Altona Energy Regulatory News (ANR)

Embargoed until 7.00am 14 November 2014

Altona Energy Plc

("Altona" or "the Company")

Arckaringa Joint Venture

Altona (AIM: ANR) is today 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 in respect of the terms of the Arckaringa project joint venture ("Joint Venture Agreement" or "the JV") on 13 November, 2014, and have incorporatedan Australian joint venture entity, Arckaringa Coal Chemical Joint Venture Co Pty Ltd, with the quantum of the contributions to be made in stage payments by Wintask and Sino-Aus totalling AUD$33 million. The Company will post its final results for the year ended 30 June 2014 at 7.01am today.

Highlights

· Investment into the Arckaringa project by Wintask and Sino-Aus of AUD$33 million

· Initial drilling programme and Bankable Feasibility Study ("BFS") targeted to be completed within two years

· Wintask and Sino-Aus will provide Altona with working capital of £2 million, subject to certain conditions, through a subscription of Altona ordinary shares of 0.1p each ("Shares")

· The product focus of the Arckaringa project will be Coal-to-Methanol,  coal chemical and synthetic gas production due to market demand and reliance of proven technology

Michael Zheng, Altona Energy's Executive Chairman, commented: 

"We are delighted to have reached this milestone agreement with Sino-Aus and Wintask, which are both fully committed to the project. The new JV entity has been created to complete the BFS at Arckaringa, and ultimately to bring this world-class project to fruition. I would like to thank our shareholders for their patience and loyalty and we offer our promise that our entire focus will be on driving forward the drilling programme and BFS and further development of Arckaringa project, which will lay a solid foundation for future production."

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

Overview

The ownership of the JV will be split accordingly: Altona 45%, Sino-Aus 45%, Wintask 10%. The transfer of Exploration Licences 4511, 4512, 4513 ("Arckaringa Licences") to the JV will occur when all conditions precedent have been met (the "Effective Date").

The conditions precedent to the Joint Venture Agreement are as follows:

· the approval of the joint venture by Australia's Foreign Investment Review Board (FIRB);

· ministerial consent pursuant to the Mining Act for the transfer of the Arckaringa Licences to the joint venture company; and

· the approval by shareholders for the issue of the new Shares at a price of 1p each ("Placing Shares") at a specially convened General Meeting immediately following the AGM.

Operational ownership of the project will be shared among the JV Partners, with the first step of the BFS being the planned 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 two years of the Effective Date.

If the cost of the BFS exceeds the total of the Sino-Aus Contribution and the Wintask Contribution, 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 consisting of two voting members from Altona, two voting members from Sino-Aus and one voting member from Wintask. Sino-Aus has the right to appoint the chairman of the board. For the avoidance of doubt, Qinfu Zhang, being both a Director of Altona and a representative of Wintask, will not be eligible to be appointed to the JV board as one of the two representatives of Altona.

Financial Contribution

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

* First Contribution Date means the date being 30 days from the date effective date.

**Second Contribution Date will occur 30 days from the commencement of the First Stage Task (ie, drilling programme) to be approved by the Board of the JV.

**\* Third Contribution Date will occur 30 days from the completion of the First Stage Task.

****Fourth Contribution date will occur after the completion of the Second Stage Tasks, which are to be determined by majority vote following the completion of the first stage tasks. The completion of a task is agreed by majority vote.

Further, Sino-Aus and Wintask will provide working capital directly to Altona, amounting to £2 million, in two tranches, which the Company regards as a strong sign of confidence from its partners.

The funding will be split as follows: subject to certain conditions Wintask will subscribe for 20,000,000 Placing Shares in two equal tranches and Sino-Aus will subscribe for 180,000,000 Placing Shares in two equal tranches. Altona will therefore seek shareholder approval at the forthcoming General Meeting, immediate following the AGM, for the issue of up to 200,000,000 Placing Shares.

Subject to shareholder approval and once the first contribution funds are received, Wintask and Sino-Aus will subscribe for 100,000,000 Placing Shares in the Company at the placing price of 1 pence per share to raise gross proceeds of £1 million. Their holdings following the first tranche placing are below:

(1) Mr Zhang Qinfu, executive director of the Company, is a director of Wintask and was nominated as a director of the Company by Wintask

Subject to the tranche one placing conditions and once the receipt of the second contribution funds have been received, Wintask and Sino-Aus will subscribe for 100,000,000 Placing Shares in the Company, again raising £1 million gross proceeds for the Company. Their holdings following the second tranche placing are below:

(1) Mr Zhang Qinfu, executive director of the Company, is a director of Wintask and was nominated as a director of the Company by Wintask

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 issued Shares.

Upon completion of the subscription by Sino-Aus of 180 million Placing Shares in Altona, Sino-Aus will have the right to appoint a director to the board of Altona.

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.

Other Information

The board believes that the South Australia government is currently highly committed to resources projects in their region, and hasbeen a long-time supporterof the Arckaringa project, especially following the return of the Exploration Licences back to Altona on 18 March 2014.

To maximise the future profit of the asset, meet perceived market demand and use readily available and proven technology, the JV partners have agreed that the focus of the BFS will now be on Coal-to-Methanol, coal chemical and synthetic gas production. The Company is currently reviewing its technical and operational capabilities, in light of its responsibilities to the JV, and a further update will be made in due course. Since the sad passing of Peter Fagiano in May of this year, the board has been seeking to appoint a senior project manager / technical director to act as on-the-ground liaison with the JV partners.

Information on the JV Partners

Sino-Aus is formed from two Chinese investors, who have come together for the purposes of investing in, and the development of, the Arckaringa Project. Through their direct ownership of a number of subsidiaries, namely; Shanghai Qianqi Petrochemical Engineering Limited, Shanxi Huaxiang Technology Energy Limited, and Shanxi Xuanyuan Investment Group, they bring a wealth of experience in the areas of power, coal, chemicals and real estate.

Wintask specialises in Clean Energy research, development and equipment production with a strong scientific research team.

Sino-Aus commented:

"We are excited to have the opportunity to participate in the Arckaringa project and are pleased to be making this investment at this time. As future shareholders in the project, along with Altona, we are looking forward to the forthcoming drilling programme as a key milestone in the development of the BFS."

Qinfu Zhang, executive Director of Altona and Chairman of Wintask, said: 

"Since our initial investment in Altona nearly 12 months ago we have seen the impressive progress made by Michael and the team. I believe we now have the right man leading Altona as we move closer to bringing the Arckaringa project to production."

Shareholder Meeting Notice

Altona confirms that its Annual Report and Accounts for the year ended 30 June 2014 together with notice of the Annual General Meeting and a form of proxy, has been posted to shareholders.

Copies of the 2014 Annual Report and Accounts are available on the Company's website www.altonaenergy.comor from the Company's registered office at Third Floor, 55 Gower Street, London WC1E 6HQ.

The AGM is to be held at the offices of BDO LLP, 55 Baker Street, London, W1U 7EU on 16 December 2014 at 11am. 

Related Party

Wintask is a related party, as defined by Rule 13 of the AIM Rules for Companies, due to its holding in Altona. Accordingly, the independent directors (being Michael Zheng and Philip Sutherland), having consulted with the Company's nominated adviser, WH Ireland Limited ("WH Ireland"), consider that the terms of the joint venture and the related party's participation 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 following the transaction, the undertakings made by Wintask to Altona and the joint venture and the benefits of continued support from Wintask as an investor in both Altona and the joint venture:

· Wintask and Sino-Aus have given undertakings to the Company and WH Ireland, that during such time as they hold or beneficially own Shares in the Company: any arrangements entered into by them with any 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 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. Its focus is firmly on the evaluation and development of the Company's coal-to-chemicals Arckaringa Project to exploit the huge coal resources, equivalent to 7.8 billion barrels, contained in three Exploration Licences covering 2,500 sq. kms in the northern portion of the Permian Arckaringa Basin in South Australia.

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