Altona Energy Regulatory News (ANR)

10 November 2011

Altona Energy Plc (AIM: ANR)

("Altona" or "the Company")

Notice of AGM - Final Results for the year ended 30 June 2011

Altona Energy Plc, the AIM listed Australian based energy company, is pleased to announce its results for the year ended 30 June 2011 and gives notice of its Annual General Meeting to be held on 8 December 2010 at 3.30pm at The Westbury Hotel, 37 Conduit Street, Mayfair, London W1S 2YF.

Highlights

·; Bankable Feasibility Study ('BFS') for the Arckaringa Project commenced in conjunction with Joint Venture Partner, CNOOC-NEIA ("CNOOC-NEIA")

·; Cooperation agreement signed with US based clean energy company Rentech Inc. ("Rentech")

·; Relationship established with Icelandic based clean energy company CRI ("CRI")

·; Financial loss for the Group of £1,593,000 (2010:£2,442,000)

·; Renewal of Arckaringa exploration licences.

Post period highlights

·; Michael Zheng, Tongjiang's representative on the board, appointed Deputy Chairman of Altona Energy

·; Evaluation reports issued by Chinese authorities that confirms quality and extent of coal deposits which underpin Arckaringa CTL and power project

Christopher Lambert, Chairman of Altona Energy, commented "Our Chinese development partners, CNOOC-NEIA, have completed key items in their internal assessments of the coal feedstock at the Arckaringa processed fuels project in Australia. We look forward to progressing the Arckaringa processed fuels project over 2012 and establish a working plan to build a major fuel and power source for South Australia. Altona has also entered into relationships with established multinational companies to develop fuels projects, in areas such as Mainland China. We shall utilise our teams expertise in bringing together different entities together to successfully match the appropriate technologies and finance with the right feedstock sources.

The report and accounts for the year ended 30 June 2011 and the Notice of Annual General Meeting will be posted to shareholders on 15 November 2011. An electronic version of the report and accounts as well as the notice will also be made available on the Company's website at www.altonaenergy.com.

CHAIRMAN'S STATEMENT

2011 has been a year of significant progress and evolution for Altona Energy Plc ("Altona"), with important development work being undertaken on the Company's flagship Arckaringa coal-to-liquids ("CTL") project and the investigation of new areas to leverage the capabilities of the Company.

The bankable feasibility study ("BFS") for the world-scale Arckaringa Project is a major undertaking, with a budget of A$40 million and a Project Base Case covering an open cut coal mine of 10 to 15 million tonnes per annum, CTL plant producing 10 million barrels of distillate per annum and 560MW co-generation export power facility. 

CNOOC-New Energy International (Australia) Pty Ltd ("CNOOC-NEIA"), the Company's 51% joint venture partner on the Arckaringa Project and operator of the BFS, is taking a measured and diligent approach to the extensive BFS work programme, to meet international and Chinese standards. Reaching these standards provides a sound foundation for future Project approvals in the Peoples' Republic of China ("PRC" or "China") and Australia, and the bankability of the Project.

In the BFS work undertaken to date, CNOOC-NEIA has given high priority to the confirmation and expansion of the geological database and coal conversion potential of the Wintinna coal resource. Importantly, this extensive process has resulted in the applicable authorities in China endorsing the quality and extent of the coal deposit which underpins the Arckaringa Project.

In parallel, CNOOC Beijing personnel, in conjunction with leading Chinese consultants, are carrying out technical and economic studies on the options for coal conversion, including CTL and power. This work includes the evaluation of upgrading a proportion of the mine's total coal output to reduce the capital cost of the CTL plant, as well as facilitating the potential export of part of the upgraded coal to China.

Looking ahead, a drilling programme focussed on EL 4512 (Wintinna) is scheduled to commence in Q1 2012. The elements and aims of the drilling programme are set out in more detail in the Operations Report below but the results will be crucial to the detailed design phase of the BFS covering both the mining and coal conversion aspects of the Arckaringa Project. Following the successful work on the confirmation of the quality and extent of the coal resource, we were delighted for the Arckaringa Energy team to join CNOOC-NEIA personnel in the establishment of the joint venture office in Adelaide, where CNOOC-NEIA have assembled a multidiscipline project team, headed by Mr Victor Li. 

With JV partner CNOOC-NEIA in place with its extensive resources funding and operating of the Arckaringa BFS, actively supported by Altona's management team, the Company is able to work on potential new projects that can bring more immediate production and enhance shareholder value. As a result, the Company established a number of important relationships during the period with leading clean energy technology providers. These technologies have potential applications at the Arckaringa Project and can potentially provide complementary business opportunities that leverage the Company's technical capabilities, experience and commercial relationships gained from the Arckaringa Project. 

These relationships include a cooperation agreement with U.S. based clean energy company Rentech, Inc ("Rentech"). Rentech has proprietary technologies for the Fischer-Tropsch Process and the gasification of biomass, enabling the production of transportation fuels such as low sulphur diesel and aviation fuels. Altona and Rentech will work together on the evaluation of coal and biomass gasification projects in Australia and China for the application of these technologies.

In addition, Altona established a relationship with Icelandic based clean energy company CRI, holder of exciting proprietary technology for the production of fuel grade renewable methanol from CO2 and hydrogen. CRI has recently commissioned a commercial fuel grade renewable methanol plant in Iceland based on CO2 sourced from geothermal wells. Under the relationship agreement, Altona and CRI will work together to evaluate the application of CRI's technology at the Arckaringa CTL Project utilising the CO2 captured for sequestration with the hydrogen produced in the synthesis gas in the Fischer-Tropsch Process production of diesel. The concept proposed to be evaluated by Altona and CRI is for a scalable renewable methanol plant at Arckaringa, producing 100 million litres per year of renewable methanol that could be increased in modular form to meet future market demand. 

In addition, the Company signed an agreement in May 2011 with its major shareholder, Tongjiang International Energy Co. Ltd ("Tongjiang"), to assess coal and biomass energy projects in China. Tongjiang has been a key partner in the Company's development in funding and by bringing in CNOOC-NEI as JV development partner to the Arckaringa Project. This agreement aims to leverage Tongjiang's established network in the PRC, Altona's expertise in energy assets and the Company's established London listing.

Since signing the agreement with Tongjiang, we have been actively working on identifying commercial opportunities, and the recently announced appointment of Michael Zheng, Tongjiang's representative on the Board, as Deputy Chairman reflects the importance of Michael's contribution to both the Arckaringa project and in the development of business in China.

During the period we very pleased that the management team could be further strengthened with the appointment in January of Peter Fagiano as Executive Director in charge of Project Technology. Peter has worked closely with Altona on the Arckaringa Project pre-feasibility study in his role with Jacobs Engineering UK Limited. His decision to join Altona in a full time executive role was another vote of confidence in the future of the Company.

Financial Review

On 20 June 2010 we placed 10,204,081 new Ordinary Shares with the Company's largest shareholder, Tongjiang, at 9.80 pence each to raise gross proceeds of £1.0 million to provide additional working capital. The financial loss of the Group for the 12 months ended 30 June 2011 of £1,593,000 (2010: £2,442,000) was in line with expectations and includes a share based payments expense of £191,000 (2010: £1,099,000), as well as the benefit during the period of a £104,000 tax credit (2010: £156,000) in respect of research and development costs available to the Group. 

As at 30 June 2011, the Group had cash of £1,563,000. Under the terms of the JV, CNOOC-NEIA, will wholly fund the BFS for the Arckaringa Project up to the budget of A$40million, however the Group will require further funds to meet its operational commitments over the next twelve months, which the Directors are confident of positively procuring.

Outlook

The strategy to build a major strategic fuel and power source for South Australia at the Arckaringa Project continues to be reinforced by the work undertaken by the BFS, and by market and energy security issues. Global economic conditions remain challenging for all but we have secured development partners for Arckaringa and strategic shareholders from the UK and Hong Kong. South Australia's economy continues to grow and the progression of the Arckaringa project means that the State will have a strategic fuel and power source to support major new resources projects coming on line such as the Olympic Dam expansion recently announced by BHP Billiton.

CNOOC's independent studies conducted throughout the year have confirmed that the quality of the Arckaringa coal is highly suitable for conversion to Syngas, using existing tried and tested commercial technologies. South Australia already has to import all its diesel fuel needs and is forecast to require an additional 1,000MW of base load power over the next 10 years, therefore products from the Arckaringa project will be highly marketable given this growing domestic and worldwide energy demand.

As with any world scale resource and energy project, the BFS is a major undertaking, but with each step in the work programme, the Company further derisks the Project and moves steadily closer to unlocking the vast potential and value in one of the world's largest undeveloped energy banks. 

With this in mind I would like to thank all those involved in the Company for their help as well as shareholders for their support, and I look forward to updating you all on our progress throughout the year.

Christopher Lambert

Chairman

9 November 2011

OPERATIONS REPORT

The past year has proved to be something of a watershed for Altona, as the Company truly shifted onto a project development footing. Not only did the Bankable Feasibility Study work programme commence for Altona's flagship Arckaringa CTL and Power Project, but the Company also established a number of operating relationships with clean energy technology providers to capitalise on the technical knowledge gained from the Arckaringa Project and to open up complementary business opportunities. 

Through the Company's Joint Venture with CNOOC-NEIA, the Arckaringa Project BFS made a solid start. CNOOC-NEIA is concentrating on project fundamentals and reducing risk. For example, our JV partner has, with the assistance of Altona and a range of first class technical advisers in China and Australia, made it a priority to reconfirm and expand the geological database and coal conversion potential of the Wintinna coal resource to meet Chinese, as well as international, standards. This approach ensures a sound foundation for successful project design and implementation and for future project approvals in China and Australia. The Directors' believe the Chinese geological and open cut mine design standards are extremely rigorous and meeting them makes a mining project eminently bankable.

Important early elements of the BFS work programme agreed by the JV partners included:

·; Detailed review of coal deposit geology and consideration of supplemental drilling;

·; Groundwater investigation and verification;

·; Groundwater management research and design;

·; Environmental baseline studies;

·; Open cut coal mining methodology options; and

·; Product market research.

The first two of these elements have been completed, largely through the work of the Geological Research Institute of the China National Administration for Coal Geology ("CNACG"), whilst work on the remaining elements is continuing. CNACG was appointed in the fourth quarter of 2010 under a contract signed with CNOOC-NEIA and approved by Altona. A technical team from CNACG visited South Australia in January 2011 and during this time held a series of technical data review sessions with Altona and met local hydrogeological and other consultants, including those employed during the Altona Pre Feasibility Study ("PFS") work. The team also visited the site and confirmed the parameters for the existing geological database and the physical conditions governing the location of the Wintinna mine and supporting infrastructure, including the transport corridor options to link into the nearby national rail and road network.

CNACG completed comprehensive reports to Chinese standards in April 2011, covering coal geology and coal quality, geotechnical characteristics of the proposed mining area and the hydrogeology of the Wintinna coal deposit (EL4512). These reports were subsequently assessed by applicable authorities in China, whose Evaluation Report endorsed the quality and extent of the coal deposit which underpins the Arckaringa Project. The CNACG reports have also served to underpin the design of a field drilling programme, described in more detail below.

Altona successfully applied for a two year renewal of the Arckaringa exploration licences ("ELs"), on behalf of the Arckaringa Joint Venture partners, for the period until 6 June 2013. The renewal of ELs in South Australia is typically for a period of one year within a maximum five year timeframe, subject to meeting minimum expenditure commitments and other terms of the Licences. In this instance, however, the Minister for Mineral Resources granted the renewals for two years in recognition of the extensive scope of the BFS work programme. As submitted in Altona's renewal application, the work during the first year of the renewal period will comfortably exceed the combined minimum annual expenditure commitment over the three ELs of A$690,000. The South Australian Government also took into account that the JV Agreement includes a sole funding commitment by CNOOC-NEIA for the BFS work programme of A$40 million, the bulk of which is scheduled to be spent over the next two years.

These positive developments have enabled CNOOC-NEIA to assemble a multidiscipline project team and relocate staff from China to a new office in Adelaide. Together with Arckaringa Energy personnel, they form the South Australian based JV Operating Team. Victor Li is the General Manager of CNOOC-NEIA and is the Project Leader and Head of the Operating Team.

In parallel, CNOOC Beijing personnel, in conjunction with leading Chinese consultants, are carrying out technical and economic studies on the options for coal conversion (including CTL and power) and on a range of project configuration issues, including:

·; The feasibility of upgrading a proportion of the mine's total coal output of up to 15 million tonnes per annum, with part of the upgraded product to be fed into the CTL plant in order to reduce its capital cost, and part to be potentially exported to China.

·; The integration and optimisation of mine output, coal upgrading and the CTL process, will form the basis of design and underpin the economic model for the mine development and CTL and power plant.

Stemming from the CNACG and other reports, the JV Operating Team has commenced detailed preparations for a drilling programme focussed on EL 4512 (Wintinna) area. The programme will feed further data into the coal conversion studies and will include:

·; Close spaced coal and geotechnical boreholes in the proposed initial mine development area, for the purposes of firming up mine design parameters and upgrading the JORC resource estimates

·; Extraction of bulk samples of coal for testing in China and Australia, with the main purpose of finalising coal feedstock characteristics for a range of coal conversion options (including gasification, coal drying, briquetting etc)

·; Detailed hydrogeological testing to refine the existing hydrogeological model and lay the basis for the mine dewatering and groundwater management plan.

Applications for an Exploration Works Approval and other required permits have been submitted to the relevant agencies of the South Australian Government and are expected to be received by the end of 2011, with field work commencing in 2012 and lasting up to six months. Consultation with local stakeholders is already taking place ahead of the field work as part of an ongoing community relations programme conducted over the five years since Altona's entry into the region.

With the BFS work programme now well underway, Altona has continued to highlight the Arckaringa Project and its potential impact on South Australia's energy outlook in presentations to State and regional forums throughout the year. Backed by the involvement of CNOOC, and the confidence in the future of the Project that this signals, the Company believes that the rationale for the Project remains as strong as ever:

·; The Arckaringa coal asset is capable of supporting large scale, very long term development

·; The coal quality is suitable for conversion to syngas and derivative products using existing commercial technologies, including high value ultra clean fuels and chemical feedstocks, plus low cost and low emission power

·; South Australia faces a shortage of fuel, base load power and water, both generally and especially for the growing mining sector

·; With CNOOC-NEIA as our JV partner, the project can also realistically target coal and liquids exports to China and other Asian destinations.

The focus of the BFS continues to be the Project Base Case, covering:

·; An open cut mine producing 10 to 15 million tonnes per annum at Wintinna

·; A CTL plant producing 10 million barrels of distillate per annum, primarily zero sulphur diesel fuel, alongside by-products including naptha, sulphur and water; and

·; An integrated gasification combined cycle plant producing 560 MW of power available for export.

However, the strength of the Project rationale suggests there is significant potential to create a range of clean energy projects based on the Arckaringa coal asset and on the commercial technologies it will employ. In that regard, Altona has looked to develop relationships with key technology providers to enhance the Project and to create other business opportunities for the Company in the clean energy sphere. Details of recent agreements with Rentech, CRI and Tongjiang were covered in the Chairman's Statement above.

The Company's clean energy technology initiatives, plus the progress of the BFS work programme, promise another productive year ahead. As is the case with major resources projects, a lot of the BFS work is not only fundamental and detailed but also subject to review and reworking, making it difficult to be precise about completion timings. But with the continuing funding commitment of CNOOC-NEIA, the work remains squarely aimed at underpinning the eventual construction of a significant new energy and fuels source in South Australia and one of the most exciting resource projects in the country.

Chris Schrape

Managing Director

9 November 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2011

STATEMENTS OF FINANCIAL POSITION

As at 30 June 2011

The financial statements were approved by the Board and authorised for issue on 9 November 2011 and signed on its behalf by:

Anthony Samaha

Director

Registered number 5350512

(Incorporated in England and Wales)

STATEMENTS OF CASH FLOWS

For the year ended 30 June 2011

STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2011

The following described the nature and purpose of each reserve within owners' equity:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

BASIS OF PREPARATION

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. Both the parent company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards IFRSs and IFRIC interpretations, issued by the International Accounting Standards Board (IASB) as endorsed for use in the EU ('IFRSs') and those parts of the Companies Act 2006 that are applicable to companies that prepare their financial statements under IFRS.

The financial information for the years ended 30 June 2011 and 30 June 2010 does not constitute statutory accounts as defined by section 435 of the Companies Act 2006 but is extracted from the audited accounts for those years. The 30 June 2010 accounts have been delivered to the Registrar of Companies. The 30 June 2011 accounts will be delivered to Companies House within the statutory filing deadline. The auditor's report on those financial statements was unqualified but did include a reference to the uncertainties surrounding going concern, to which the auditors drew attention by way of emphasis and did not contain a statement under s498 (2) - (3) of Companies Act 2006.

GOING CONCERN

The financial statements have been prepared on a going concern basis. The Company raises money for exploration and capital projects as and when required. There can be no assurance that the Group's projects will be fully developed in accordance with current plans or completed on time or to budget. Future work on the development of these projects, the levels of production and financial returns arising therefrom may be adversely affected by factors outside the control of the Group. 

Under the terms of the JV, CNOOC-NEIA, will fund the BFS for the Arckaringa Project and thereby the Group's licence commitments up to A$40million, however the Group requires further funds to meet its operational commitments over the next twelve months. The Directors remain confident that the Group's potential from the development of the Arckaringa project, together with the Group's historic proven ability to raise additional funds, will enable the Group to fully finance its future working capital requirements beyond the period of twelve months of the date of this report. However, there can be no guarantee that the required funds will be raised within the necessary timeframe. Consequently a material uncertainty exists that may cast significant doubt on the Group's ability to fund this cash shortfall and therefore be able to meet its commitments and discharge its liabilities in the normal course of business for a period not less than twelve months from the date of this report.

The financial statements do not include the adjustments that would result if the Group was unable to continue in operation.

2. REVENUE AND SEGMENTAL INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision‑maker. The chief operating decision‑maker, who is responsible for allocating resources and assessing performance of the operating segment and that make strategic decisions, has been identified as the Board of Directors.

The Group had no operating revenue during the period.

The Group operates in one segment, the evaluation of the Arckaringa coal and CTL project in South Australia. The Parent Company operates a head office based in the United Kingdom which incurred certain administration and corporate costs. The Group's operations principally span two countries, Australia and the United Kingdom, the operations of the Beijing branch are included within the Administration and Corporate activity in the UK and are therefore not separately considered in this analysis because the operating segment does not breach 10% of any of the analysis provided.

Segment result

The share based payment charge is included within the United Kingdom segment result.

Segment assets and liabilities

Other segment information

3. LOSS PER SHARE

The loss for the period attributed to shareholders is £1,593,000 (2010: Loss £2,442,000).

This is divided by the weighted average number of Ordinary shares outstanding calculated to be 419.4million (2010:381.6 million) to give a basic loss per share of 0.38pence (2010: basic loss per share of 0.64pence).

As inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive and, as such, the effect of the dilution has not been applied in the calculation. The potential future share issues that may dilute the loss per share relate to options in issue and deferred shares disclosed in the full version of the financial statements.

4. INTANGIBLE ASSETS

Exploration and evaluation relates to the development of an integrated coal-to-liquid plant and co-generation power facility, supported by an open-cut coal mine at its Arckaringa Project in South Australia. 

5. RELATED PARTY TRANSACTIONS

The Key Management personnel are considered to be the Directors. Details of their remuneration are included in the full version of the financial statements.

In the current year the Group issued Mr Zheng with 2,500,000 fully paid ordinary shares and paid him £100,000 under the success fee agreement entered into between Mr Zheng and the Company. These payments were in respect of milestone achievements under this agreement.

The milestone achievements were established in March 2010 when the Company agreed success fees with Michael Zheng, a director of the Company, which were contingent in respect of the achievement of the JV and its subsequent progress. Upon satisfaction of the completion of conditions precedent to the JV, Mr Zheng was entitled to receive £100,000 and be issued with 2,500,000 fully paid ordinary shares in the Company, during 2011 the conditions precedent in respect of these two conditions were met and the payments were made. 

Furthermore in 2010 Mr Zheng was issued with 6,500,000 options, exercisable at 0.1p, of which 3,000,000 vest upon completion of Stage 1 of the BFS and 3,500,000 vest upon completion of Stage 2 of the BFS. Mr Zheng will receive a further £100,000 upon completion of Stage 1 of the BFS and a further £200,000 upon completion of Stage 2 of the BFS. 

During the period, the Company paid £250,000 (2010: £184,000) to CJL Consultants Limited, a company related to Christopher Lambert, for Director Fees. These fees are included in the numbers disclosed in the full version of the financial statements.

During the period, the subsidiary company Arckaringa Energy Pty Ltd paid rent and other administrative expenses of £53,000 (2010: £50,000) to PepinNini Minerals Limited, a company of which Christopher Lambert and former Director Norman Kennedy are Directors. At 30 June 2011, there was £Nil owing (2010: £15,000).

During the period, the Group paid £27,000 (2010: £Nil) in respect of Directors fees to Sutherland People Pty limited, a company related to the Group by Phil Sutherland, a common Director, a further amount of £10,000 (2010: £Nil) in respect of recruitment services provided to the subsidiary company Arckaringa Energy Pty Limited (2010: £Nil). At 30 June 2011, there was £Nil owing/owed (2010: £Nil).

6. POST REPORTING DATE EVENTS

There were no post reporting date events to disclose.