THORNEY TECHNOLOGIES LTD — Capital/Financing Update 2008

Feb 21, 2008

AUSTRALIAN RENEWABLE

FUELS LIMITED

ARM AN ORA 782 INA

Friday 22 February 2008

SUITE 3 SUILE 3
18 ANGOVE ST
NORTH FERTH WA 6006 PO BOX 119 NOTTH RETH WA 6906 $752 + 61892277688$ $MAX + 61892270101$ EMAIL info@artuels.com.au

WEB www.artuals.com.nu

ASX Release

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

Dear Sir/Madam,

Update to Shareholders

The Board of Directors of Australian Renewable Fuels Limited ("ARF" - ASX Code ARW) is please to provide an update of its current status to shareholders.

The rapidly changing environment in Australia for biodiesel producers during the last eight months has necessitated major changes to the manner in which ARF's business has been conducted. Broadly, the three major adverse conditions facing biodiesel producers can be summarised as:

• The cost of feedstock (primarily tallow and canola) has increased by over $\bullet$ 50% in the past six months. Notwithstanding the higher oil prices that influence the sale price of biodiesel, margins available to biodiesel producers have significantly diminished;
• Changes in Federal government policy in 2006 relating to fuel excise had a $\bullet$ dramatic impact on customers being able to use high blends of biodiesel and diesel above B20:
• The fallout from the sub-prime mortgage environment has proved challenging $\bullet$ for ARF's U.S. operations securing funding for its first plant.

ARF, like the majority of biodiesel producers, ceased continuous production at both its Port Adelaide and Picton plants and put both plants on care and maintenance. The Company does undertake spot production from time to time when contracts are secured that provide positive margins.

The Company immediately undertook the necessary restructuring of its business to reduce costs but still retain its biodiesel manufacturing capability. Accordingly, it is able to recommence production when the commercial environment for biodiesel improves.

The Company announced to shareholders the retrenchment of almost all its Corporate office staff in the last quarter of calendar 2007 as the plants were closed. Operating staff at both plants have also been retrenched except for core operations personnel necessary to maintain the plants and be available for immediate possible restart with improved conditions. Such reductions in staff also included the resignation of the Company's CEO, John Lillywhite.

The Board has also been restructured to reflect the major reduction in activities. The Company's Chairman, Alan Mulgrew, together with our CFO, Max Ger, and non executive director, Graham Scott, resigned from the Board during the period. Max Ger continues with the remaining executive team as the Company's Australian CEO and Chief Financial Officer. He is leading the Company's orderly restructuring of operations. The directors are very appreciative of Max's continued professional management of the Company in these very difficult conditions. The Board is also delighted that the Company's National Operations Manager, Lorin Sole, remains on in his critical role.

The Company's United States subsidiary, American Renewable Fuels Inc. (ARF Limited 64%) has continued with the feasibility studies for establishing a biodiesel business in the state of New Mexico, USA. ARF Inc raised approximately US\$2m during the period as seed capital to fund the feasibility study. The Board of ARF Limited continues its policy that the activities of the U.S. company will be self funding. ARF Inc. is now seeking to secure the capital necessary to construct the ARF Group's first U.S. plant. However, these efforts are in an environment where markets in the U.S. are not conducive to securing major capital for greenfields projects. Nevertheless, ARF Inc's President Ross Garrity's team continues to pursue options for securing the finance.

The directors are pleased with the orderly reduction in operating costs over the period and wishes to recognize the excellent efforts of staff in expediently bringing the changes into effect.

The Company intends undertaking a number of initiatives over the course of the first half of 2008 that should realize benefits to shareholders and possibly lead to the reopening of at least one of its the biodiesel plants. The Company is in discussions with customers to take the environmentally friendly biodiesel on terms that will allow its manufacture over the longer term with positive results to ARF. The Company is also considering the sale of surplus land at the Picton plant site. The Company owns approximately 10ha of industrial land at Picton, Western Australia, which was recently independently valued at \$3.12 m. The Company also intends undertaking a fresh capital raising in coming months to provide working capital that will enable it to restart at least one of its plants on improved terms.

Your directors believe a very prudent approach has been undertaken to limit the negative effects to the business caused by the adverse environment it is operating in. However, the changing environmental conditions are expected to be favourable for ARF over the longer term as the use of biodiesel made from tallow provides significant environmental benefits for customers compared to the use of mineral diesel. This coupled with the continuing upward trend in oil prices provide favourable conditions for the manufacture and sale of biodiesel in Australia over the longer term. The directors are eager to maintain the Company as the pre-eminent supplier of biodiesel in the region and be well placed to play a leading role in the re-emergence of biodiesel as conditions improve.

For further information, please contact:

Australian Renewable Fuels Limited

Tania Oosterhof Company Secretary T: 08 9227 7688 E: info@arfuels.com.au