Altona Energy Regulatory News (ANR)

27 June 2013

Altona Energy Plc

("Altona")

MOU to Invest in Operating Coal Mine in China

Project Dragon Update

Altona Energy (AIM:ANR) today announced that it has entered into a Memorandum of Understanding (MOU) with Xinjiang Hetian Duwa Industry Limited ("Duwa") to conduct due diligence and establish conditions for the acquisition of Duwa's operating coal mine, located in the Xinjiang Autonomous Region of the People's Republic of China. The prospective acquisition is in line with Altona's strategy to develop revenue generating businesses to boost its future growth and to help underpin its continuing participation in the Arckaringa JV Project with CNOOC.

At Project Dragon, the vendor has been unable to progress the ML application process beyond local authority level and has therefore failed to obtain the conversion of EL1 by the 30 June 2013 deadline. The initial approval at local authority level was encouraging but unfortunately the application has not received the requisite regional approval. This failure is consistent with the recent record of the regional government, which has not approved any EL conversions to new MLs this calendar year, instead concentrating on consolidating and increasing coal production on existing MLs.

Throughout this period a great deal of work has been continuing, through Altona's Beijing office, on developing contingency plans to militate against the possibility of the regional government not approving the EL conversion by the 30 June deadline, as stipulated in the Amended and Restated Share Acquisition Agreement ("SAA") with Cheerful Jade Investment Holdings ("Seller"), under which Altona acquired an indirect 95% beneficial interest in EL1 and an option to acquire EL2..

Consequently, Altona (as the Buyer under the SAA) is reviewing the steps required to terminate the SAA and fully release the Company from its acquisition and payment obligations under that agreement. Withdrawing from Project Dragon is the inevitable consequence of the vendor being unable to procure the EL conversion and the Company can now focus its full attention on its flagship Arckaringa JV Project with CNOOC in South Australia, and the renewed progress being made under the BFS, as well as the MOU with Duwa and other business opportunities.

The MOU with Duwa represents an opportunity to invest in an operating coal mine based on an existing ML, rather than relying on the conversion of ELs in the current regulatory environment. Unlike the Project Dragon EL1 conversion target, the Duwa mine is well established and it produces coal 24/7, all year round. The Company has already commenced its legal and technical due diligence, which is expected to be completed within the 3 month period allowed under the MOU. Altona's Executive Deputy Chairman and head of the Beijing Office, Mr. Michael Zheng, commented: "It is indeed disappointing that the EL1 conversion has not happened by the deadline, even though the reasons for this are outside of our immediate control. However we have, as a matter of sound business strategy, been actively exploring opportunities throughout this period to invest in operating coal mine assets and provide the income Altona needs to grow its business and sustain our share in the Arckaringa Project. Critically, acquiring an operating coal mine - with substantial potential for increased production and a ready market in place - will remove the uncertainty of dealing with the regional government and bring matters back under our control. The MOU with Duwa represents the first fruits of our labour in this area and we are working hard to ensure a successful and timely outcome, although of course there can be no guarantees at this stage. We aim to complete our technical and legal due diligence as soon as possible and are excited about the potential of this proposed acquisition."  

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About Altona Energy

Altona Energy is listed on the London Stock Exchange's AIM market. In addition to a 49% interest in its flagship Arckaringa CTL and Power Project in South Australia, Altona Energy has entered into a Memorandum of Understanding (MOU) with Xinjiang Hetian Duwa Industry Limited ("Duwa") to conduct due diligence and establish conditions for the acquisition of the latter's coal mine, located in the Xinjiang Autonomous Region of the People's Republic of China.

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