Altona Energy Regulatory News (ANR)

4 Dec 2007 16:19

Altona Resources PLC04 December 2007 Altona Resources Plc / Index: AIM / Epic: ANR / Sector: Exploration & Production 4 December 2007 Altona Resources Plc ("Altona" or "the Company") Final Results for the year ended 30 June 2007 Notice of AGM Altona Resources plc, the Australian based energy company, announces its finalresults for the year ended 30 June 2007 and gives notice of its Annual GeneralMeeting to be held on 28 December 2007. Overview • Completion of the pre-feasibility study for coal-to-liquid ("CTL") plant and cogeneration power facility, supported by an open-cut coal mine at the Wintinna Deposit, is expected in Q1 2008 • Drill programme and bulk sampling commenced at Wintinna to define 700 million tonnes of coal to current JORC standards • MOU with South Australia's largest electricity producer to evaluate potential for supplying 4 million tonnes of coal per annum for 25 years • Extension of MOU with BP to evaluate power generation and CTL development opportunities • Commenced Greenhouse Gas Initiative in line with South Australian Government policy • MOU with FreightLink, one of Australia's leading freight logistics companies • Appointed Bell Potter as Australian financial adviser Altona Chairman, Christopher Lambert, said, "This has been another busy periodas we continue to work towards achieving our objective of becoming a leadingAustralian based energy supplier through the use of the CTL process. Whilst ourtenements contain known resources of 7.8 billion tonnes of sub-bituminous coal,a field drilling programme is underway aimed at providing an updated JORCresource and reserves calculation to define at least 700 m tonnes in theMeasured and Indicated Categories within the Wintinna deposit. To this end, weare making solid progress, with pre-feasibility activities expected to becompleted Q1 2008. We also continue to build and strengthen relationships withkey organisations including FreightLink and the South Australian Government,which has understood our potential and ideal position to help tackle SouthAustralia's major domestic power and fuel shortages. The current tradingperiod is proving just as busy for us and we are not only excited about theArckaringa Project's prospects but also look forward to the coming months withconfidence." The Company's 2007 Annual Report and Accounts together with the notice of its2007 Annual General Meeting have been posted to shareholders. Copies of bothdocuments are now available at the Company's website www.altonaresources.com and copies are available free of charge for collection from the registered officeat 55 Gower Street, London WC1E 6HQ. Altona's Annual General Meeting will be held at Level 1, 18-19 Pall Mall, LondonSW1Y 5LU on Friday 28 December 2007 at 10.00 am. For further information visit www.altonaresources.com or please contact: Chris Lambert Chairman +44 (0) 207 024 8391Chris Schrape Managing Director +61 (0) 417 984 434Hugh Oram Nabarro Wells & Co Limited +44 (0) 207 710 7400Alastair Stratton Matrix Corporate Capital LLP +44 (0) 207 925 3300Hugo de Salis St Brides Media & Finance +44 (0) 207 242 4477 Chairman's Statement The Board is pleased to report the results of Altona Resources plc ("Altona" or"the Company") for the year ended 30 June 2007. This has been another busy period of development as we continue to work towardsachieving our objective of become a leading energy supplier, through the use ofthe Coal to Liquid ("CTL") process. Accordingly we are making solid progresswith the bankable feasibility study ("BFS") for an integrated 10 million barrelper year CTL plant with a 560 MW co-generation power facility based on theCompany's wholly owned coal assets - the Arckaringa Project ("Arckaringa") inSouth Australia. We remain confident that the work programme that is currentlybeing carried out will deliver the BFS and in-turn create value for ourshareholders. Arckaringa is potentially one of the world's largest undeveloped energy bankswhich the Company believes will be capable of conversion into clean liquidfuels, low cost power and high value industrial feedstock. Arckaringa's location in South Australia is key to the importance of this energyproject. According to official forecasts of electricity supply and demand by theSouth Australian Electricity Supply Industry Planning Council, South Australiais facing a 'reserve' supply deficit of over 500 MW by 2016. This does notinclude the more than 500 MW of new power demand from BHP Billiton's Olympic DamExpansion project and other new mineral based developments planned for the nextdecade. The State also imports all its petroleum fuel requirements, which areset to rise rapidly on the back of these developments. Due to the nature of our resource and the potential for Altona to assist inreducing the potential reserve deficit and securing the State's fuel needs, theCompany regularly meets with the South Australian Government, includingofficials such as the Minister for Mineral Resources Development and theExecutive Director of the State Office of Minerals and Energy Resources toupdate on developments at Arckaringa. These meetings have resulted in theCompany being asked to formally present the current status of the project tomultiple government agencies, and discussions relating to the CTL plant continuein anticipation of establishing a process and framework for Project assessmentsand approvals. CTL, the proven technology best demonstrated in South Africa, where currently30% of the country's gasoline and diesel fuel needs are met through CTL plants,converts coal into more environmentally clean and manageable energy sourcesincluding gas and synthetic fuels. CTL is a prime example of 'clean coaltechnology' - the associated combined cycle power units produce up to 20% lessCO2 per unit of power generated than a conventional coal fired plant, whilstcarbon capture at the synthetic gas production stage and subsequent storageoffers the potential to reduce the overall greenhouse gas emissions from CTL tobelow the "well to wheel" level of fuels derived from crude oil. Early in the reporting period Chris Schrape was appointed to the Board andsubsequently as Managing Director in relation to Arckaringa. Chris is based inAustralia and is working diligently in heading up all activities at the Projectand is a key figure in the development of commercial opportunities andrelationships to advance the development of this potentially world-scale energyproject. As is Phillip Sutherland, who was appointed to the Board asNon-Executive Director and his experience with local, state and federalgovernment agencies and his comprehensive understanding of regulatory proceduresand issues in developing resource projects will be invaluable to Altona'srelationships with the South Australian government and related bodies. Atpresent Altona is currently looking to identify a firm to report as theProject's Development Engineers in relation to completion of the FinalFeasibility report stage of the BFS. In April this year we raised £2.07 million before costs through Matrix CorporateCapital LLP ("Matrix") with the proceeds of the placing being put towards thefurther development of Arckaringa and in particular, the Wintinna drillprogramme. Following on from this placing, the Company appointed Matrix asBroker in August 2007. In July 2007 the Company's existing MOU agreement with BP Australia to evaluatepower generation and CTL development opportunities was extended until 30th June2008, which the Company believes is a strong reflection of the potential thatArckaringa demonstrates in becoming a fully integrated CTL and power project. Looking forward towards the completion of the BFS I remain positive about ourpotentially world class Arckaringa project. We continue to build and maintainrelationships with key players in the industry, such as BP Australia, and we areincreasingly happy to report the growing institutional support Altona isreceiving, particularly demonstrated through our relationship with Matrix. I would like to thank you, the shareholders, for your continuing supportthroughout the year and to the Board members for all of their hard work andcommitment to Altona and our work in South Australia. Chris LambertChairman30 November 2007 Operations Report Altona Resources plc ("Altona") holds, through its wholly owned subsidiaryArckaringa Energy Pty Ltd, a 100% interest in three exploration licences,covering 2,500 sq.kms in the northern portion of the Permian Arckaringa Basin inSouth Australia. These licences include three coal deposits - Westfield (EL3360), Wintinna (EL 3361) and Murloocoppie (EL 3362) - each located close to theAdelaide to Darwin railroad and the Stuart Highway. Today, the growing deficit in Australian oil and fuels production and a risingdemand for power, fuel and industrial feedstocks in South Australia provide thekeys for unlocking the value inherent in these resources. Altona has thereforeshifted its strategic focus from simply mining, to the high value added businessmodel of an integrated mine and Coal to Liquids ("CTL") plant with aco-generation power facility - the "Arckaringa Project". The Company has made significant progress on the Project during the currentyear, including the completion of a number of pre-feasibility studies andreports commissioned from Altona's team of consultants and advisers. The resultsof this work have been used to develop a Project "Base Case", which covers: • a 10 Million Tonne Per Annum ("MTPA") open cut mine based on the Wintinna deposit • a CTL plant producing 10 Million Barrels Per Annum ("MBPA") or 30 Thousand Barrels Per Day ("KBPD") of liquid products, mainly zero sulphur diesel fuel, plus by-products including naptha, elemental sulphur and water • 560 MW of power for export On this basis, one tonne of Wintinna coal can be seen to yield one barrel ofliquids plus power and industrial products - a significant order of added valuebeyond supplying coal simply for conventional power generation. In conjunction with its principal Project Financial Advisor, the Royal Bank ofScotland, the Company developed a Project Economic Model using the inputs fromtwo keystone reports: • The Jacobs Consultancy (UK) Feasibility Report on an Expandable CTL and Cogeneration Power Plant, with the plant design incorporating three Phases, each of 5 MBPA of liquid products and 280 MW of power, and using ConocoPhilips Gasification and Rentech's Fischer-Tropsch technology; • A parallel report by the Company's mine planning consultants in Australia, Minarco MineConsult, which updated Base Case capital and operating cost estimates for an open cut mine from an optimum area within the Wintinna deposit, to supply the CTL Plant. The Project Model has revealed a potentially robust long term operation. Theindicated unit production (operating) cost of US$35/barrel, on the basis ofliquids production alone, is competitive with global CTL industry operating costbenchmarks. However, the attractiveness of the Project is significantly enhancedby the revenue available from the sale of power into the increasingly supplydeficient South Australian power market. Applying the sale of the Base Case 560MW of power at recent base load prices against costs, the net unit operatingcosts are effectively reduced to a projected US$20 per barrel of liquidproducts. This would place the Project at the very low end of CTL industryoperating cost benchmarks and indicates that it could make operating profitsunder virtually all future oil price forecasting scenarios. The Base Case combines 2 Phases over a 4.5 year construction period, at acapital cost of US$2.7 Billion for CTL and Power and US$0.5 Billion for the mine(including mine development operating costs). These capital costs, which arewithin the typical range for CTL projects worldwide, can be offset by the largerevenue generating capacity of the Project, underpinned by strong locationadvantages. Several factors are converging to make South Australia and the Arckaringa regiona particularly attractive location for a CTL and power project: • Political and economic stability, which is critical to the success of long life, high capital cost projects • Abundant and technically suitable coal resources • The Adelaide - Darwin rail and road links • Growing markets for fuels and power, plus industrial process inputs such as sulphur, water and chemicals South Australia is host to a large number of new and expanding resourceprojects, fostered by a rapid increase in minerals exploration. At the sametime, the State's dependence on imported diesel is rising and available powersupply is officially forecast to fall increasingly short of demand. Inaddition, regional centres and new mining developments in the north of the Stateand in the neighbouring Northern Territory are dependent on imported dieselfuel. The Arckaringa Project will be uniquely placed to: • supply both fuel and power to new resources and industrial projects • be a catalyst for regional development and employment • enhance power supply to the State grid and the National Electricity Market • provide commercial grade sulphur and potentially a range of chemical feedstocks such as naptha • supply water to the region from mine dewatering and plant processes , subject to appropriate environmental management and approval Based on encouraging results from the studies over the past 18 months and as aresult of a "Gap Analysis" report commissioned from Hatch Engineering, theCompany identified several key areas that required further work to make theProject ready for the Final Feasibility stage. The first step was to undertake afield drilling programme to update the Wintinna deposit to current JORCclassification standards, extract bulk samples for coal quality and processtesting and to update hydro-geological (groundwater) and geotechnicalassessments. The programme commenced in May 2007 and is scheduled to be finishedbefore the end of the year. It focuses on an optimum area within the Wintinnadeposit for extraction by open cut mining methods and, as such, has beendesigned for the definition of at least 700 million tonnes of coal to beclassified as Measured or Indicated according to the current, 2004, JORC Codefor reporting coal resources. A bulk sample of approximately five tonnes of coal, extracted from five largediameter (200mm) partially cored boreholes, was completed in June and loggedsuccessfully. These large diameter boreholes were drilled adjacent to previouslydrilled sites and will be used to validate and upgrade the previous explorationresults. The bulk sample will also be used for various tests and analyses todefine the optimum specifications for the mining and preparation of Wintinnacoal in relation to the CTL process. Test work commenced during September 2007at the Newcastle laboratories of ACIRL Pty. Ltd, one of Australia's leading coaltesting and analysis companies, in accordance with the test programme supervisedby Altona's coal quality and testing consultants, QCC Resources Pty. Ltd. (partof DownerEDi Mining). As part of the associated hydrogeological and geotechnical assessments, drillingof production wells and monitoring piezometers is included in the programme.This work includes various tests to assess the hydrogeological characteristicsof the deposit and the impact of mine dewatering, plus the development of agroundwater model. Following completion of the hydrogeological wells, anadditional fifteen geophysically logged slim diameter (HQ-61mm), partially coredboreholes and five geophysically logged open holes are proposed to be drilled toreduce the borehole spacing within the area of interest to between 500 metresand 1 kilometre for resource definition purposes. Up to four geotechnical holesare also being undertaken to better define the geotechnical parameters of thedifferent lithological units proposed to be mined at Wintinna and to help definepit geometry for mine design and planning. The Company has identified that the Final Feasibility studies will need to givepriority attention to environmental and social impact issues. In preparation,Altona has started scoping the evaluation of regional water supply impacts andmitigation, based on the groundwater modelling and covering the use and disposalof water in an area subject to water allocation approvals. Additionally,recognising that the CTL process is a prime example of 'clean coal technology'(incorporating the extraction and storage of CO2), the Company has identifiedpotential CO2 sequestration options for the Project and will be investigatingthese further for the Final Feasibility environmental reports. Altona has already commenced a community consultation process and has presentedthe environmental and technical aspects of the Project to a number of regionalforums during the year. The Company has also held regular briefing sessions withthe South Australian Government and the Opposition parties, to inform them aboutprogress on the Project and to anticipate future approval requirements. Overall, I am very pleased with the progress of the Project and am lookingforward to working with the Company's world class advisers and the Board tocomplete the Final Feasibility stage and bring this global scale project tocommercial fruition. Chris SchrapeManaging Director30 November 2007 Directors' Report The Directors are pleased to present their annual report together with theconsolidated financial statements for the year ended 30 June 2007. Principal Activities and Business Review The principal activity of the Group is the evaluation of the development of anintegrated Coal-To-Liquid plant and co-generation power facility, supported byan open-cut coal mine at its Arckaringa Project in South Australia. Thedevelopments during the period are detailed in the Chairman's Statement andOperations Report. Results And Dividends The consolidated loss for the year on ordinary activities of the Company aftertaxation amounted to £1,010,000 (2006: Loss £359,000). The Directors do notrecommend payment of a dividend. Directors Christopher Walter Lambert, Executive Chairman Mr Lambert's financial background is predominantly commodity based in the Cityof London. Over a period of 17 years Mr Lambert headed up the London and globaltrading for Elders Finance Group, The Rural and Industries Bank of WesternAustralia, Barclays Bank and Prudential Securities (USA) During his time atthese companies his duties included managing global dealing operations in themajor financial centres around the world, the structuring of corporate andproject finance transactions for governments, central banks, industrialcompanies and mining houses. In 1997 Mr Lambert left the City to act as a consultant to mining housespredominantly in Australia. During this period he also worked closely with a fareastern government body whose investments included soft commodities, miningassets and substantial property portfolios. Mr Lambert is currently a directorof Braemore Resources Plc, Cue Energy Plc, Atlantic Coal plc and AustralianStock Exchange listed resource exploration company Pepinnini Minerals Limited. Christopher John Schrape, Managing Director Mr Schrape is an Economics graduate from the University of Melbourne, with over25 years experience in the coal industry, including the position of ChiefExecutive Officer of Western Australian based Griffin Coal and 20 years with RioTinto in senior coal marketing and management roles. Anthony John Samaha, Executive Finance Director Mr Samaha holds Bachelor of Commerce and Bachelor of Economics degrees. He is anAssociate of the Institute of Chartered Accountants of Australia and anAssociate of the Securities Institute of Australia. Mr Samaha has over 16 years'experience in providing accounting and corporate advice in a diverse range ofindustry sectors, including resource development. He is a director of AIM quotedresources companies Braemore Resources Plc and Irvine Energy Plc. Norman Lee Kennedy, Non-Executive Technical Director Mr Kennedy is a geologist with more than 25 years experience in explorationmanagement in both Australia and overseas and is a principal of Rank GeologicalServices Pty Ltd, a geological services consulting firm. He has been anexploration consultant for a number of resource companies, including WesternMining Corporation, Caltex, CRA, Meekatharra Minerals, NRG Flinders, Shell, BPand ABB Energy Ventures. He is currently a director of Australian StockExchange listed resource exploration company PepinNini Minerals Limited. Mr Kennedy has been associated with Arckaringa since the early 1980's asprincipally a consulting geologist and has extensive knowledge of its geologyand commercial aspects. He oversaw the extensive drilling programme whichprogressed Arckaringa from an early stage to a JORC compliant resource,including a significant Measured Resource component. Phillip George Sutherland, Non-Executive Director Phillip Sutherland joined the Board of Altona Resources in November 2006. He hasbeen the Chief Executive Officer of the South Australian Chamber of Mines andEnergy since February 2001. Born in Adelaide in 1951, Mr. Sutherland is agraduate in business management from the South Australian Institute ofTechnology and the University of South Australia. Mr Sutherland is a Fellow ofthe Australian Institute of Management and a Member of both the AustralianInstitute of Company Directors and Australian Human Resources Institute. MrSutherland is a recipient of the National Service Medal. Under Mr. Sutherland's leadership the South Australian Chamber of Mines andEnergy has grown from 60 member companies to 170 and become firmly positioned asthe peak industry body for the resources industry in South Australia. MrSutherland is an accomplished advocate specializing in resources industryrelated public policy and public affairs. He has a whole of industryappreciation of the challenges and opportunities facing resources companies. MrSutherland is well known in government, media and industry circles. In addition to his work with the Chamber, Mr Sutherland has extensive executivemanagement experience with local, state and federal government agencies. Jeremy Edelman - resigned 4 July 2006 Directors' Interests The Directors who served during the year to 30 June 2007 had, at that time, andat the date of their respective appointment, the following beneficial interestsin the shares of the Company: 30 June 2007 Number of ordinary Options at 7p Options at 10p Options at 14p sharesChristopher Lambert 5,000,000 1,500,000 2,000,000 2,000,000Christopher Schrape - 1,500,000 1,000,000 1,000,000Anthony Samaha 1,000,000 1,500,000 1,000,000 -Norman Kennedy 17,712,693 1,500,000 1,000,000 -Phillip Sutherland - - - - For further details on options held by Directors, refer to note 6 and 15 of theFinancial Statements. None of the Directors hold warrants in the Company. There have been no changes in Directors' interests in shares since the year end. Employment Policies The Group is committed to promoting policies which ensure that high calibreemployees are attracted, retained and motivated, to ensure the ongoing successfor the business. Employees and those who seek to work with the Group aretreated equally regardless of sex, marital status, creed, age, colour, race orethnic origin. Details of the director emoluments and payments made for professional servicesrendered are set out in note 6 to the financial statements. Health & Safety The Group's aim is to maintain its record of workplace safety. In order toachieve this objective the group provides training and support to employees andsets demanding standards for workplace safety. Substantial Shareholdings On the 28 October 2007 the following shareholdings were registered as beinginterested in 3% or more of the Company's issued share capital, other thanDirectors holdings as previously disclosed under Directors' Interests above: Number of Shares % of issued capital Euroclear Nominees Limited 46,715,800 16.50%Securities Services Nominees Limited 22,749,000 8.03%Fitel Nominees Limited 22,050,000 7.79%Credit Suisse Client Nominees (UK) Limited 17,925,000 6.33%Teawood Nominees Limited 17,575,000 6.21%T. Hoare Nominees Limited 11,550,000 4.08%HSBC Global Custody Nominee (UK) Limited 10,740,789 3.79%R C Greig Nominees Limited 9,950,964 3.51%Bear Stearns Securities Corp 9,240,789 3.26% Political Contributions And Charitable Donations During the period the Group did not make any political contributions orcharitable donations. Payment To Suppliers The Group's policy is to agree terms and conditions with suppliers in advance;payment is then made in accordance with the agreement provided the supplier hasmet the terms and conditions. It is usual for suppliers to be paid within 30days of receipt of invoice. Insurance The Group maintained insurance in respect of its Directors and Officers againstliabilities in relation to the Group. Going Concern Notwithstanding the loss incurred during the period under review, the Directorsare of the opinion that ongoing evaluations of the Group's interests indicatethat preparation of the group's accounts on a going concern basis isappropriate. Auditors The auditors, Chapman Davis LLP, have indicated their willingness to continue inoffice and a resolution that they be reappointed will be proposed at the annualgeneral meeting. Corporate Governance The Directors are committed to maintaining high standards of corporategovernance. The Directors have established procedures, so far as is practicable,given the Company's size, to comply with the Combined Code as modified by therecommendations of the Quoted Companies Alliance. The Company has adopted andoperates a share dealing code for directors and senior employees onsubstantially the same terms as the Model Code appended to the Listing Rules ofthe UKLA. The Board The Board meets regularly throughout the year. To enable the Board to performits duties, each of the Directors has full access to all relevant informationand to the services of the Company Secretary. If necessary the non-executivedirectors may take independent professional advice at the Company's expense. TheBoard currently includes four non-executive directors. The Board has delegatedspecific responsibilities to the committees described below. The audit committee The audit committee comprises Anthony Samaha (Chairman) and Norman Kennedy, withtwo meetings held during the period ended 30 June 2007. The committee reviewsthe Company's annual and interim financial statements before submission to theBoard for approval. The committee also reviews regular reports from managementand the external auditors on accounting and internal control matters. Whenappropriate, the committee monitors the progress of action taken in relation tosuch matters. The committee also recommends the appointment of, and reviews thefees of, the external auditors. The remuneration committee The remuneration committee is made up of Christopher Lambert (Chairman) andAnthony Samaha, with one meeting held during the period ended 30 June 2007. Itis responsible for reviewing the performance of the Executive Directors and forsetting the scale and structure of their remuneration, paying due regard to theinterests of shareholders as a whole and the performance of the Company. Directors' Responsibilities Company law in the United Kingdom requires the Directors to prepare financialstatements for each financial year which give a true and fair view of the stateof the affairs of the Company and of the Group and of the profit or loss of theGroup for that period. In preparing those financial statements, the Directorsare required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; - state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and group will continue in business for the foreseeable future. So far as each Director is aware, there is no relevant audit information ofwhich the Company's auditors are unaware, and the Directors have taken all thesteps that they ought to have taken as Directors' in order to make themselvesaware of any relevant audit information and to establish that the Company'sauditor are aware of that information. The Directors are responsible for keeping proper accounting records, forsafeguarding the assets of the Group and for taking reasonable steps for theprevention and detection of fraud and other irregularities. They are alsoresponsible for ensuring that the annual report includes information required bythe Alternative Investment Market. The maintenance and integrity of the Company's website is the responsibility ofthe Directors: the work carried out by the auditors does not involveconsideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the financialstatements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination ofthe financial statements may differ from legislation in other jurisdictions. By order of Board: Christopher LambertChairman30 November 2007 Independent Auditors Report to the Shareholders of Altona Resources Plc We have audited the group and parent company financial statements of AltonaResources Plc for the year ended 30 June 2007, which comprise the Group andParent Income Statement, the Group and Parent Statement of Recognised Income andExpense, Group and Parent Balance Sheets, Group and Parent Cash Flow Statements,Group and Parent Statement of Changes in Equity, and the related notes 1 to24.These financial statements have been prepared under the accounting policiesset out therein. Respective Responsibilities of Directors and Auditors The Directors' responsibilities for preparing the Annual Report, and thefinancial statements in accordance with applicable law and InternationalFinancial Reporting Standards (IFRSs) as adopted by the European Union are setout in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance withrelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a trueand fair view and whether the financial statements have been properly preparedin accordance with the Companies Act 1985, and as regards the group financialstatements, Article 4 of the IAS Regulation. We also report to you whether inour opinion the information given in the Directors' Report is consistent withthe financial statements. In addition we report to you if, in our opinion, the Company has not kept properaccounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regardingDirectors' remuneration and other transactions is not disclosed. We read other information contained in the Annual Report and consider whether itis consistent with the audited financial statements. The other informationcomprises only the Directors' Report, the Operations Report and the Chairman'sStatement. We consider the implications for our report if we become aware of anyapparent misstatements or material inconsistencies with the financialstatements. Our responsibilities do not extend to any other information. Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgements made by the Directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriateto the group's and company's circumstances, consistently applied and adequatelydisclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. Opinion In our opinion: • the group financial statements give a true and fair view , in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 30th June 2007 and of its loss for the year then ended; • the parent company financial statements give a true and fair view , in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company's affairs as at 30th June 2007; • the financial statements have been properly prepared in accordance with the Companies Act 1985 and, as regards the group financial statements, Article 4 of the IAS Regulation; and • the information given in the Directors' Report is consistent with the financial statements. Chapman Davis LLPRegistered AuditorsLondon30 November 2007 INCOME STATEMENTFor the year ended 30 June 2007 Group Company Notes 2007 2006* 2007 2006* £'000 £'000 £'000 £'000 Administrative expenses (675) (394) (674) (370)Share options expensed (364) - (364) -Operating loss 4 (1,039) (394) (1,038) (370)Interest income 5 29 35 29 35Loss on ordinary activities before taxation (1,010) (359) (1,009) (335)Income tax expense 7 - - - -Loss for the financial period (1,010) (359) (1,009) (335) Loss per share expressed in pence - Basic 8 (0.41p) (0.18p) All of the operations are considered to be continuing. STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the period ended 30 June 2007 Group Company 2007 2006* 2007 2006* £'000 £'000 £'000 £'000 Loss for the financial period (1,010) (359) (1,009) (335)Currency translation difference (1) - - -Total recognised gains and losses for the (1,011) (359) (1,009) (335)period * The 2006 period is from incorporation on 2 February 2005 to 30 June 2006. BALANCE SHEETSAs at 30 June 2007 Notes Group Group Company Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000ASSETSNon-current assetsIntangible assets 9 2,957 2,361 - -Plant and equipment 10 6 2 6 2Investment in subsidaries 11 - - - -Trade and other receivables 12 39 - 36 - 3,002 2,363 42 2Current assetsTrade and other receivables 12 65 42 2,960 2,402Cash and cash equivalents 16 1,638 454 1,627 450 1,703 496 4,587 2,852TOTAL ASSETS 4,705 2,859 4,629 2,854 LIABILITIESCurrent liabilitiesTrade and other payables 13 164 150 62 121 NET ASSETS 4,541 2,709 4,567 2,733 EQUITYIssued capital 14 283 231 283 231Share premium 3,226 829 3,226 829Merger reserve 2,001 2,001 2,001 2,001Other reserves 401 7 401 7Retained earnings (1,370) (359) (1,344) (335) TOTAL EQUITY 4,541 2,709 4,567 2,733 The financial statements were approved by the Board on 30 November 2007 andsigned on its behalf by: Christopher LambertDirector CASH FLOW STATEMENTS For the year ended 30 June 2007 Group Company Notes 2007 2006* 2007 2006* £'000 £'000 £'000 £'000Operating activitiesOperating loss (1,039) (394) (1,038) (370)Adjustment to reconcile profit before tax tonet cash flowsNon-cash:Depreciation 1 1 1 1Foreign exchange adjustment 22 - 37 -Share options expensed 364 - 364 -Working capital adjustmentsIncrease in debtors (59) (42) (42) (33)Increase in creditors (59) 150 (59) 121Net cash flows used in operating activities (770) (285) (737) (281) Investing activitiesPayments to acquire tangible fixed assets (5) (3) (5) (3)Payments to acquire intangible fixed assets (546) (330) - -Payment for bond deposit (3) - - -Payment for investment - - - (69)Payments to subsidiary - - (589) (269)Interest received 29 35 29 35Net cash outflows used in investing (525) (298) (565) (306)activities Financing activitiesNet proceeds from issue of shares 2,479 1,037 2,479 1,037Net cash inflow from financing 2,479 1,037 2,479 1,037 Net increase in cash and cash equivalents 1,184 454 1,177 450Cash and cash equivalents at beginning of 454 - 450 -periodCash and cash equivalents at 30 June 16 1,638 454 1,627 450 * The 2006 period is from incorporation on 2 February 2005 to 30 June 2006. STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2007 Called up Share Merger Share based Retained Total share premium reserve payment earnings equity capital reserve reserveGroup £'000 £'000 £'000 £'000 £'000 £'000 As at 2 February 2005 - - - - - -Shares capital issued 231 846 2,001 - - 3,078Cost of share issue - (10) - - - (10)Share-based payments - (9) - 9 - -Options exercised - 2 - (2) - -Loss for the period - - - - (359) (359)Balance at 30 June 2006 231 829 2,001 7 (359) 2,709 Share capital issued 52 2,599 - - - 2,651Cost of share issue - (204) - - - (204)Share-based payments - - - 396 - 396Options exercised - 2 - (2) - -Currency translation differences - - - - (1) (1)Loss for the period - - - - (1,010) (1,010)Balance at 30 June 2007 283 3,226 2,001 401 (1,370) 4,541 Company £'000 £'000 £'000 £'000 £'000 £'000As at 2 February 2005 - - - - - -Shares capital issued 231 846 2,001 - - 3,078Cost of share issue - (10) - - - (10)Share-based payments - (9) - 9 - -Options exercised - 2 - (2) - -Loss for the period - - - - (335) (335)Balance at 30 June 2006 231 829 2,001 7 (335) 2,733 Shares capital issued 52 2,599 - - - 2,651Cost of share issue (204) - - - (204)Share-based payments - - - 396 - 396Options exercised - 2 - (2) - -Loss for the period - - - - (1,009) (1,009)Balance at 30 June 2007 283 3,226 2,001 401 (1,344) 4,567 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. CORPORATE INFORMATION The Group financial statements of Altona Resources Plc ('the Company') for theyear ended 30 June 2007 were authorised for issue in accordance with aresolution of the directors on 30 November 2007. Altona Resources Plc is apublicly listed company incorporated and domiciled in England & Wales under theCompanies Act 1985. The Company's ordinary shares are traded on the AIM Marketoperated by the London Stock Exchange. 2. ACCOUNTING POLICIES The principal accounting policies are summarised below. They have been appliedconsistently throughout the period. STATEMENT OF COMPLIANCE The consolidated financial statements of Altona Resources Plc and all itssubsidiaries (the Group) have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS). BASIS OF ACCOUNTING These financial statements have been prepared for the first time in accordancewith IFRS as adopted by the European Union, and with those parts of theCompanies Act, 1985 applicable to companies reporting under IFRS. Thedisclosures required by IFRS 1 concerning the transition from UK GAAP to IFRSare given in note 22. The financial report is presented in Sterling and all values are rounded to thenearest thousand pounds (£'000) unless otherwise stated. Exemptions taken on first time adoption of IFRS 1 Business combinations: The Group has applied the exemption fromrestrospectively recalculating goodwill which arose on acquisitions prior to 1July 2006. This goodwill is included at its deemed cost, being the amountrecorded under UK GAAP as at 1 July 2006 following an impairment review. BASIS OF CONSOLIDATION The consolidated financial statements comprise the financial statements ofAltona Resources Plc and its subsidiaries (the 'Group') as at 30 June each year. The financial statements of the subsidiaries are prepared for the samereporting year as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits andlosses resulting from intra-group transactions that are recognised in assets,are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the dateon which the Group obtains control, and continue to be consolidated until thedate that such control ceases. FOREIGN CURRENCIES The Company's functional currency is Sterling (£). Each entity in the Groupdetermines its own functional currency and items included in the financialstatements of each entity are measured using that functional currency. As atthe reporting date the assets and liabilities of these subsidiaries aretranslated into the presentation currency of the Company at the rate of exchangeruling at the balance sheet date and their income statements are translated atthe average exchange rate for the year. The exchange differences arising on thetranslation are taken directly to a separate component of equity. All otherdifferences are taken to the income statement. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The key assumptions concerning the future and other key sources of estimationuncertainty at the balance sheet date, that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within thenext financial year are discussed below: (i) Impairment of intangibles The Group determines whether intangibles are impaired when facts andcircumstances suggest that the carrying amount may exceed its recoverableamount. Such indicators include the point at which a determination is made asto whether or not commercial reserves exist. The carrying amount of intangiblesat 30 June 2007 was £2,957,000 (2006: £2,361,000). (ii) Share based payment transactions The Group measures the cost of equity settled transactions by reference to thefair value of the equity instruments at the date at which they are granted. Thefair value is determined using a Black-Scholes model. EXPLORATION AND EVALUATION COSTS Exploration and evaluation costs, including the costs of acquiring licences, arecapitalised as exploration and evaluation assets on an area of interest basis.Costs incurred before the consolidated entity has obtained the legal rights toexplore an area are recognised in the income statement. Exploration and evaluation assets are only recognised if the rights of the areaof interest are current and either: (i) the expenditures are expected to be recouped through successfuldevelopment and exploitation of the area of interest; or (ii) activities in the area of interest have not at the reporting date,reached a stage which permits a reasonable assessment of the existence orotherwise of economically recoverable reserves and active and significantoperations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are assessed for impairment if (i) sufficientdata exists to determine technical feasibility and commercial viability, and(ii) facts and circumstances suggest that the carrying amount exceeds therecoverable amount. For the purposes of impairment testing, exploration andevaluation assets are allocated to cash-generating units to which theexploration activity related. The cash generating unit shall not be larger thanthe area of interest. Once the technical feasibility and commercial viability of the extraction ofmineral resources in an area of interest are demonstrable, exploration andevaluation assets attributable to that area of interest are first tested forimpairment and then reclassified from intangible assets to mining property anddevelopment assets within property, plant and development. PROPERTY, PLANT AND EQUIPMENT Plant and equipment is stated at cost less accumulated depreciation and anyaccumulated impaired losses. Depreciation is provided on all tangible assets to write off the cost lessestimated residual value of each asset over its expected useful life on astraight-line basis at the following annual rate: Plant and equipment 20% All assets are subject to annual impairment reviews. TAXATION The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the Balance Sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit and is accounted for using the balance sheet liability method. Deferredtax is calculated at the tax rates that are expected to apply in the period whenthe liability is settled or the asset is realised. FINANCIAL INSTRUMENTS The Group's financial instruments, other than its investments, comprise cash anditems arising directly from its operation such as trade debtors and tradecreditors. The Group has overseas subsidiaries in Australia whose expenses aredenominated in Australian dollars. Market price risk is inherent in the Group'sactivities and is accepted as such. There is no material difference between the book value and fair value of theGroup's cash. CASH AND CASH EQUIVALENTS Cash consists of cash on hand and cash held on current account or on short-termdeposits at variable interest rates. Any interest earned is accrued monthly andclassified as interest. TRADE AND OTHER RECEIVABLES Trade and other receivables, which generally have 30-60 day terms, are stated atcost less impairment for losses. TRADE AND OTHER PAYABLES Trade and other payables are carried at amortised cost and represent liabilitiesfor goods and services provided to the Group prior to the end of the financialyear that are unpaid and arise when the Group becomes obliged to make futurepayments is respect of the purchase of these goods and services. IMPAIRMENT OF NON-FINANCIAL ASSETS Non-financial assets and identifiable intangibles, other than exploration andevaluation assets, are reviewed for impairment each reporting date and wheneverevents or changes in circumstances indicate that the carrying amount may not berecoverable. If the expected undiscounted future cash flow from the use of theassets and their eventual disposition is less than the carrying amount of theassets, an impairment loss is recognised and measured using the asset's fairvalue or discounted cash flows. INVESTMENTS Investments in subsidiary undertakings are stated at cost less any provision forimpairment in value, prior to their elimination on consolidation. FINANCE COSTS/REVENUES Borrowing costs are recognised as an expense when incurred. Finance revenue is recognised as interest accrues using the effective interestmethod. This is a method of calculating the amortised cost of a financialassets and allocating the interest income over the relevant period using theeffective interest rate, which is the rate that exactly discounts estimatedfuture cash receipts through the expected life of the financial asset to the netcarrying amount of the financial asset. SHARE BASED PAYMENT TRANSACTIONS The Group issues equity settled share based payments to certain employees.Equity settled share based payments are measured at fair value at the date ofgrant. The fair value is determined using a Black-Scholes model. Where equity instruments are granted to persons other than employees, the incomestatement is charged with the fair value of goods and services received, exceptwhere it is in respect to costs associated with the issue of securities, inwhich case it is charged to the share premium account. MERGER RESERVE The difference between the fair value of an acquisition and the nominal value ofthe shares allotted in a share exchange have been credited to a merger reserveaccount, in accordance with the merger relief provisions of the Companies Act1985 and accordingly no share premium for such transactions is set-up 3. TURNOVER AND SEGMENTAL INFORMATION The Company has no turnover during the period. The Group operates in one business segment, the exploration and evaluation ofcoal. The Group has material interests in two geographical segments, Australiaand the United Kingdom. The Group assets are substantially attributable to theexploration and evaluation of coal activities in Australia. The parent Companyoperates a head office based in the United Kingdom which incurred certainadministration and corporate costs. United Kingdom Australia TotalBy geographical area £'000 £'000 £'000 Loss for the period ended 30 June 2007 (1,009) (1) (1,010)Other segment information:Segment assets 1,709 2,996 4,705 Operating results and net assets are substantially attributable to activities inAustralia. The parent company operates a head office based in the United Kingdom whichincurs certain administration costs. 4. OPERATING LOSS Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Operating loss is arrived at after charging:Auditors' remuneration - audit services 13 8 10 5 - non audit services 7 3 2 3Depreciation 1 1 1 1Directors' emoluments (note 6) 166 71 166 71Directors' share based payments (note 15) 175 - 175 -Finance warrants expensed (note 15) 189 - 189 - Auditors remuneration for audit services above includes £8,000 (2006: £Nil)charged by Deloitte Touche Tohmatsu and £Nil (2006: £3,000) charged by WilliamBuck, Chartered Accountants relating to the audit of the subsidiary companies. 5. FINANCE REVENUE Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Interest receivable 29 35 29 35 6. DIRECTORS' EMOLUMENTS Director Fees Options Issued 2007 2006 2007 2006 £'000 £'000 £'000 £'000Non-Executive DirectorsNorman Kennedy (1) 24 14 35 -Anthony Samaha 60 40 35 -Phillip Sutherland 14 - - -Executive DirectorsChristopher Schrape 87 - 43 -Christopher Lambert (2) 146 49 62 -Jeremy Edelman (3) - 45 - - 331 148 175 -Directors fees allocated to intangibles (157) (77) - -Directors fees allocated to cost of capital (8) - - - 166 71 175 - (1) Services provided by Rank Geological Services Pty Limited (2) Services provided by Walkerton Limited (3) Jeremy Edelman - resigned from office on 4 July 2006 No pension benefits are provided for any Director. 7. TAX ON PROFIT ON ORDINARY ACTIVITIES Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 No taxation has been provided due to losses in theperiod.Factors affecting the tax charge for the yearLoss on ordinary activities before tax (1,010) (359) (1,009) (335) Loss on ordinary activities before taxation (303) (108) (303) (100)multiplied by the standard rate of UK corporation taxof 30% Effects of:Non deductible expenses 110 5 110 5Losses available for future relief 193 103 193 95Current tax charge - - - - No deferred tax asset has been recognised because there is insufficient evidenceof the timing of suitable future profits against which they can be recovered. 8. LOSS PER SHARE The loss for the period attributed to shareholders is £1,010,000 (2006: Loss£359,000). This is divided by the weighted average number of Ordinary shares outstandingcalculated to be 245.7 million (2006: 204.2 million) to give a basic loss pershare of 0.41p (2006: basic loss per share of 0.18p). As inclusion of the potential Ordinary shares would result in a decrease in theloss per share they are considered be to anti-dilutive and, as such, a dilutedloss per share is not included. 9. INTANGIBLE ASSETS Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Exploration and evaluationCostAt beginning of period 2,361 - - -Fair value uplift on acquisition - 2,031 - -Costs of acquisition - 69 - -Deferred evaluation expenditure 619 261 - -Exchange adjustment (23) - - -At 30 June 2,957 2,361 - -Amortisation - - - -Net Book Value at 30 June 2,957 2,361 - - The directors undertook an impairment review as at 30 June 2007 and as a resultof this review no provision was required. 10. PLANT AND EQUIPMENT Group Company £'000 £'000CostAdditions 3 3At 30 June 2006 3 3Additions 5 5At 30 June 2007 8 8DepreciationDepreciation charge for the period 1 1At 30 June 2006 1 1Depreciation charge for the year 1 1At 30 June 2007 2 2Net book valueAt 30 June 2007 6 6At 30 June 2006 2 2 11. INVESTMENTS Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000CostInvestments in subsidiaries (i) - - - - (i) The investment in subsidiaries is for £2 (2006: £2). Subsidiaries of Altona Resources PlcEntit y Country of Holding Nature of Business Registration 2007 2006 % %DirectAltona Australia Pty Limited Australia 100 100 Holding CompanyIndirectArkaringa Energy Pty Limited Australia 100 100 Evaluation of the Arckaringa Project Project and Evaluation 12. TRADE AND OTHER RECEIVABLES Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Current trade and other receivableOther receivables (i) 46 35 20 26Amounts owed by subsidiary undertakings (ii) - - 2,921 2,369Prepayments and accrued income 19 7 19 7 65 42 2,960 2,402 Non current trade and other receivableRent deposit (iii) 36 - 36 -Tenement bond 3 - - - 39 - 36 - (i) Other receivables are non interest bearing and generally repayablebetween 30-60 days. (ii) The receivables from wholly owned subsidiaries are non interest bearingand are due at call. (iii) Rent deposit accrues interest at the 2.76% and is refundable uponcompletion of the lease property. 13. TRADE AND OTHER PAYABLES Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Trade creditors 139 119 37 93Accruals and other creditors 25 31 25 28 164 150 62 121 Trade and other creditors are non interest bearing and are normally settled onterms of 30 days from month end. 14. SHARE CAPITAL Authorised1,000,000,000 Ordinary shares of 0.1p each (2006: 1,000 1,000 1,000 1,0001,000,000,000) Allotted, called up and fully paid283,165,784 ordinary shares of 0.1p each (2006: 283 231 283 231230,500,000) During the period the Company issued the following Ordinary 0.1 pence fully paidshares for cash: Date Issue Price Number of Shares1 July 2006 Opening balance 230,500,0003 July 2006 Exercise of options at £0.01 per share 250,00014 August 2006 Placing at £0.09 per share 1,000,00014 August 2006 Placing at £0.07 per share 350,00011 September 2006 Placing at £0.065 per share 6,000,0001 December 2006 Exercise of options at £0.01 per share 500,0001 December 2006 Placing at £0.07 per share 1,000,00024 April 2007 Placing at £0.0475 per share 43,565,784 283,165,784 Share options and warrants During the period, 26,000,000 options or warrants to subscribe for ordinaryshares in the Company were issued (2006: 3,000,000). As at 30 June 2007 the options and warrants in issue were: Date Number Exercise price Expiry Date Granted IPO options * 10/03/2005 1,750,000 1.00p 10/03/2010Warrant instruments 03/08/2006 3,000,000 8.00p 02/08/2011Warrant instruments 03/08/2006 3,000,000 12.00p 02/08/2011Warrant instruments 03/08/2006 3,000,000 16.00p 02/08/2011Director options 13/10/2006 6,000,000 7.00p 12/10/2011Director options 13/10/2006 5,000,000 10.00p 12/10/2011Director options 13/10/2006 3,000,000 14.00p 12/10/2011Broker options 24/04/2007 1,500,000 4.75p 23/04/2012Broker options 24/04/2007 1,500,000 9.50p 23/04/2012 * During the period Nabarro Wells & Co Limited (advisors to the Company)exercised options on the following shares: Date of exercise Number Market Price at Date of Exercise 03/07/2006 250,000 6.6p 01/12/2006 500,000 8.0p 15. SHARE BASED PAYMENTS The accessed fair value at the grant date has been determined using theBlack-Scholes Model that takes into account the exercise price, the term of theoption, the share price at grant date, the expected price volatility of theunderlying share, the expected dividend yield and the risk free interest ratefor the term of the option. Directors Options The Company granted options to Directors as tabled below. Under IFRS 2 'ShareBased Payments', the Company determines the fair value of options issued toDirectors as remuneration and recognises the amount as an expense in the incomestatement with a corresponding increase in equity. Date Granted/ Vested Number Exercise Price Expiry Date Fair Value per Fair Value £'000 Option 13/10/2006 6,000,000 7p 12/10/2011 1.6p 96 13/10/2006 5,000,000 10p 12/10/2011 1.1p 55 13/10/2006 3,000,000 14p 12/10/2011 0.8p 24 14,000,000 175 The fair value of the options granted to Directors during the period was£175,000. The key inputs applied to the Black-Scholes Model included: theclosing share price on 13 October 2006 of 6.6p; risk free interest rate of4.79%; and expected volatility of 0.40. In accessing the fair value of theoptions, a discount of 40% has been applied to the theoretical value calculatedby the Black-Scholes Model to take into account the lack of marketability of theoptions and the inherent limitations of the Black-Scholes Model. Warrants to Royal Bank of Scotland The Company granted warrants to Royal Bank of Scotland (RBS) as tabled below.The expense in respect to these options was charged to the financing fees in theincome statement. Date Granted/ Vested Number Exercise Price Expiry Date Fair Value per Fair Value £'000 Option 03/08/2006 3,000,000 8p 12/10/11 2.7p 81 03/08/2006 3,000,000 12p 12/10/11 1.9p 57 03/08/2006 3,000,000 16p 12/10/11 1.7p 51 9,000,000 189 The fair value of the warrants granted to RBS during the period was £189,000.The key inputs applied to the Black-Scholes Model included: the closing shareprice on 3 August 2006 of 9.4p; risk free interest rate of 4.80%; and expectedvolatility of 0.40. In accessing the fair value of the options, a discount of40% has been applied to the theoretical value calculated by the Black-ScholesModel to take into account the lack of marketability of the options and theinherent limitations of the Black-Scholes Model. Options to Matrix Corporate Capital Limited The Company granted options to Matrix Corporate Capital Limited (Matrix) astabled below. The expense in respect to these options was charged to the sharepremium account. Date Granted/ Vested Number Exercise Price Expiry Date Fair Value per Fair Value £'000 Option 24/04/2007 1,500,000 4.75p 23/04/12 1.4p 21 24/04/2007 1,500,000 9.50p 23/04/12 0.7p 11 3,000,000 32 The fair value of the options granted to Matrix during the period was £32,000.The key inputs applied to the Black-Scholes Model included: the closing shareprice on 24 April 2007 of 5.2p; risk free interest rate of 5.21%; and expectedvolatility of 0.40. In accessing the fair value of the options, a discount of40% has been applied to the theoretical value calculated by the Black-ScholesModel to take into account the lack of marketability of the options and theinherent limitations of the Black-Scholes Model. 16. CASH AND CASH EQUIVALENTS Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Cash at bank and on hand 1,638 454 1,627 450 Cash at bank were bearing an average interest rate of 5.64% per annum at 30 June2007 (2006: 4.10%). 17. FINANCIAL INSTRUMENTS The Group uses financial instruments comprising cash, liquid resources anddebtors/creditors that arise from its operations. The Group holds cash as aliquid resource to fund the obligations of the Group. The Group's cash balancesare held in Sterling and in Australia Dollars. The Group's strategy formanaging cash is to maximise interest income whilst ensuring its availability tomatch the profile of the Group's expenditure. This is achieved by regularmonitoring of interest rates and monthly review of expenditure forecasts. The Company has a policy of not hedging and therefore takes market rates inrespect of foreign exchange risk, however it does review its currency exposureson an ad hoc basis. Currency exposures relating to monetary assets held byforeign operations are included within the foreign exchange reserve in the GroupBalance Sheet. The Group considers the credit ratings of banks in which it holds funds in orderto reduce exposure to credit risk. To date the Group has relied upon equity funding to finance operations. TheDirectors are confident that adequate cash resources exist to finance operationsto commercial exploitation but controls over expenditure are carefully managed. The net fair value of financial assets and liabilities approximates the carryingvalues disclosed in the financial statements. The currency and interest rateprofile of the financial asset is as follows: Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Sterling 1,627 450 1,627 450Australian Dollars 11 4 - -At 30 June 1,638 454 1,627 450 The financial assets comprise cash balances in interest earning bank accounts atcall. The financial assets in Sterling currency earn interest at 30 June 2007of 5.64% (2006: 4.10%). 18. MATERIAL NON-CASH TRANSACTIONS Refer to Note 15 for share based payments made during the year ended 30 June2007. 19. COMMITMENTS As at 30 June 2007, the Group had entered into the following materialcommitments: Exploration commitments Ongoing exploration expenditure is required to maintain title to the Group'smineral exploration permits. No provision has been made in the financialstatements for these amounts as the expenditure is expected to be fulfilled inthe normal course of the operations of the Group. Operating lease commitments Leasing arrangements Operating leases relate to office facilities. The Company entered into a 5 yearlease with a break clause after 3 years. The lease was entered into jointly,with Braemore Resources Plc (Refer Note 20) Group Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000Non-cancellable operating lease paymentsNot longer than one year 83 - 83 -Longer than one year and not longer than five 145 - 145 -years 228 - 228 - 20. RELATED PARTY TRANSACTIONS During the period the subsidiary company Arckaringa Energy Pty Ltd paidgeological consultancy fees and expenses reimbursements of £36,000 (2006:£53,000) to Rank Geological Services Pty Ltd, a company related to NormanKennedy, Director of Altona Resources Plc. This amount was paid under amanagement agreement dated 18 November 2005 forming part of an agreement totransfer Arckaringa coalfield tenements EL 3360, 3361, and 3362. At 30 June2007 £13,000 (2006: £8,000) of the total balance was outstanding. The Company has entered into a joint lease of office facilities with BraemoreResources Plc, a related party due to common Directors. At 30 June 2007, therewas £Nil owing to/from Braemore Resources Plc. 21. POST BALANCE SHEET EVENTS At the date of this report, there are no subsequent events noted that wouldmaterially affect the results of the Group. 22. TRANSITION FROM UK GAAP TO IFRS The adoption of IFRS did not have any affect on the Income Statement of theGroup. IFRS 2 'Share Based Payments' required the Company to fair value shareoptions issued. In 2006, the Company issued 3,000,000 options to a third partyengaged on the Company's IPO The fair value of the options issued was £9,000which was allocated to Share Premium Reserve. The net assets of the Group andthe Company remained unchanged as a result of the adoption of IFRS. 23. RESTATEMENT OF BALANCE SHEET COMPARATIVES The investment in Altona Australia Pty Limited (refer note 11) and the amountreceivable from subsidiary (refer note 12) were incorrectly recorded in theprior year. The comparative figures have been adjusted for this as reflected inthe table below: 2006Company Prior year accounts Correction Restated balance £'000 £'000 £'000 Investment in subsidiary 2,100 (2,100) -Trade and other receivables - current 302 2,100 2,402 The above restatement had no impact upon the consolidated Group. 24. CONTINGENT LIABILITIES In the prior financial period the Company acquired the subsidiary ArckaringaEnergy Pty Ltd. At that time Arckaringa Energy Pty Ltd was the holder of threeexploration licences in South Australia. The Group obtained advice that thisacquisition would not be subject to the land rich stamp duty provisions relatingto South Australian property. On 7 September 2007, the Commissioner of StateRevenue has contacted the Group advising that Revenue SA was conducting a reviewof the transaction to determine whether land rich stamp duty should have beenpaid in connection to this transaction. The Group has obtained further advice and has responded to Revenue SA indicatingthat they do not believe the transaction is subject to a payment of furtherstamp duty. The advice provided to the Group indicates that should stamp dutybe ultimately payable it may amount to £112,000. In the event that an additional stamp duty payment is required the amount paidwould represent an increase in the amount recognised as capitalised explorationand evaluation expenditure. The Group has not recognised a liability in connection to additional stamp dutyas the directors believe that no further stamp duty is payable in connection tothis matter. This information is provided by RNS The company news service from the London Stock Exchange