Altona Energy Regulatory News (ANR)

5 November 2015

Altona Energy plc

("Altona" or "the Company")

Arckaringa Joint Venture

Altona (AIM: ANR) is pleased to announce that Altona, Sino-Aus Energy Group Limited ("Sino-Aus") and Wintask Group Limited ("Wintask") (together the "JV Partners") have signed an agreement (the "Deed of Variation") modifying the terms of the Arckaringa project joint venture ("Joint Venture Agreement" or "the JV") announced on 14 November 2014.

Highlights

· Investment into the Arckaringa project by Wintask and Sino-Aus of a maximum of AUD$33 million in four contribution stages

· An initial drilling programme will be planned as a part of a Bankable Feasibility Study ("BFS") which is targeted to be completed within three years of the Effective Date

· Sino-Aus will provide Altona with working capital of up to £1.25 million in two tranches, subject to certain conditions

Qinfu Zhang, Altona Energy's Executive Chairman, commented: 

"Despite wider market turmoil since the signing of the original agreement, Altona and Wintask have continued negotiations with Sino-Aus and we are delighted to have signed this Deed of Variation to our original agreement with Sino-Aus and Wintask. We look forward to the future funding dates whereafter we can commence the Arckaringa project in earnest.

"The Deed of Variation to the agreement creates a more flexible agreement, which is in the interest of all parties as we collectively pursue the successful development of the Arckaringa licences."

For further information, please visit www.altonaenergy.com or contact:

Overview

The joint venture partners have agreed to modify the definition of the Arckaringa Project to mean the completion of a BFS for an underground coal gasification ("UCG") project and or one or more synthetic gas projects and or any other mining project within the Arckaringa Licence area as agreed by the board of the JV.

The conditions precedent to the Joint Venture Agreement, as amended by the Deed of Variation, are now as follows:

1) Written consent from the South Australian Government Minister for Mineral Resources and Energy

2) All consents and approvals required under the AIM rules

3) The JV company obtaining all necessary Governmental approvals for the Arckaringa Project when its scope has been determined by the Board of the JV Company

4) Altona seeking and gaining approval at a General Meeting to issue 200 million new shares to Sino-Aus

The date that the aforementioned conditions are met is termed the Effective Date. As at the date of this announcement, Altona can confirm that it has received consents for items 1 and 2. The Company will advise shareholders in due course once the third and fourth conditions have been met.

If the conditions precedent have not been satisfied by 30 June 2016, a party not in default may terminate the JV Agreement.

Operational ownership of the project will be shared among the JV Partners, with the first step of the BFS being to plan a drilling programme; the results of which will inform the JV Partners of the scope of work needed to complete the BFS. The JV Partners have agreed to endeavour to complete the BFS within three years of the Effective Date.

If the cost of the BFS exceeds the total of the Sino-Aus Contribution and the Wintask Contribution, being a maximum of AUD$33 million, then each of the three JV Partners will be obliged to contribute to the overrun amount in accordance with its shareholding interests.

Arckaringa Coal Chemical Joint Venture Co Pty Ltd will have a board of directors consisting of two voting members from Altona, two voting members from Sino-Aus and one voting member from Wintask.

Joint Venture Financial Contribution

The financial contribution from the Sino-Aus and Wintask is as follows:

It has been agreed that Sino-Aus can reduce its second and third stage contributions to 90% of the amount set out above provided that the final total Sino-Aus contribution still meets the total contribution amount.

Unless otherwise varied by agreement between the joint venture partners the contribution dates are as follows:

* First Contribution Date means the later of 30 days from the signing of the Deed of Variation or 5 days following the Company receiving all necessary AIM and shareholder approvals.

**Second Contribution Date will occur 180 days from the Effective Date.

**\* Third Contribution Date will occur one calendar year from the second contribution date.

****Fourth Contribution Date will occur one calendar year from the third contribution date.

Once the investors have made their total contributions to the joint venture, the ownership of the JV will be split as follows: Altona 45%, Sino-Aus 45%, Wintask 10%. Initially Arckaringa Energy Pty Ltd ("Arckaringa Energy" being the Company's wholly owned subsidiary) will hold 100% of the shares in the JV and will issue shares to Wintask and Sino-Aus as they make their contributions.

The shares in the JV will be issued to Sino-Aus and Wintask upon each company making its contribution to the JV. As an example, the first contribution from Sino-Aus of $5.4million represents 18.18% of its anticipated total contribution entitling Sino-Aus to be issued with 8.18% of the shares in the JV, being 18.18% of its total potential interest of 45%.

In the event that the delay is in respect of the third or fourth contribution payments, then where the delay is more than 30 days Arckaringa Energy has the right to buy back the interest from the defaulting party at the market price. If Arckaringa Energy does not take up this right then the defaulting partner has the right to assign all or part of its interests, earned or to be earned, to a third party who will take on future performance obligations.

Share Placing

Sino-Aus will provide working capital directly to Altona, amounting to a total of £1.25 million, in two tranches. The funding will be split as follows: subject to certain conditions, Sino-Aus will subscribe in two equal tranches of 100,000,000 shares each ("Placing Shares"), the first being priced at 0.5 pence raising a total of £500,000 with the second being priced at 0.75 pence raising a total of £750,000. Altona will therefore seek shareholder approval at the forthcoming General Meeting for the issue of 200,000,000 Placing Shares.

No later than 5 days from shareholder approval, Sino-Aus is to subscribe for the first tranche of 100,000,000 Placing Shares. Its holding following the first tranche placing is shown below:

Upon completion of the subscription by Sino-Aus of the first 100 million Placing Shares in Altona, Sino-Aus will have the right to appoint a director to the board of Altona.

The second tranche placing is due 180 days following the date for the payment of the first tranche of the placing,, Sino-Aus' interest in Altona following the second tranche placing is shown below:

The first and second tranche placings are conditional inter alia on admission of the Placing Shares to trading on AIM. The Placing Shares, when issued, will rank pari passu in all respects with the Company's existing ordinary shares.

Assuming no other shares are issued by the Company, following completion of the first tranche placing, there will be 891,956,853 shares in issue and following the completion of the second tranche placing, there will be 991,956,853 shares in issue.

Related Party

Wintask is a related party, as defined by Rule 13 of the AIM Rules for Companies, due to it being a substantial shareholder in Altona and Qinfu Zhang being a director of both Altona and Wintask. Accordingly, the independent directors, being Phil Sutherland and Nick Lyth, having consulted with the Company's Nominated Adviser, Northland Capital Partners Limited ("Northland"), consider that the terms of the JV are fair and reasonable in so far as the Company's shareholders are concerned.

In making their decision, the independent directors have, inter alia, considered the size of the related party investors' shareholding in the Company as a result of the JV and the benefits of continued support from Wintask as an investor in both Altona and the JV.

In addition, the independent directors have also considered the original undertakings made by Wintask and Sino-Aus to Altona at the time the JV was entered into in November 2014 which remain valid and further details of which are highlighted below:

· Wintask and Sino-Aus have given undertakings to the Company and Northland, that during such time as they hold or beneficially own shares in the Company: any arrangements entered into by them with Altona, or any of its subsidiary undertakings, shall be on arm's length financial and commercial terms;

· each of Wintask and Sino-Aus will neither propose nor vote in favour of any proposed alternations to the Company's Articles of Association which would vary the rights attaching to the Company's shares, unless recommended to do so by all the directors of Altona;

· each of Wintask and Sino-Aus will exercise the voting rights attaching to the Altona shares held or beneficially owned by them in such a way as to maintain the ability to trade the Company's shares on AIM and to enable the Company to comply in all respects with the AIM rules; and

· each of Wintask and Sino-Aus acknowledge the duty of the Directors for the Company to exercise the powers and authorities vested in them in the interest of all of the shareholders.

About Altona Energy

Altona is listed on the London Stock Exchange's AIM market. It is focused on the evaluation and development of the Company's Arckaringa Project to exploit the significant coal resources of approximately 7.8 billion tonnes,(non-JORC). The project area is covered by three Exploration Licences covering 2,500 sq. kms in the northern portion of the Permian Arckaringa Basin in South Australia.

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