Shareholders registered outside of Australia and New Zealand.

1.13 Market Prices of Shares on ASX

The highest and lowest closing market sale prices of Shares on ASX during the 3 months immediately preceding the date of this Prospectus and the respective dates of those sales were \$0.60 on 12 December 2006 and \$0.33 on 15 January 2007. The latest available market sale price of Shares on ASX immediately before the date of issue of this Prospectus was \$0.40 on 9 March 2007.

Section 2 DETAILS OF THE PLACEMENT OPTIONS

$2.1$ The Placement Options

Prior to the Record Date the Company proposes to complete the issue of up to 9,000,000 Shares under the Placement to Placees, at an issue price of 35 cents each, to raise \$3.15m before the costs of the Placement. Each of the Placees are entitled to be offered one free attaching Placement Option for each Share subscribed under the Placement, each to acquire one Share at 60 cents on or before 24 April 2009.

Funds raised from the Placement are to be used by the Company to repay a facility the Company has obtained from HSBC.

The Placement Options will be offered to the Placees pursuant to this Prospectus after the Record Date.

The terms of the Placement Options are the same as the terms of the New Options under the Rights Issue, as summarised in Section 5.5 of this Prospectus.

The Shares issued under the Placement participate in the Rights Issue. As the Placement Options will not be issued until after the Record Date, the holders, should they choose to exercise those Placement Options, will not be entitled to participate in the Rights Issue.

$2.2$ Opening and Closing Dates

The Placement Options will open for receipt of acceptances at 9:00am AWST on 29 March 2007 and will close at 5:00pm AWST on 16 April 2007, or such later date as the Directors, in their absolute discretion and subject to compliance with the Listing Rules, may determine and provided that the Company gives ASX notice of the change at least 6 Business Days prior to the Closing Date.

2.3 Brokerage and Commission

No brokerage or stamp duty will be payable by investors.

2.4 Entitlements and Acceptance

Acceptance of Placement Options in Full

If you wish to take up all of your Placement Options, please complete the Placement Option Entitlement and Acceptance Form in accordance with the instructions set out on the reverse of that form. Please ensure the completed Placement Option Entitlement and Acceptance Form, is received by the Company's Share Registry at:

Delivered to	Or by post to
Computershare Investor Services Pty Ltd	Computershare Investor Services Pty Ltd
Level 2, 45 St Georges Terrace	GPO Box D182
PERTH WA 6000	PERTH WA 6840

not later than 5.00pm AWST on 16 April 2007 or such later date as the Directors advise.

$2.5$ Issue and Allotment of Placement Options

The Placement Options are expected to be issued and allotted by no later than 17 April 2007.

ASX Listing 2.6

The Company will make application to ASX within 7 days following the date of this Prospectus for official quotation of the Placement Options.

If approval is not granted by ASX within 3 months after the date of this Prospectus, the Company will not allot or issue any Placement Options.

A decision by ASX to grant official quotation of the Placement Options is not to be taken in any way as an indication of ASX's view as to the merits of the Company, or the Placement Options now offered for subscription.

No Issue of Placement Options after 13 months $2.7$

No Placement Options will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

Section 3 OPERATIONAL UPDATE, CAPITAL STRUCTURE & EFFECT OF THE RIGHTS ISSUE AND THE ISSUE OF THE PLACEMENT OPTIONS

$3.1$ Operational Update

The Company has commissioned its plants at Largs Bay in South Australia and Picton in Western Australia with sales of 1.8 million litres in December 2006 - consistent with sales projections announced in November 2006.

The majority of sales in the short term will be met with production from the Largs Bay plant. During December 2006, the Picton plant began the production of biodiesel from a blend of tallow and canola. Marketing initiatives for the Picton production are currently a key focus for the Company. This has continued in 2007.

Production to date has been limited by operational issues which are being addressed in the short term through off-site pre-treatment of the feedstock and in the long term through the planned installation of enhanced filtration systems, heat tracing and lagging as part of the infrastructure development associated with current production facilities. The use of pre-treated feedstock has impacted on feedstock costs to date, taking them above the earlier expectations of the Company. The inherent flexibility of the technology utilised by the Company allows it to continually assess other feedstocks and alternative feedstock blends to reduce costs. Management is constantly looking for improved outcomes.

Whilst the commissioning and production ramp-up of the Company's two facilities has been challenging, the knowledge base of the Company has increased significantly and sets a solid foundation for the future optimisation of the plant processes and the exploitation of the Energea patents both here and in the NAFTA Zone.

The Company has also undertaken a significant operational re-structure and appointed two new CEOs who will be responsible for the performance of the Australian and NAFTA Zone operations. This increase in management resources is a reflection of the changing status of the Company as it moves from developer to operator in Australia and commences pre-development in North America.

In Australia, John Lillywhite has joined the Company, leaving major energy player, Verve Energy, to do so. John has a proven track record in operational management and marketing in the energy sector and is already contributing to the success of the Company after joining us at the start of this year. His focus has been on improved operating performance and reduced cost.

The Company has also recently announced the improved performance of the Company over the November 2006 to January 2007 period, which was in line with the Company's expectations as provided to the market in November 2006.

The Company has reached the level of production and sales which, subject to the product meeting specification and the Company satisfying other criteria, will entitle it to claim the \$5.35 million balance of the Federal Government's Biofuels Capital Infrastructure Grant. The Company expects to lodge its claim in the near term and the funds, if received, will be used by the Company to fund its ongoing working capital

requirements. If, for any reason, the Company does not receive the grant monies it will have to review its operating programme and budgets and/or utilise additional facilities, if available, from its financiers.

Last year, the Company entered into agreements with Energea for the acquisition of the patents for the Energea technology (which are the technical core of the biodiesel production plants) for Australia and its territories, New Zealand and its territories, Torres Strait Islands, Papua New Guinea, the Solomon Islands and the NAFTA Zone. The addition of the NAFTA Zone as an expansion opportunity and Australian fuel tax changes have impacted on the desire of the Company to progress domestic growth opportunities in the short term.

The expansion in the NAFTA Zone has been facilitated through the provision by the Company of \$US9m in equity to ARF Inc to pay for the further development of intellectual property and acquire Energea's right, title and interest in the patents held in the NAFTA Zone, as well as the right to exploit the know-how and technology for the construction and operation of plants of any capacity to produce biodiesel in the The Company now holds 65.52% of the NAFTA Zone and for working capital. issued capital in ARF Inc with Energea holding the remainder and ARF Inc has satisfied its obligations to Energea for the purchase of the NAFTA technology rights.

ARF has made significant progress in expanding operations into the NAFTA Zone, including via the following:

the incorporation in the US of ARF Inc and Energea Inc, a wholly owned subsidiary of ARF Inc;
the appointment of Ross Garrity as CEO and President of ARF Inc;
the establishment of an office and infrastructure in Dallas which is one of the major transport and commercial hubs in the US;
detailed negotiations on available State Government support held with the Government of New Mexico which has responded with the announcement of a range of State Government initiatives to support the biodiesel industry. Such initiatives include a 6 cent per gallon biodiesel credit and a progressive State Government mandate for B5 or 5% minimum blend of biodiesel with mineral diesel:
detailed negotiations held with a number of local governments under New Mexico's "Partnership Program";
selection of the city of Clovis, New Mexico for the establishment of the first ARF Inc plant in the US; and
been offered in writing support from the State Government of New Mexico and the Clovis Industrial Development Corporation in the form of land, infrastructure and facilities to the value of up to US\$9.1m.

The Board views this US expansion as a major strategic initiative for the Company. The Board has observed that support for the biofuels sector in the US is both bipartisan and strong. In addition to the State initiatives already outlined above, there is also an existing US\$1 per gallon Federal blending credit for eligible biofuels. ARF Inc currently anticipates access to this payment. It should be noted that this program ends in 2008, but is expected to be extended, perhaps indefinitely under the provisions of the Renewable Fuels and Energy Independence Promotion Act. To this end, the House of Representatives has already passed this Democrat sponsored bill which would remove the termination provisions of the current arrangements and give the Blending Credit indefinite life.

$3.2$ Placement of Additional Securities to Darryl Butcher

The Directors will convene a General Meeting, for the purposes of seeking Shareholder approval for the placement of 5,714,286 Shares and 5,714,286 free attaching Options to Mr Darryl Butcher. The deemed issue price of the Shares is \$0.35. per Share, being the same price as the issue price of the Shares under the Placement and the New Shares under the Rights Issue, and the Options are subject to the same conditions as the Placement Options and the New Options under the Rights Issue. These Shares and Options will be issued by the Company in lieu of paying a \$2 million debt owed by the Company to Mr Darryl Butcher, being deferred consideration for the acquisition of all of the issued shares in Shelly Nominees Pty Ltd from Mr Darryl Butcher, further details of which are set out in Section 5.12 of this Prospectus.

The issue of Shares and free attaching Options to Mr Darryl Butcher will occur after the Record Date and, accordingly, those Shares will not give Mr Darryl Butcher the right to participate in the Rights Issue. Mr Darryl Butcher will remain entitled to participate in the Rights Issue with respect to his current shareholding which is described in Section 5.6.

$3.3$ Principal Effects

If the maximum number of New Securities and Placement Options issued pursuant to this Prospectus are issued (excluding any Shares that may be the result of any existing Options that are exercised prior to the Record Date), the number of Shares on issue (assuming all of the 33,300,000 New Options and 9,000,000 Placement Options are exercised and including the Shares issued under the Placement) will be 208,800,001 Shares.

The Rights Issue (assuming none of the New Options are exercised) will improve the Company's balance sheet by approximately \$11.7m (before expenses of the Rights Issue, which are estimated to be approximately \$700,000) by removing debt and increasing cash reserves to enable the Company to pursue its objectives.

Consolidated Balance Sheet and Capital Structure $3.4$

Capital Structure of the Company

$\omega_{\rm{max}} = 1.5$

The pro-forma capital structure of the Company following the Placement and the Rights Issue pursuant to this Prospectus is set out below:

Issued Capital	Number
Existing Shares	124,200,001
Shares to be issued under the Placement	9,000,000
New Shares now offered for subscription pursuant to this Prospectus	33,300,000
Total Shares on issue after completion of the Placement and the Rights Issue	166,500,001
Outstanding Options:
75,000 Options with an exercise price of \$1.50 each, exercisable from 18 October 2007 with an expiry date of 18 October 2009;	5,255,000
75,000 Options with an exercise price of \$1.00 each, exercisable from 18 October 2006 with an expiry date of 18 October 2009;
75,000 Options with an exercise price of \$0.50 each, exercisable from 18 October 2005 with an expiry date of 18 October 2009;
410,000 Options with an exercise price of \$2.00 each, exercisable from 30 June 2008 with an expiry date of 30 June 2010;
410,000 Options with an exercise price of \$1.50 each, exercisable from 30 June 2007 with an expiry date of 30 June 2010;
410,000 Options with an exercise price of \$1.13 each, exercisable from 30 June 2006 with an expiry date of 30 June 2010;
70,000 Options with an exercise price of \$2.00 each, exercisable from 24 March 2009 with an expiry date of 24 March 2011;
65,000 Options with an exercise price of \$1.62 each, exercisable from 24 March 2008 with an expiry date of 24 March 2011;
65,000 Options with an exercise price of \$1.62 each, exercisable from 24 March 2007 with an expiry date of 24 March 2011;
100,000 Options with an exercise price of \$2.00 each, exercisable from 17 March 2009 with an expiry date of 17 March 2011;
100,000 Options with an exercise price of \$1.58

Issue Notes:
	Total Options on issue after completion of Rights	47,555,000
	this Prospectus	33,300,000
	Free attaching New Options to be issued pursuant to
	pursuant to this Prospectus
Free	issued attaching Placement Options to be	9,000,000
	with an expiry date of 2 January 2012.
	\$2.00 each, exercisable from 2 January 2010
	2,000,000 Options with an exercise price of
	expiry date of 2 January 2012; and
	each, exercisable from 2 January 2009 with an
	500,000 Options with an exercise price of \$1.50
	expiry date of 2 January 2012;
	each, exercisable from 2 January 2008 with an
	500,000 Options with an exercise price of \$0.75
	an expiry date of 11 November 2011;
	30,000 Options with an exercise price of \$2.00 each, exercisable from 11 November 2009 with
	an expiry date of 11 November 2011;
	each, exercisable from 11 November 2008 with
	30,000 Options with an exercise price of \$1.50
	an expiry date of 11 November 2011;
	each, exercisable from 11 November 2007 with
	30,000 Options with an exercise price of \$1.00
	an expiry date of 6 November 2011; ⁽³⁾
	each, exercisable from 6 November 2009 with
	70,000 Options with an exercise price of \$2.00
	an expiry date of 6 November 2011; ⁽²⁾
	each, exercisable from 6 November 2008 with
	70,000 Options with an exercise price of \$1.50
	an expiry date of 6 November 2011; $^{(1)}$
	each, exercisable from 6 November 2007 with
	70,000 Options with an exercise price of \$1.00
	expiry date of 17 March 2011;
	each, exercisable from 17 March 2007 with an
	100,000 Options with an exercise price of \$1.58
	each, exercisable from 17 March 2008 with an expiry date of 17 March 2011;

(1) 30,000 of these Options have been approved for issue, but have not yet been allotted;
(2) 30,000 of these Options have been approved for issue, but have not yet been allotted; and
(3) 30,000 of these Options have been approved for issue, but have not yet been allotted.

Consolidated Balance Sheet

Set out as follows is the Consolidated Balance Sheet of the Company as at 31 December 2006 (audit reviewed):

CONSOLIDATED BALANCE SHEET

PRO-FORMA REFLECTING PROPOSED RIGHTS ISSUE AND PLACEMENT

	31 December 2006 Audit reviewed (5000)	31 December 2006 Unaudited Pro-forma $($ \$000 $)$
CURRENT ASSETS
Cash and cash equivalents $\cdot$		6540
Trade and other receivables	2489	2489
Inventories	4461	4461
TOTAL CURRENT ASSETS	6950	13490
NON-CURRENT ASSETS
Property, plant & equipment	46596	46596
Deferred tax asset	5980	5980
Intangible assets	43292	43292
TOTAL NON-CURRENT ASSETS	95868	95,868
TOTAL ASSETS	102818	109358
CURRENT LIABILITIES
Trade and other payables	3002	3002
Borrowings	9370	2000
TOTAL CURRENT LIABILITIES	12372	5002
NON-CURRENT LIABILITIES
Borrowings	400	400
Deferred tax liabilities	9733	9733
Non-interest bearing liabilities	1886	1886
TOTAL NON-CURRENT LIABILITIES	12019	12019
TOTAL LIABILITIES	24391	17021
NET ASSETS	78427	92337
EQUITY
Contributed Equity	83900	97810
Accumulated Losses	(9261)	(9261)
Reserves	773	773
	75412	89322
Minority Shareholders Interest	3015	3015
TOTAL EOUITY	78427	92337

Notes to the Pro-Forma Consolidated Balance Sheet

The Pro-forma Consolidated Balance Sheet includes \$14.805m less Rights Issue and $1¹$ Placement costs of \$0.895m received by virtue of the Rights Issue and Placement.
The Pro-forma Balance Sheet above has been prepared on the basis that no existing $2.$ Options are exercised prior to the Record Date. If all existing Options are exercised after the Record Date, cash will increase by \$8.6 million and contributed capital would increase by a similar amount.
1. No account is taken of any transactions including trading losses between 31 December 2006 and the date of this Prospectus. The Pro-forma Consolidated Balance reflects only the transactions the subject of this Prospectus.
1. In the event that the Company is successful in achieving payment of the balance of the Federal Government Biofuels Capital Infrastructure Grant (\$5.35m), the increase in cash at bank would be the equivalent sum. In addition, this would entitle the Company to recognise the full grant proceeds in the Company's Income Statement for the year ended 30 June 2007.
1. In the event that ARF Inc is successful in raising funds in the US the increase in cash at bank would be the Australian dollar equivalent of the funds raised in the US less any associated costs.

Commentary on Results for the 6 Months Ended 31 December 2006

The significant movements in the Company's Consolidated Balance Sheet from 30 June 2006 to 31 December 2006 include the following:

$Cash - Decreased by $13.5m$

Funding of operations and balance of NAFTA Rights acquisition.

Accumulated Losses - Increased by \$5.1m after tax

Operating losses incurred following the commencement of production.

Property, Plant and Equipment - Increased by \$1.6m

The final payments have been made for construction and commissioning of the plants at Picton and Adelaide. This includes finalisation of the Leighton contracts and plant commissioning.

Inventories - Increased by \$2.5m

The commencement of production has resulted in increased stocks of biodiesel and feedstock at the Picton and Adelaide sites.

Intangible Assets - Increased by \$11.3m

The increase results from:

The payment by ARF Inc of US\$4m (approx A\$5million) to acquire the patent rights to Energea's technology in the NAFTA Zone.
The impact of providing for deferred taxation on the Energea patent rights acquired by $\bullet$ the Company during the period (A\$5.9m).

Capitalised expenditure associated with the development of the NAFTA patent rights $\bullet$ $(A$400k).$

Trade Receivables - Increased in assets by \$2m
Trade debtors within normal credit terms.

Borrowings (Current Liabilities) - Increased by \$9.4m As follows:

• Bank loans, \$3.5million

$\hat{\rho}$ and $\hat{\rho}$

$\bullet$ Shareholder loans, \$5.9million

Section 4 RISK FACTORS

$4.1$ Introduction

Investors should be aware that an investment in the Company involves risks that may be higher than risks associated with an investment in some other companies. Careful consideration should be given to all matters raised in this Prospectus and the relative risk factors prior to applying for New Securities offered for subscription under this Prospectus. Some of these risks can be mitigated by the use of appropriate safeguards and actions, but some are outside the control of the Company and cannot be mitigated. Prospective investors in the Company should consider the risk factors described in this Section, together with the information contained elsewhere in this Prospectus, before deciding whether to apply for New Securities.

The following summary, which is not exhaustive, represents some of the major risk factors which potential investors need to be aware of.

$4.2$ General Risks

Factors such as inflation, interest rates, levels of tax, taxation law and accounting practices, government legislation or intervention, natural disasters, social upheaval, and war may have an impact on prices, operating costs and market conditions generally. Accordingly, the Company's future possible revenue and operations can be affected by these factors, which are beyond the control of the Company.

General movements in local and international stock markets, and economic conditions could all affect the market price of the Company's securities.

Economic Factors $(a)$

Factors such as inflation, currency fluctuation, interest rates, supply and demand and industrial disruption have an impact on operating costs, oil price, biodiesel prices and stock market prices. The Company's future possible revenues and share price can be affected by these factors, which are beyond the control of the Company and its Directors.

$(b)$ Government Legislation Policy Changes

Government legislation and policies are subject to review and change from time to time. Such changes are beyond the control of the Company and may affect industry profitability.

$(c)$ Operating licences

The operation of the plants is subject to extensive environmental laws and regulations and the Company is required to obtain a licence to operate in a manner designed to promote safety and to prevent the release of hazardous substances from the plants. Violations of these requirements could result in liabilities that affect the Company's financial condition.

$(d)$ Development and Continuity of Operations

The Company's development of biodiesel production plants may be adversely impacted by numerous issues including, but not limited to, land access, native title and heritage and environmental legislation, industrial disputes, cost overruns, governmental approval, licensing and approval processes and other could render development unforeseen contingencies. Such issues uneconomical, result in a need to cease development of a plant, adversely impact on the operating and financial performance of a plant or result in a need to shut down a plant.

$(e)$ Insurance

The Company may, where economically practicable and available, endeavour to mitigate some project and business risks by procuring relevant insurance cover.

$(f)$ Exchange Rate Risks

Adverse currency movements would impact upon the future profitability of ARF.

$4.3$ Specific Risks

In addition to the general risks outlined above, there is a range of specific risks associated with the Company's business operations and its involvement in the production of biodiesel. Potential investors in the Company should note the following additional risks prior to investing.

Intellectual Property $(a)$

ARF has acquired the patents for the Energea technology which are the technical core of the biodiesel production plants for the NAFTA Zone and it has entered into agreements to acquire such technology in Australia and its territories, New Zealand and its territories, Torres Strait Islands, Papua New Guinea, the Solomon Islands. One of Energea's European patents has been challenged in Austria, but nowhere else, and there is a risk that this challenge could be upheld. If upheld aspects of the intellectual property used in the production plants will no longer be subject to patent protection in Europe, potentially making it easier for others to copy the design of the productions plants. The Company does not believe this will affect its ability to utilise the process and the Company has been assured by Energea that this is the case.

ARF relies on patent, trademark and copyright law, trade secret protection and duties of confidence with third parties and its contract with Energea to protect its rights. While the Company will use all reasonable endeavours to protect its intellectual property rights, the steps that the Company takes to protect these rights may be inadequate. The unauthorised use or disclosure of its proprietary technology and systems may have adverse effects on the operation and financial performance of ARF.

The Company is aware of one other company in the US which is claiming to

have technology which is capable of producing biodiesel in a manner which is similar to that of the Energea technology. ARF is currently determining whether the technology used by the US company breaches any of the Energea patents and what its rights of action may be in these circumstances.

$(b)$ Expansion Plans

The Company's intention has been to commit to three additional plants in the Australian region by the end of calendar year 2007. The Company may not now achieve this due to the impact of the recent fuel tax changes to the taxation of biodiesel in Australia.

$(c)$ Energea

As part of the agreement which the Company reached with Energea with respect to the payment of monies for the NAFTA Rights, Energea agreed that as a condition to the payment it would enter into a compromise with a majority of its creditors. These compromise arrangements were subsequently entered There is risk that notwithstanding Energea's agreement to pay its into. creditors, including those who entered into the compromise arrangements, Energea's continued solvency cannot be assured as Energea, like any business, is subject to a wide range of market and commercial factors and its ability to continue to licence its technology and provide consulting engineering services on a profitable fee paying basis.

Notwithstanding that pursuant to the terms of the agreement referred to in Section 5.13 of this Prospectus, Energea receives from either the Company or ARF Inc the total payment for the sale of the NAFTA Rights, there is a risk that if a trustee in bankruptcy was appointed to Energea then the trustee could contest the disposition by Energea of the NAFTA Rights. Similarly, if a trustee in bankruptcy was appointed to Energea, he could look to contest the disposition by Energea of Australasian Rights (as that term is defined in Section 5.13 of this Prospectus).

It is the current intention of the Company that it and its subsidiaries will engage Energea to provide certain engineering design services for the plants which the Company and its subsidiaries may wish to establish. In the event Energea was placed into bankruptcy the Company may no longer have access to design engineers who are familiar with the Energea technology. In these circumstances there may be a material adverse impact on the cost, timing and performance of any new plant which the Company or its subsidiaries may seek to establish.

$(d)$ Production Risks

To date the Company has not been able to achieve long term base case performance from either of its two plants and has experienced delivery and quality control difficulties. In addition the Company has not operated either plant for sustained periods due to start up issues and low sales volumes. These issues have resulted in material adverse effects on the cashflow of the Company. The Company has sought to minimise these risks by employing suitably qualified and skilled staff, and undertaking suitable staff training, to ensure production is maintained at a high standard.

Environmental Risks $(e)$

Notwithstanding that the Adelaide and Picton plant sites are zoned to allow for the operation of plants capable of producing biodiesel, that such operations are otherwise properly permitted and that the Company via its subsidiaries have proper procedures in place, there is a risk that in the production of biodiesel there could be a breach of the environmental laws or permits regulatory to the production operations.

$(f)$ Key Personnel and Management

The Company relies on a number of key employees and consultants. There is a risk that the Company may fail to attract, retain or develop key employees or consultants and this would have a negative effect upon the development of the Company. The loss of any of these individuals could have an adverse impact on the business of ARF. In an attempt to mitigate this risk, the Company has engaged Mr Darryl Butcher's services by way of a five-year consultancy agreement which commenced 1 July 2004 and Mr Max Ger's services by way of a three year consultancy agreement which commenced on 18 October 2004. Either party may only terminate this contract in the event of material breach by the other party that is not adequately remedied within a specified time. The Company is also in the process of establishing similar agreements with Mr John Lillywhite and Mr Ross Garrity.

The ability of the Company to implement its strategy of growth will require effective planning and management control systems. The Company's growth plans may place a significant strain on the Company's management, operational, financial and personnel resources. Therefore, the Company's future growth and prospects will depend on its ability to manage this growth and to continue to expand and improve operational, financial and management information and quality control systems on a timely basis, whilst at the same time maintaining effective cost controls.

$\left( \mathbf{g} \right)$ Marketing Risks

The Company has produced biodiesel to Australian and European standards, however, some fats preclude achieving these standards, particularly in terms of cold filter plugging point. In addition the Company's current and potential customers require various cold filter plugging point specifications. It may therefore not be in the Company's interests to meet some customers' requirements and therefore the Company cannot market its biodiesel to those customers.

Additional Financing Requirements $(h)$

The Directors expect that the proceeds of the Rights Issue when combined with the proceeds of the Placement and existing cash resources, undrawn debt facilities and the expected receipt of grant monies will provide sufficient capital resources to enable the Company to achieve its business objectives. The Company anticipates the balance of the Federal grant being \$5.35million will be paid in the 2007 financial year, and if this is not forthcoming at that time, then the Company may have to rely on the existing bank debt facility to enable it to meet its initial business objectives until the grant is paid or Hence, the Directors can give no otherwise reforecast those objectives. assurances that such objectives will in fact be met without additional borrowings or capital raisings.

Further financing may be required to assist in the establishment of further plants. Any additional equity financing may be dilutive to the Shareholders and debt financing, if available, may involve restrictions on future financing and operating activities. If the Company is unable to obtain additional financing as required it may not be possible to expand in the manner currently envisaged.

ARF Inc is seeking additional funds in order to expand into the NAFTA Zone. ARF Inc is yet to conclude this additional raising. If ARF Inc does not undertake the raising or raise the full amount required then ARF Inc may need to curtail its NAFTA Zone business plan or look for alternate ways to fund the progress of that business plan from sources other than the Company.

$(i)$ Credit risks

$\tau \rightarrow \pi \pi \pi$

$\sim$

There can be no certainty that third parties will perform, or be able to perform, their obligations under various contracts with the Company or that the Company will be able to recover damages for breach of contract. The insolvency of third parties or their default under the terms of such contracts could have a material adverse effect on the Company and its operations.

$(i)$ Current Competition

The Company will be operating in a market where biodiesel is produced from other sources. Although the Board believes that the Company's product has a number of significant advantages over biodiesel produced from other sources, other competitively produced biodiesel unknown to the Company may emerge from time to time. The introduction of new competitors or a more aggressive competitive response from existing participants may affect the operating performance of the Company.

Given the potential for growth of the biodiesel and biofuels markets, it is likely that the market for these fuels will become increasingly competitive in Europe, NAFTA and Australia and the Company may face significant competition. There is no assurance that the Company will be able to compete successfully in such a marketplace.

Biodiesel is seen as one of a number of renewable sources of energy and it is possible that other alternatives to diesel may be developed which compete with biodiesel. The development of new alternatives to fossil fuels could also give rise to significant new competitors, which may have a material and adverse effect on the Company's business.

$(k)$ Feedstock and New Competition

There have been a number of biodiesel facilities both proposed and constructed within the Australian region since the Company's Short-Form Prospectus dated 21 April 2006. Such developments may result in an increased demand for feedstock and eventually affect the production cost of biodiesel.

$($ ) Raw Material Risk

The Company has contracted Gardner Smith as the main provider of logistics and fat supply in both South Australia and Western Australia. Whilst the availability of supply is a risk, the price of fat supply also, from time to time, may be such that operating would be uneconomic.

The Company is utilising a feedstock blend of canola, tallow and used cooking oil. The use of vegetable based feedstocks such as canola and soy increases feedstock costs.

Feedstock prices are subject to continuous movements due to international market forces which may be affected by matters such as crop and weather conditions, currency movements, freight rates, competing product prices and other supply and demand factors.

$(m)$ Sales Risk

Recent determinations and guidance by the Australian Tax Office with respect to the Fuel Tax Act 2006 and the Excise Act 2006 have resulted in Australian users of the 100% biodiesel and some blended biodiesel products being ineligible to claim tax rebates on the use of those products. These tax rebates would be claimable if the users had purchased mineral diesel. These changes have resulted in the sales process becoming more complex and pose a risk to future sales.

ARF has a five year contract in the European market with Godiver but to date has not delivered any biodiesel to this customer. Godiver has contracted to purchase a significant portion of all ARF's biodiesel production. Notwithstanding the Company has entered into this contract there can be no certainty that the Company can obtain the full economic benefit of the contract as this will be dependent on the ability of Godiver to either perform under the contract or to pay damages should it fail to do so. The Company is therefore exposed to the risk, notwithstanding the existence of this contract, that it will need to source additional or alternative clients. The European contract price varies with the European price for Gasoil EN590(1) (European diesel specification) and this may change in a manner adverse to the economic performance of the Company. The Directors and Company have no ability to control movements in this market place.

$(n)$ Operating Cost Risk

Operating costs are based on estimates by the Directors having reference to

ARF's operations to date and the Company's financial modelling. These operations have not achieved a steady state. Higher costs have impacted and will continue to impact the Company's results as may a variety of other factors outside of the Company's control, such as increased competition and slower than expected take-up by customers of the Company's biodiesel product.

Lack of Diversification Risk $(0)$

The value of the Company's securities will be dependent, among other things, on the success of the trading activities undertaken and since ARF will initially seek to produce mainly biodiesel and glycerine by-product, it is totally dependent on the commercial success of these products. This lack of diversification increases the risks inherent in acquiring and operating in a single field.

Excessive Sales of the Company's securities $(p)$

The market price of the Company's securities could decline significantly as a result of any sales of securities by certain Shareholders following expiry of the escrow period.

Government Grants $(q)$

The Company has been awarded two Federal grants and a State grant. There is a risk that the Company may not comply with the terms of these grants and have to repay a portion or all of the grant monies.

One of these grants is a \$7.15m grant under the Biofuels Capital Infrastructure Grant Scheme and is for the purpose of constructing and operating a biodiesel plant in Adelaide, South Australia. The Company has received \$1.78m of this grant at the date of the Prospectus. One of the conditions of the grant is that ARF produces and sells the agreed production levels into the Australian transport fuel market for a period of three years.

At the date of this Prospectus, the Company is of the opinion that it has complied, or is able to comply, with all the remaining conditions required to entitle it to claim the balance of the grant, being \$5.35 million. Receipt of the balance of the grant funds is anticipated to occur in March/April 2007.

While it is the Company's expectation to meet the required levels of sales to the Australian transport fuels market during the assessment period, in the event that this is not achieved, a repayment of 16 cents per litre up to the amount of grant received plus interest may be enforced.

US Expansion and Fundraising $(r)$

Section 5 ADDITIONAL INFORMATION

$5.1$ Legal Framework of this Prospectus

The Company is a "disclosing entity" under the Corporations Act and is subject to the regime of continuous disclosure and periodic reporting requirements. Specifically as a listed company, the Company is subject to the Listing Rules which require continuous disclosure to the market of any information possessed by the Company which a reasonable person would expect to have a material effect on the price or value of its securities.

$5.2$ Applicability of Corporations Act

As a "disclosing entity", the Company has issued this Prospectus in accordance with section 713 of the Corporations Act applicable to prospectuses for an offer of securities which are quoted enhanced disclosure ("ED") securities or options to acquire securities which are quoted as ED securities, and the securities are in a class of securities or underlie a class of securities that were quoted ED securities at all times in the 12 months before the issue of this Prospectus.

Having taken such precautions and having made such enquiries as are reasonable, the Company believes that it has complied with the provisions of the Listing Rules as in force from time to time which apply to disclosing entities, and which require the Company to notify ASIC of information available to the stock market conducted by ASX, throughout the 12 months before the issue of this Prospectus.

The ASX maintains files containing publicly disclosed information about all listed companies. The Company's file is available for inspection at ASX in Perth during normal working hours. In addition, copies of documents lodged by, or in relation to, the Company with ASIC may be obtained from, or inspected at, any regional office of ASIC.

The New Shares and the Shares underlying the New Options to be issued under this Prospectus are in respect of a class of shares that were continuously quoted securities at all times in the 12 months before the issue of this Prospectus.

5.3 Information Available to Shareholders

The Company will provide a copy of each of the following documents, free of charge, to any investor who so requests during the application period under this Prospectus:

the Annual Report for the Company for the period ending 30 June 2006; and $(a)$
the Half Yearly Report for the Company for the period ending 31 December $(b)$ 2006;
the following documents used to notify ASX of information relating to the $(c)$ Company during the period after lodgement of the Annual Report of the Company for the period ending 30 June 2006 and before the issue of this Prospectus:

Date	Description of ASX Announcement
9 March 2007	Trading Halt
28 February 2007	Half Yearly Report & Half Yearly Accounts
23 February 2007	US Subsidiary (ARF Inc) In Announcement by Governor
	Richardson
31 January 2007	Commitments Test Entity - Second Quarter Report
22 January 2007	Achieves production & sales in line with November forecast
27 December 2006	Ceasing to be a Substantial Shareholder
1 December 2006	Results of AGM held 30.11.06
30 November 2006	CEO Address to AGM 30.11.06
29 November 2006	Appointment - CEO of NAFTA
27 November 2006	Achieves biodiesel sales milestones & anticipates Grant
15 November 2006	Top Energy Executive joins ARF as CEO Australia
31 October 2006	Commitments Test Entity - Quarter Report
26 October 2006	Notice of Annual General Meeting
19 October 2006	Ceasing to be a Substantial Shareholder
18 October 2006	Response to ASX Share Price Query
9 October 2006	ARF Secures major biodiesel sale from Adelaide Plant

Rights Attaching to New Shares $5.4$

The New Shares to be issued pursuant to this Prospectus will rank equally in all respects with existing Shares in the Company.

Full details of the rights attaching to the Company's Shares are set out in its Constitution, a copy of which can be inspected at the Company's registered office.

The following is a summary of the principal rights which attach to the Company's Shares:

Voting

Subject to any restriction on voting imposed due to a breach of the Listing Rules relating to restricted shares or any escrow agreement entered into by the Company and a member, every holder of shares present in person or by proxy, attorney or representative at a meeting of shareholders has one vote on a vote taken by a show of hands, and, on a poll every holder of shares who is present in person or by proxy, attorney or representative has one vote for every share held by him or her, but, in respect of partly paid shares, shall have a fraction of a vote for each partly paid share.

A poll may be demanded before a vote is taken, or before or immediately after the declaration of the result of the show of hands by the chairperson of the meeting, by at least five shareholders present in person or by proxy, attorney or representative, or by any one or more shareholders who are together entitled to not less than five percent of the total voting rights of all those shareholders having the right to vote on the resolution.

Dividends

Dividends are payable out of the Company's profits and are declared by the Directors.

Dividends declared will (subject to the rights of any preference shareholders and to the right of the holders of any shares created or raised under any special arrangement as to dividend) be payable on the shares in accordance with the Corporations Act.

Transfer of Shares

A shareholder may transfer shares by a market transfer in accordance with any computerised or electronic system established or recognised by ASX or the Corporations Act for the purpose of facilitating transfers in shares or by an instrument in writing in a form approved by ASX or in any other usual form or in any form approved by the Directors.

The Directors may refuse to register any transfer of shares, other than a market transfer, where permitted by the Listing Rules or the ASTC Settlement Rules. The Company must comply with such obligations as may be imposed on it by the Listing Rules and where appropriate the ASTC Settlement Rules in connection with any market transfer and may not prevent, delay or in any way interfere with the registration of a market transfer where to do so would be contrary to the provisions of any of the Listing Rules or the ASTC Settlement Rules.

Meetings and Notice

Each shareholder is entitled to receive notice of and to attend general meetings for the Company and to receive all notices, accounts and other documents required to be sent to shareholders under the constitution of the Company, the Corporations Act or the Listing Rules.

Winding Up

The Company has only issued one class of shares, which all rank equally in the event of liquidation. A liquidator may, with the authority of a special resolution of shareholders divide among the shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as he considers fair upon any property to be so divided, and may determine how the division is to carried out as between the shareholders. The liquidator can with the sanction of a special resolution of the shareholders vest the whole or any part of the assets in trust for the benefit of shareholders as the liquidator thinks fit, but no shareholder of the Company can be compelled to accept any shares or other shares in respect of which there is any liability.

Shareholder Liability

As the shares under the Prospectus are fully paid shares, they are not subject to any calls for money by the Directors and will therefore not become liable for forfeiture.

Alteration to the Constitution

The constitution can only be amended by a special resolution passed by at least three quarters of shareholders present and voting at the general meeting. At least 28 days' written notice specifying the intention to propose the resolution as a special resolution must be given.

ASX Listing Rules

If the Company is admitted to the Official List, notwithstanding anything in the constitution of the Company, if the Listing Rules prohibit an act being done, the act must not be done. Nothing in the constitution prevents an act being done that the Listing Rules require to be done. If the Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be). If the Listing Rules require the constitution to contain a provision or not to contain a provision the constitution is deemed to contain that provision or not to contain that provision (as the case may be). If a provision of the constitution is or becomes inconsistent with the Listing Rules, the constitution is deemed not to contain that provision to the extent of the inconsistency.

Terms and Conditions of New Options and Placement Options $5.5$

The following are the terms and conditions of the New Options and Placement Options:

each Option will entitle the holder to subscribe for one Share at 60 cents per $(a)$ Share;
the Options shall expire at 5pm (Western Standard Time) on 24 April 2009 $(b)$ ("Expiry Date");
the Options may be exercised, wholly or in part, by notice in writing to the $(c)$ Directors given prior to or on the Expiry Date stating the intention of the option holder to exercise all or a specified number of Options held by them accompanied by an Option Certificate and a cheque made payable to the Company for the subscription monies for the Shares. An exercise of only some Options shall not affect the rights of the option holder to the balance of the Options held by him or her. Any notice of exercise will be deemed to be dated as at the last day of the month on which the Company receives the notice;
$(d)$ the Options will be listed for official quotation on ASX;
the Options may be transferred at any time prior to the Expiry Date; $(e)$
Shares allotted pursuant to an exercise of Options shall rank, from the date of $(f)$ the allotment, equally with the existing ordinary fully paid shares of the Company in all respects;
$(g)$ the Company shall in accordance with the Listing Rules make application to have Shares allotted pursuant to an exercise of Options listed for official quotation on ASX;
there are no participating rights or entitlements inherent in the Options and $(h)$ option holders will not be entitled to participate in new issues of Shares offered to Shareholders during the term of the Options, unless the option holder exercises their Options. The Company will ensure that for the purposes of the proposed issue, notice of the new issue will be given to option holders at least 7 business days before the record date. This will give option holders the

opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue;

$(i)$

in the event that a pro rata issue (except a bonus issue) is made to the holders of the underlying securities in the Company, the exercise price of the Options may be reduced according to the following formula:

$$
O' = \frac{O - E[P - (S + D)]}{N + 1}
$$

where:

$Q' =$ the new exercise price of the Option;

the old exercise price of the Option; $Q =$
$E =$ the number of underlying securities in the Company into which one Option is exercisable;
$P =$ the average market price per security (weighted by reference to volume) of the underlying securities in the $\alpha$ , $\beta$ , $\beta$ , $\beta$ Company during the 5 trading days ending on the day before the ex rights date or ex entitlements date;
the subscription price for a security under the pro rata $S =$ issue:
the dividend due but not yet paid on the existing $D =$ underlying securities (except those to be issued under the pro rata issue);
$N =$ the number of securities with rights or entitlements that must be held to receive a right to one new security in the Company;
in the event of any reconstruction (including consolidation, subdivision, $(i)$ reduction or return) of the issued capital of the Company, the number of the Options or the exercise price of the Options or both shall be reconstructed (as appropriate) in accordance with the Listing Rules; and
the Options will not give any right to participate in dividends until Shares are $(k)$ allotted pursuant to the exercise of the relevant Options.

5.6 Interests of Directors

Directors' Holdings

	shares
Mr Alan Mulgrew
Mr Darryl Butcher ¹	`
Mr Max Ger		"25.0L

Mr Glyn Denison ²
Mr Graham Scott′	.
Mt Robert Scott"
Mr Geoffrey Towner ^*

Notes:

¹ Mr Butcher personally holds 12.6 million Shares and is entitled to apply for 3.150,000 New Shares (and 3.150,000 free attaching New Options) under the Rights Issue.

² The 2,729 Shares referred to above for Mr Denison are held in the Denison Superannuation Fund. Mr Denison has agreed to acquire 342,667 Shares from Amadeus with settlement due or on about 10 May 2007.

³ Mr Graham Scott is a director of Local Government Superannuation Board, which holds 11.13 million Shares. The Local Government Superannuation Board is entitled to apply for 2,783,333 New Shares (and 2,783,333 free attaching New Options) under the Rights Issue.

⁴ Mr Robert Scott and Mr Geoffrey Towner are directors of Amadeus which holds 34.27 million Shares. Messrs Scott and Towner also hold interests directly and indirectly in Amadeus. Amadeus is entitled to apply for 8,566,667 New Shares (and 8,566,667 free attaching New Options) under the Rights Issue.

Amadeus and Mr Darryl Butcher have agreed to subscribe for their full Entitlement, under the Rights Issue. To the extent that the Company owes money to each of Amadeus and Mr Darryl Butcher under the Loan Agreements referred to in Section 5.11, those debts will be offset against the liability of each of Amadeus and Mr Darryl Butcher to subscribe funds to take up their respective entitlements to the New Securities.

Remuneration of Directors

The Constitution of the Company provides that the non-executive Directors may collectively be paid as remuneration for their services a fixed sum not exceeding the aggregate maximum sum per annum from time to time determined by the Company in general meeting (which is currently \$300,000 per annum).

A Director may be paid fees or other amounts as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties.

Details of remuneration provided to Directors and their associated entities during the past two years are as follows:

Directors	Director's Fees/ Salaries/	Super- annuation	Other non- monetary remuneration	Total
	Contract Payments	\$		\$
	\$
Mr Alan Mulgrew*	53,333	4,800		58,133
Mr Darryl Butcher**	238,491			238,491
Mr Max Ger***	130,874		31,891	162,765
Mr Robert Scott	40,000	3,600		43,600
Mr Geoffrey Towner	33,333	3,333		36,666
Mr Glyn Denison	33,333	3,333		36,666
Mr Graham Scott	33,333	3,333		36,666

Director's accrued remuneration for the period from 1 July 2006 to 28 February 2007

Note:

* Mr Mulgrew was appointed as a Director on 1 July 2006.

** Mr Butcher's services are provided to the Company through a services agreement with his consulting company NeoProTec Pty Ltd.

*** Mr Ger's services are provided to the Company through a services agreement with his consulting company Picola Holdings Pty Ltd.

Financial year up to 30 June 2006

Directors	Director's Fees/ Salaries/ Contract Payments Ŝ	Super- annuation \$	Other non- monetary remuneration \$	Total \$
Mr Alan Mulgrew	Nil	Nil	Nil	Nil
Mr Darryl Butcher**	320,000			320,000
Mr Max Ger***	174,500	m.	136,692	311,192
Mr Robert Scott	58,333	5,250		63,583
Mr Geoffrey Towner	35,000	3,150		38,150
Mr Glyn Denison	35,000	3,150	H	38,150
Mr Graham Scott	35,000	3,150	$\blacksquare$	38,150

Note:

* Mr Mulgrew was appointed as a Director on 1 July 2006.

** Mr Butcher's services are provided to the Company through a services agreement with his consulting company NeoProTec Pty Ltd.

*** Mr Ger's services are provided to the Company through a services agreement with his consulting company Picola Holdings Pty Ltd.

Financial year up to 30 June 2005

Directors	Director's	Super-	Other non-	Total
	Fees/	annuation	monetary
	Salaries/		remuneration
	Contract
	Payments	\$	\$	\$

	S
Mr Alan Mulgrew*	Nil	Nil	Nil	Nil
Mr Darryl Butcher**	205,073			205,073
Mr Max Ger***	92,830		19,111	111,941
Mt Robert Scott	8,333	me.		8,333
Mr Geoffrey Towner	5,000	w.		5,000
Mr Glyn Denison****	73,374	$\blacksquare$		73,374
Mr Graham Scott	5,000	ىد		5,000

Note:

* Mr Mulgrew was appointed as a Director on 1 July 2006.

** Mr Butcher's services are provided to the Company through a services agreement with his consulting company NeoProTec Pty Ltd.

*** Mr Ger's services are provided to the Company through a services agreement with his consulting company Picola Holdings Pty Ltd.

**** The Company paid for consulting services provided by Glyn Denison through his company, International Business Development Consultants Pty Ltd.

Except as disclosed in this Prospectus, no Director (whether individually or in $(a)$ consequence of a Director's association with any company or firm or in any material contract entered into by the Company) has now, or has had, in the 2 year period ending on the date of this Prospectus, any interest in:
the formation or promotion of the Company; or
property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Rights Issue; or
the Rights Issue.

Except as disclosed in this Prospectus, no amounts of any kind (whether in cash, Shares, Options or otherwise) have been paid or agreed to be paid to any Director or to any company or firm with which a Director is associated to induce him to become, or to qualify as, a Director, or otherwise for services rendered by him or his company or firm with which the Director is associated in connection with the formation or promotion of the Company or the Rights Issue.

Other Interests

Mr Darryl Butcher has received or is entitled to receive the following in regard to the sale to the Company of all of his shareholding in Shelly Nominees Pty Ltd:

12,600,000 Shares; and $(a)$
\$3,000,000 payable as to: $(b)$
\$1,000,000 on first quotation of Shares on ASX; $(i)$
\$1,000,000 within 30 business days of the sale and delivery of $(ii)$ 1,000 tonnes of biodiesel from the Adelaide plant; and
\$1,000,000 within 30 business days of the sale and delivery of $(iii)$ 1,000 tonnes of biodiesel from the Picton plant.

At the date of this Prospectus 12.6m Shares have been issued to Mr Darryl Butcher and are held in escrow until two years from 5 May 2005, being the date the Company listed on ASX. The first payment of \$1m under paragraph $(b)(i)$ has been paid.

Payment pursuant to paragraph (b)(ii) is due and payable and payment pursuant to paragraph (b)(iii) is due and payable by 23 April 2007. Mr Darryl Butcher and the Company have agreed to vary the date for payment of the amounts referred to in paragraphs (b)(ii) and (b)(iii) in accordance with the Deferred Consideration Payment Deed summarised in Section 5.12.

Mr Towner and Mr R Scott are directors of Amadeus and hold interests directly and indirectly in that company. Amadeus was instrumental in the development and equity and debt financing of ARF until its initial public offering.

Mr G Scott is a director of Local Government Superannuation Board, which was a significant investor prior to ARF's initial public offering.

5.7 Interests of Named Persons

Except as disclosed in this Prospectus, no expert, promoter or any other person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of the Prospectus, nor any firm in which any of those persons is or was a partner nor any company in which any of those persons is or was associated with, has now, or has had, in the 2 year period ending on the date of this Prospectus, any interest in:

the formation or promotion of the Company;
property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Rights Issue; or
the Rights Issue.

Except as disclosed in this Prospectus, no amounts of any kind (whether in cash, Shares, Options or otherwise) have been paid or agreed to be paid to any expert, promoter or any other person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of the Prospectus, or to any firm in which any of those persons is or was a partner or to any company in which any of those persons is or was associated with, for services rendered by that person in connection with the formation or promotion of the Company or the Rights Issue.

Horwath Audit (WA) Pty Ltd are the auditors to the Company. They have provided audit services to the Company during the last two years totalling approximately \$65,398 and non-audit related services totalling \$136,589.

Shaw Corporate Finance Pty Ltd has acted as Underwriter to the Rights Issue for which it will, pursuant to the Underwriting Agreement, receive fees and expenses. The Underwriting Agreement is summarised in Section 5.10. During the last two years, the total amount paid to Shaw Corporate Finance Pty. Ltd. is \$2,801,175.

Blakiston $\&$ Crabb have acted as solicitors to the Company in relation to this Prospectus. In respect of their work on this Prospectus, the Company will pay approximately \$100,000 for these professional services. Blakiston & Crabb have provided other professional services to the Company during the last two years amounting to approximately \$546,521.

The amounts disclosed above are exclusive of any amount of goods and services tax payable by the Company in respect of those amounts.

5.8 Expenses of the Rights Issue

The approximate expenses of the Rights Issue, including legal fees, lodgement fees, underwriting fees, fees for other advisers, Prospectus design, printing and advertising expenses and other miscellaneous expenses will be approximately \$700,000 (exclusive of any goods and services tax which may be payable on that amount). These expenses have been paid or are payable by the Company.

5.9 Consents

Each of the parties referred to in this Section 5.9:

does not make, or purport to make, any statement in this Prospectus or on $(a)$ which a statement made in the Prospectus is based, other than as specified in this Section 5.9; and
to the maximum extent permitted by law, expressly disclaims and takes no $(b)$ responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this Section 5.9.

Horwath Audit (WA) Pty Ltd consents to the inclusion of the audit reviewed half year financial statements for the half year ended 31 December 2006 and to all references to those statements in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with the ASIC.

American Renewable Fuels Inc has given its written consent to the inclusion in this Prospectus of all statements made by it or attributed to or derived from those statements in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with the ASIC.

Each of the following has consented to being named in this Prospectus in the capacity as noted below and has not withdrawn such consent prior to the lodgement of this Prospectus with the ASIC:

Horwath Audit (WA) Pty Ltd as auditors of the Company; $(a)$
Blakiston $\&$ Crabb as solicitors to the Rights Issue; $(b)$
Shaw Corporate Finance Pty. Ltd. as Underwriter to the Rights Issue; and $(c)$
Computershare Investor Services Pty Limited as share registry of the $(d)$ Company.

5.10 Underwriting Agreement

Pursuant to an Underwriting Agreement between ARF and the Underwriter dated 12 March 2007, the Underwriter will exclusively arrange and manage the offer of the New Securities under the Rights Issue ("Offer") and underwrite the issue of the New Securities on the terms of the Underwriting Agreement. The Underwriter also agreed to underwrite the offer of Shares under the Placement on the terms of the Underwriting Agreement (where applicable) and the mandate letter dated 2 March 2007 between the Underwriter and the Company.

ARF must pay the Underwriter a commission equal to 5% of the aggregate amount of the Offer less those funds raised through subscription for shares by both Amadeus and Mr Darryl Butcher, plus 2% of the aggregate amount raised through subscription for shares by both Amadeus and Mr Butcher. In addition, a management fee equal to 1% of the aggregate amount of the Offer and the Placement, and a fee of 5% of the total amount of the Placement, is payable. A termination fee of 0.5% of the aggregate amount of the Offer and the Placement is payable if the Underwriting Agreement is terminated. In addition, ARF must pay or reimburse the Underwriter for all reasonable costs incurred by the Underwriter in connection with the Offer, including reasonable legal fees and disbursements (up to a maximum of \$20,000 plus GST), travel, postage, accommodation and other out-of-pocket costs and expenses, and any fees incurred as a result of any investigation, enquiry, claim or proceedings conducted by ASX, ASIC or applicable government body. The Underwriter's legal fees are exclusive of GST.

The Company has given warranties and covenants to the Underwriter which are usual in an agreement of this nature.

The Underwriting Agreement provides that the Underwriter may terminate its obligations under the Underwriting Agreement by notice on or before the allotment of all the New Securities upon the occurrence of any one or more of the termination events, including:

a) (Contravention of law): The Company contravenes any law, regulation, authorisation, ruling, consent, judgement, order or decree of any governmental agency.
b) (Market Movement): The S&P/ASX 200 Index or the ASX All Ordinaries Share Price Index or the S&P/ASX 200 Energy Index is, at the close of normal trading on a business day after the date of the Underwriting Agreement, 10% or more below its level as at the close of trading on the business day immediately preceding the date of the Underwriting Agreement.
c) (Failure to obtain listing):
ASX makes an official statement to any person, or indicates to the $(i)$ Company or the Underwriter in writing, that unconditional approval, or approval subject to conditions the satisfaction of which is within the control of the Company or the Underwriter for the official quotation of all the New Shares will not be granted.
Approval for the official quotation of all the New Shares, although $(ii)$ granted, is subsequently withdrawn, qualified or withheld before the issue of the New Shares.
Application for official quotation of the New Shares is not made by the $(iii)$ Company within the time prescribed by the Corporations Act.
d) (Insolvency): An Insolvency Event occurs or is threatened.
e) (Material adverse change):
Any material adverse change occurs in the financial or trading position $(i)$ or performance or in the assets, liabilities, earnings, profits, losses, business, operations or prospects of the Company and its subsidiaries.
Any significant or material contract of the Company or any subsidiary $(ii)$ is without the prior written consent of the Underwriter breached in a material respect by the Company or a subsidiary, terminated for any reason, altered or amended in any material way or found to be void or voidable.
f) (Placement): The Shares to be issued under the Placement are not issued prior to the Record Date.
g) (Amadeus and Mr Darryl Butcher): Amadeus and Mr Darryl Butcher do not accept their entitlement to at least 11,716,667 New Shares (in total) under the Rights Issue by the Closing Date, strictly in accordance with clause 3 of the mandate letter dated 2 March 2007 between the Underwriter and the Company.
h) (Offer): The Underwriter notifies the Company in writing that, on reasonable grounds, it is not satisfied that the offer of New Shares under the Rights Issue and all procedures involved in the offer are lawful, or that the acceptances of the offer will be binding.
i) (Prospectus): The Company fails to, within a reasonable period (and having regard to the timetable), prepare and lodge this Prospectus which complies with, and meets all the requirements of, the Listing Rules and Part 6D.2 of the Corporations Act.
i) (Hostilities): There is an outbreak of hostilities not presently existing or an escalation of hostilities (whether or not war has been declared) or political or civil unrest or a terrorist act is committed involving any one or more of the following: Australia, New Zealand, the United Kingdom, the United States of America, the People's Republic of China (including Hong Kong), Indonesia, or the Middle East; or a diplomatic, military or political establishment of any of those countries anywhere in the world other than Fiji or the Solomon Islands.
k) (Default): The Company is in default under the Underwriting Agreement.
I) (Prejudicial publication): Without the approval of the Underwriter the Company makes any statement or publishes of issues by any means and any notice, circular or advertisement relating to the Company or its activities or the Offer or the Placement which is prejudicial to the Offer or the Placement being fully subscribed by persons other than the Underwriter.
m) (Change of law): Any of the following occurs and which has or is likely to have the effect of prohibiting, restricting, regulating, or having a materially adverse effect on, the Offer or the Placement:
the introduction of legislation into the Parliament of the Commonwealth $(i)$ of Australia or of any state or territory;
the public announcement or proposal of prospective legislation or $(ii)$ policy by the government of the Commonwealth of Australia or of any state or territory;
the adoption of, or announcement of a proposal to adopt, any policy or $(iii)$ regulation by the ASIC, the Reserve Bank of Australia or any other governmental authority.
n) (Market conditions): Any change or disruption in the national or international political, financial or economic conditions which has or is likely to have an adverse effect on the Offer or the Placement.
o) (Warranty untrue or incorrect): Any representation or warranty in the Underwriting Agreement is or becomes untrue or incorrect.
p) (Repayment or withdrawal): Any circumstance arises after the date of the Underwriting Agreement resulting in:
the Company being required to: $(i)$
- repay the money received from subscribers for New Shares; or А.
give subscribers for New Shares an opportunity to withdraw their B. subscriptions and be repaid; or
persons having a right to return securities issued in connection with the $(ii)$ Offer or the Placement and have their application money for New Shares or any Shares under the Placement, repaid.
q) (Specific intervention by ASIC): ASIC:
gives notice of its intention to hold a hearing under section 739 of the $\left($ i Corporations Act;
applies for an order under Part 9.5 of the Corporations Act in relation to $(ii)$ the Offer:
commences any investigation, examination or hearing under Part 3 of $(iii)$ the Australian Securities and Investments Commission Act 2001 in connection with the Offer; or
gives an infringement notice to the Company under the Corporations $(iv)$ Act.
r) (Constitution altered): The Company alters its constitution without the prior written consent of the Underwriter.
(Directors): S)
There are any changes to the Board of Directors of the Company after $(i)$ the date of the Underwriting Agreement without the prior written consent of the Underwriter, other than the retirement of a Director or lapse of office due to ill health or death.
A Director: $(ii)$
- is charged with an indictable offence relating to any financial or A. corporate matter; or
- B. is disqualified from managing a corporation under Part 2D.6 of the Corporations Act.

The following terms used in this section 4.9 are defined in the Underwriting Agreement as follows:

"Insolvency Event" means the happening of any of these events:

execution or other process of a court or authority or distress is levied for $(a)$ an amount exceeding \$100,000 upon any of the property of the Company or a subsidiary and is not satisfied, set aside or withdrawn within 7 days of its issue;

an order for payment is made or judgment for an amount exceeding $(b)$ \$100,000 is entered or signed against the Company or a subsidiary which is not satisfied within 7 days;
the Company or a subsidiary suspends payment of its debts; $(c)$
the Company or a subsidiary becomes an "externally-administered body $(d)$ corporate" within the meaning of the Corporations Act;
steps are taken by any person towards making the Company or a $(e)$ Subsidiary an "externally-administered body corporate" within the meaning of the Corporations Act (but not where the steps taken consist of making an application to a court and the application is withdrawn or dismissed within 14 days);
a controller (as defined in section 9 of the Corporations Act) is $(f)$ appointed to, or acts in relation to, any of the property of the Company or a subsidiary or any steps are taken for the appointment of a controller (but not where the steps taken are reversed or abandoned within 14 days);
the Company or a subsidiary is taken to have failed to comply with a $(g)$ statutory demand within the meaning of section 459F of the Corporations Act;
a resolution is passed for the reduction of capital of the Company or a $(h)$ subsidiary or notice of intention to propose such a resolution is given, without the prior written consent of the Underwriter;
an event happens analogous to an event specified in paragraphs (a) to $(i)$ (h) above to which the law of another jurisdiction applies and the event has an effect in that jurisdiction similar to the effect which the event would have had if the law of Australia applied.

5.11 Loan Agreements with Amadeus and Darryl Butcher

On 14 December 2006, two major Shareholders, Amadeus and Mr Darryl Butcher loaned \$2,855,565 and \$1,049,490, respectively, to the Company for the Company to advance ARF Inc to finance the final payment of US\$3,000,000 for the acquisition of the NAFTA Rights and US\$500,000 for working capital. These loans by ARF to ARF Inc have subsequently been converted to equity in ARF Inc.

The loans are not secured and are on commercial terms. Interest is payable by the Company on the loans at HSBC's Bank Bill Rate plus 2%.

The principal amount of the loans must be repaid by the earlier of the Closing Date and 30 April 2007.

At the discretion of the Directors these loans must be repaid by any one of the following mechanisms:

within 7 days after the date of repayment by ARF Inc of the sum of US\$3.5 million pursuant to the loan agreement dated on or about 20 December 2006 between the Company and ARF Inc:
subject to obtaining all necessary Shareholder approvals, by the issue of Shares at an issue price not less than the issue price of any capital raising undertaken by the Company between 1 January 2007 and the Repayment Date by way of an offer of Shares under a share purchase plan, rights issue or as otherwise determined by the Board: or
by cash payment.

The value of Amadeus' and Mr Darryl Butcher's Entitlements under the Rights Issue exceeds the amount of their loans to the Company. Amadeus and Mr Darryl Butcher have agreed to convert their loans to equity by subscribing for their full Entitlement, which will result in the issue of 8,566,667 New Shares (and 8,566,667 free attaching New Options) to Amadeus and 3,150,000 New Shares (and 3,150,000 free attaching New Options) to Mr Darryl Butcher.

The Directors have elected to repay these loans by offsetting the debt which is due and payable by the Company to each of Amadeus and Mr Darryl Butcher against the liability of each of Amadeus and Mr Darryl Butcher to subscribe funds to take up their respective Entitlements under the Rights Issue.

5.12 Deferred Consideration Payment Agreement

Pursuant to a Share Sale Agreement dated 10 January 2005 as varied by three deeds of variation dated 3 and 9 March 2005 and 7 March 2007 between Mr Darryl Butcher as the vendor and the Company as purchaser, Mr Darryl Butcher sold all of his shareholding in Shelly Nominees Pty Ltd for:

12,600,000 Shares; and $(a)$
\$3,000,000 payable as to: $(b)$
\$1,000,000 on first quotation of Shares on ASX; $(i)$
$$1,000,000$ within 30 business days of the sale and delivery of $1,000$ $(ii)$ tonnes of biodiesel from the Adelaide plant; and
\$1,000,000 within 30 business days of the sale and delivery of 1,000 $(iii)$ tonnes of biodiesel from the Picton plant.

At the date of this Prospectus 12.6m Shares have been issued to Mr Darryl Butcher and are held in escrow until two years from 5 May 2005, being the date the Company listed on ASX.

The first payment of \$1m under paragraph (b)(i) has been paid. Payment pursuant to paragraph (b)(ii) is due and payable and payment pursuant to paragraph (b)(iii) is due and payable by 23 April 2007.

Pursuant to a Deferred Consideration Payment Deed dated 7 March 2007 ("Deferred Consideration Payment Deed"), the Company has agreed to satisfy its obligations to pay the Deferred Consideration by:

(a) cash payment;
(b) subject to prior Shareholder approval, by the issue of securities on the same terms as the terms of the securities offered under an equity raising of not less than \$10,000,000; or
(c) a combination of cash and the issue of securities in accordance with paragraphs $(a)$ and $(b)$ above.

The Rights Issue is an equity raising of not less than \$10,000,000.

The Directors will convene a General Meeting for the purposes of seeking Shareholder approval for the placement of 5,714,286 Shares and 5,714,286 free attaching Options to Mr Darryl Butcher in lieu of repaying the \$2 million debt owed by the Company to Mr Darryl Butcher. The deemed issue price of the Shares is \$0.35 per Share, being the same price as the issue price of the Shares under the Placement and the New Shares under the Rights Issue, and the Options are subject to the same conditions as the Placement Options and the New Options under the Rights Issue. If Shareholders approve this proposed debt to equity conversion, the Company will issue and allot the 5,714,286 Shares and 5,714,286 free attaching Options to Mr Darryl Butcher within 10 business days after the Shareholder approval is obtained.

5.13 Agreements with Energea

The Company has acquired through its majority owned subsidiary ARF Inc, Energea's NAFTA Rights and has agreed to acquire Energea's Australasian Rights, as defined below. The following agreements with Energea set out the terms for the acquisitions.

Amended Australian Region Patent Transfer & NAFTA Zone Joint Development Agreement

Energea and ARF entered into an agreement on 8 September 2006, as varied by deeds of variation dated 15 September 2006, 23 October 2006 and 6 February 2007 ("Development Agreement"). The Development Agreement replaces the Australian Region Patent Transfer and NAFTA Zone Joint Development Agreement between the parties dated 25 March 2006 referred to in the Company's Short Form Prospectus dated 21 April 2006.

Under the Development Agreement ARF agreed to incorporate a specific purpose vehicle in the United States of America, namely ARF Inc. The Development Agreement provides that upon incorporation of ARF Inc, ARF will hold 57.45%, and Energea will hold 42.55%, of the shares in ARF Inc. Further, ARF may at its sole discretion elect to increase its equity interest in ARF Inc by converting all or part of the loans made to ARF Inc into equity or by investing additional funds. At the date of this Prospectus a loan amount of \$US5.5m from ARF to ARF Inc has been converted to equity, resulting in ARF holding 65.52% of ARF Inc.

Pursuant to a Shareholders Agreement dated 6 February 2007, ARF and Energea have granted each other pre-emptive rights in relation to their respective shareholding in ARF Inc.

NAFTA Zone

Under the Development Agreement Energea granted to ARF, on behalf of ARF Inc. all of Energea's right, title and interest in the patents held in the NAFTA Zone, ("NAFTA Patents") as well as a right to exploit the technology and know-how for the construction and operation of plants of any capacity to produce biodiesel ("Technology") in the NAFTA Zone ("NAFTA Rights") in consideration for the payment of US\$5 million.

The Company acknowledges it is aware that Energea has granted to Biofuels Corporation Ltd ("Biofuels"), a company incorporated in the United Kingdom, a licence for Biofuels to use the Technology in the construction and operation of up to 3 plants for its own purposes (which purposes do not include the right to sublicence, joint venture or otherwise share the Technology) and that for these 3 plants Biofuels has paid or is to pay to Energea a licence fee which Energea is entitled to keep.

After Biofuels has constructed the 3 additional plants should Biofuels whish to obtain a further licence for the construction of a plant in NAFTA Zone then the Company or ARF Inc, as the case may be, and Biofuels will need to negotiate a licence fee for the use of the Technology in that plant and when paid, this fee will be for the benefit of ARF Inc.

Australasia

Under the Development Agreement, Energea also granted to ARF an exclusive right to exploit the Technology in Australia and its territories, New Zealand and its territories, Torres Strait Islands, Papua New Guinea and Solomon Islands ("Australasian Region") and to purchase and take an assignment and transfer of Energea's Australian and New Zealand patents and patent applications ("Australasian Patents") ("Australasian Right"). The consideration payable for the Australasian Right is EUR750,000, of which EUR300,000 has already been paid.

Other

ARF has also agreed to facilitate the raising of seed capital for ARF Inc of up to US\$10 million. US\$5 million was advanced by ARF to ARF Inc for paying Energea for the NAFTA Rights, which amount has been converted into equity. The Development Agreement also provides that funds are to be raised by either ARF Inc or ARF, and where it is raised by ARF, ARF will either subscribe for equity in ARF Inc or lend money to ARF Inc on commercial terms.

The parties have agreed that for the purposes of developing a commercialisation strategy for the NAFTA Patents and Technology, they will act in good faith toward one another. If the agreed strategy is the takeover of ARF Inc by ARF, then Energea provides ARF with an option to purchase Energea's shareholding in ARF Inc, and ARF must exercise the option where it dual lists on a USA equity market or is taken over by a shell company listed on a USA equity market. The option is conditional upon the issue by ARF of convertible notes to investors providing the funds. Upon exercise of the option, ARF must issue Energea with such number of shares in ARF as is determined using the value of Energea's shareholding in ARF Inc. as is pro rata to the value ARF is paying the holders of convertible notes for their convertible notes or the resultant shares on conversion of those notes into shares in ARF Inc.

If the agreed strategy is for ARF Inc to undertake one or more equity raisings and then list ARF Inc in a USA equity market, then Energea does not grant ARF an option to acquire Energea's shares in ARF Inc but the parties will negotiate in good faith the terms of an agreement pursuant to which ARF may acquire Energea's shares in ARF . Inc in consideration for shares in ARF.

Australasian Escrow Deed

By deed dated 15 December 2006 between ARF, Energea and Blakiston & Crabb, Energea shall deposit with Blakiston $\&$ Crabb the documents required for the transfer of the Australasian Patents, a licence agreement from Energea to ARF for the licence of the Technology in the Australasian Region, and all original documents evidencing title to the Australasian patents ("Australasian Transfer Documents"). The Australasian Transfer Documents will be released to ARF on the payment of the balance of the consideration referred to in the Development Agreement.

Technology Licence - NAFTA

Energea and ARF Inc have entered into an agreement on 14 December 2006 by which Energea has granted to ARF Inc a perpetual, irrevocable, royalty free licence to use, exploit, modify, adapt, develop and sublicense the use of the Technology in the NAFTA Zone. The licence is exclusive, subject to any rights to the Technology in the Region that Biofuels Corporation Ltd may have pursuant to their licence agreement with Energea.

Energea provides ARF Inc with a perpetual, irrevocable, royalty free, exclusive licence to use the name "Energea" in the NAFTA Zone.

Technology Licence - Australasia

Energea and ARF have entered into an agreement on 14 December 2006 by which Energea has granted to ARF a perpetual, irrevocable, royalty free, exclusive licence to use, exploit, modify, adapt, develop and sublicense the use of the Technology in the Australasian Region.

Settlement Deed

By deed dated 8 September 2006 between ARF and Energea, each party agreed not to make any claims against the other with respect to work done or not done by Energea at ARF's Picton and Adelaide plants or for additional work ARF had to undertake and pay for at ARF's Picton and Adelaide plants.

Option Deed

By deed dated 14 December 2006, Energea granted ARF an option to purchase Energea's shares in ARF Inc.

If ARF and Energea agree a strategy for the takeover of ARF Inc by ARF, then Energea provides ARF with an option to purchase Energea's shareholding in ARF Inc, and ARF must exercise the option where it dual lists on a USA equity market or is taken over by a shell company listed on a USA equity market. The option is conditional upon the issue by ARF of convertible notes to investors providing the funds. Upon exercise of the option, ARF must issue Energea with such number of shares in ARF as is determined using the value of Energea's shareholding in ARF Inc, as is pro rata to the value ARF is paying the holders of convertible notes for their convertible notes or the resultant shares on conversion of those notes into shares in ARF Inc.

If ARF and Energea agree a strategy for ARF Inc to undertake one or more equity raisings and then list ARF Inc in a USA equity market, then Energea does not grant ARF an option to acquire Energea's shares in ARF Inc but the parties will negotiate in good faith the terms of an agreement pursuant to which ARF may acquire Energea's shares in ARF Inc in consideration for shares in ARF.

The option may be exercised at any time between the date of execution of the deed, and 6 months after the occurrence of any of the fundraising events referred to in the deed.

Energea may not sell, assign or transfer their shareholding in ARF Inc without assigning the obligations under the deed.

Deed of Assignment - Biofuels

By deed dated 7 December 2006 between Energea and ARF Inc, Energea assigned some of its rights under a licence agreement with Biofuels. Under that licence agreement, Biofuels has a worldwide licence to use Energea technology to manufacture or have manufactured biodiesel at three plants. The assigned interest is the rights, interests and obligations of Energea where a new plant is located in the NAFTA Zone.

ARF Inc has covenanted to assume the obligations of the assigned interest. The parties have acknowledged that Energea's rights to receive payment under the licence agreement with Biofuels are not assigned.

Section 6 DEFINED TERMS

"Amadeus" means Amadeus Energy Limited ACN 058 717 408;

"American Renewable Fuels Inc" or "ARF Inc" means American Renewable Fuels Inc. a company incorporated in the State of Delaware, USA;

"ASIC" means the Australian Securities & Investments Commission;

"ASX" means ASX Limited ACN 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited;

"AWST" means Australian Western Daylight Saving Time;

"Business Day" means every day other than a Saturday, Sunday, New Year's Day, Good Friday, Easter Monday, Christmas Day, Boxing Day and any other day that ASX declares is not a business day;

"Closing Date" means 5.00pm AWST on 16 April 2007;

"Company" or "ARF" means Australian Renewable Fuels Limited ABN 66 096 782 188;

"Corporations Act" means the Corporations Act 2001 (Cth);

"Directors" means the directors of the Company;

"Energea" means Energea Unwelttechnologie GmbH;

"Entitlement" means the entitlement of an Existing Shareholder to apply for New Shares and New Options;

"Entitlement and Acceptance Form" means the Entitlement and Acceptance Form accompanying this Prospectus;

"Existing Shareholder" means those Shareholders of the Company whose details appear on the Company's register of Shareholders as at the Record Date;

"General Meeting" means a general meeting of the Company to be held on 20 April 2007, for the purposes of seeking Shareholder approval for the placement of 5,714,286 Shares and 5,714,286 free attaching Options to Mr Darryl Butcher in lieu of repaying the \$2 million debt owed by the Company to Mr Darryl Butcher, details of which are set out in Section 5.12;

"HSBC" means HSBC Bank Australia Limited;

"Leighton" means Leighton Contractors Pty Ltd ABN. 98 000 893 667;

"Listing Rules" means the Listing Rules of ASX;

"NAFTA" means the North American Free Trade Agreement;

"NAFTA Rights" is defined in Section 5.13;

"NAFTA Zone" means the area comprising the United States of America, Canada and Mexico:

"New Options" means the free attaching Options being offered pursuant to this Prospectus, each Option being exercisable at 60 cents on or before 24 April 2009 the full terms of which are set out in Section 5.5;

"New Securities" means New Shares and New Options;

"New Shares" means the Shares offered pursuant to the Rights Issue;

"Option" means an option to acquire one Share;

"Placees" means institutional and sophisticated investors who take up Shares under the Placement:

"Placement" means a Share placement to institutional and sophisticated investors by the Company prior to the Record Date, whereby the Company will issue 9,000,000 Shares at an issue price of 35 cents each to raise \$3,150,000 before costs. Each Placee is entitled to be offered one free attaching Option for each Share subscribed under the Placement, each to acquire one Share at 60 cents on or before 24 April 2009;

"Placement Option Entitlement and Acceptance Form" means the application form in relation to the Placement Options accompanying this Prospectus;

"Placement Options" means the free attaching Options to be issued to Placees under this Prospectus, each Option being exercisable at 60 cents on or before 24 April 2009 the full terms of which are set out in Section 5.5;

"Prospectus" means this prospectus dated 12 March 2007;

"Record Date" means 5.00 pm AWST on 23 March 2007;

"Rights Issue" means the issue pursuant to the Prospectus of 33,300,000 New Shares on the basis of 1 New Share for every 4 Shares held on the Record Date at an issue price of 35 cents per New Share, together with up to 33,300,000 free attaching New Options, each to acquire one Share at 60 cents on or before 24 April 2009, on the basis of one New Option for every New Share issued, to raise approximately \$11.7m before the costs of the issue;

"Section" means a section in this Prospectus;

"Share" means an ordinary fully paid share in the capital of the Company;

"Shareholder" means a holder of the Shares;

"Shortfall" means the New Shares forming Entitlements, or parts of Entitlements, not accepted by Existing Shareholders;

"Underwriter" means Shaw Corporate Finance Pty Ltd ABN 25 101 193 971;

"Underwriting Agreement" means the Underwriting Agreement dated 12 March 2007 between the Company and the Underwriter; and

Contact State Card

"US" means the United States of America.

$\sim$ $\sim$

Company of Assessment Company

Section 7 DIRECTORS' RESPONSIBILITY STATEMENT & CONSENT

The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds to believe that any statements made by the Directors in this Prospectus are not misleading or deceptive and that in respect to any other statements made in the Prospectus by persons other than Directors, the Directors have made reasonable enquiries and on that basis have reasonable grounds to believe that persons making the statement or statements were competent to make such statements, those persons have given their consent to the statements being included in this Prospectus in the form and context in which they are included and have not withdrawn that consent before lodgement of this Prospectus with the ASIC, or to the Directors knowledge, before any issue of New Securities pursuant to this Prospectus.

The Prospectus is prepared on the basis that certain matters may be reasonably expected to be known to likely investors or their professional advisers.

Each Director has consented to the lodgement of this Prospectus with the ASIC and has not withdrawn that consent.

Dated: 12 March 2007

Director

AI assistant

THORNEY TECHNOLOGIES LTD — Capital/Financing Update 2007

65908_rns_2007-03-11_cef94fb6-1723-42f8-b86f-43d6385d2402.pdf

Monday 12 March 2007

RE: PROSPECTUS DATED 12 MARCH 2007

AUSTRALIAN RENEWABLE FUELS LIMITED

PROSPECTUS

AND

The Rights Issue and Placement Option issue closes at 5.00pm AWST on 16 April 2007.

UNDERWRITER TO THE RIGHTS ISSUE Shaw Corporate Finance Pty Ltd ABN 25 101 193 971

IMPORTANT NOTICE

INDEX

IMPORTANT NOTICE

CORPORATE DIRECTORY

BRIEF INSTRUCTIONS FOR THE RIGHTS ISSUE

For Current Shareholders

What You May Do

If You Wish To Take Up All or Part Of Your Entitlement

If You Wish To Take Up More Than Your Entitlement

Entitlements Not Taken Up

Section 1 DETAILS OF THE RIGHTS ISSUE

$1.1$ The Rights Issue

Purpose of the Rights Issue $1.2$

$1.3$ No Entitlement Trading

1.4 Opening and Closing Dates

1.5 Brokerage and Commission

Entitlements and Acceptance 1.6

Acceptance of Entitlement in Full

Acceptance of More Than Your Entitlement

Delivered to

Or by post to Computershare Investor Services Pty Ltd

Partial Acceptance of Entitlement

Delivered to

Or by post to Computershare Investor Services Pty Ltd GPO Box D182 PERTH WA 6840

Non-Acceptance of Entitlement

Enquiries

$1.7$ Issue and Allotment of New Securities

1.8 Issue and Allotment of Shortfall

1.9 ASX Listing

1.10 No Issue of New Securities after 13 months

1.11 Underwriting

1.12 Overseas Investors

1.13 Market Prices of Shares on ASX

Section 2 DETAILS OF THE PLACEMENT OPTIONS

$2.1$ The Placement Options

$2.2$ Opening and Closing Dates

2.3 Brokerage and Commission

2.4 Entitlements and Acceptance

Acceptance of Placement Options in Full

$2.5$ Issue and Allotment of Placement Options

ASX Listing 2.6

No Issue of Placement Options after 13 months $2.7$

Section 3 OPERATIONAL UPDATE, CAPITAL STRUCTURE & EFFECT OF THE RIGHTS ISSUE AND THE ISSUE OF THE PLACEMENT OPTIONS

$3.1$ Operational Update

$3.2$ Placement of Additional Securities to Darryl Butcher

$3.3$ Principal Effects

Consolidated Balance Sheet and Capital Structure $3.4$

Capital Structure of the Company

Consolidated Balance Sheet

CONSOLIDATED BALANCE SHEET

PRO-FORMA REFLECTING PROPOSED RIGHTS ISSUE AND PLACEMENT

Notes to the Pro-Forma Consolidated Balance Sheet

Commentary on Results for the 6 Months Ended 31 December 2006

$Cash - Decreased by $13.5m$

Property, Plant and Equipment - Increased by \$1.6m

Inventories - Increased by \$2.5m

Intangible Assets - Increased by \$11.3m

Section 4 RISK FACTORS

$4.1$ Introduction

$4.2$ General Risks

$4.3$ Specific Risks

$(b)$ Expansion Plans

$(c)$ Energea

$(d)$ Production Risks

Environmental Risks $(e)$

$(f)$ Key Personnel and Management

Additional Financing Requirements $(h)$

$(k)$ Feedstock and New Competition

$(m)$ Sales Risk

Section 5 ADDITIONAL INFORMATION

THORNEY TECHNOLOGIES LTD Capital/Financing Update 2007