8th February 2010

Linc Energy Ltd Exploration Permit for Coal

EPC 910 ‘Rathdowney’

Partial Relinquishment Report for the period ending 8th February 2010

Tenure Holder: Linc Energy Ltd

Compiled by: Gregory Cochrane

Submitted by: Linc Energy Ltd

Date of report: 8th February 2010

Linc Energy Ltd 32 Edward St Brisbane QLD 4000 - GPO Box 1315 Brisbane QLD4001 Telephone: (07) 3229 0800 Facsimile: (07) 3229 6800 Email: [email protected]

8th February 2010

CONTENTS Statement of exploration philosophy & objectives 1

Introduction 2

Tenement Details ...... 2 Location and Access...... 2

Location and Access Relinquished Sub-Blocks 3

Climate, Topography and Land Use...... 3

Topography & Land Use Relinquished Sub-Blocks 3

Historic exploration ...... 4

Company Stratigraphic Drilling 4

Company Drilling For Petroleum 4

Company Drilling for Coal Seam Gas 5

Geology of the area 5

Work Completed 6

Program of activities statement 2009-2010...... 6 Drilling and Exploration Program 2010-2011...... 7 Exploration summary in Relinquished Area & Reason for Relinquishment ...... 7

RELINQUISHMENT OF SUB-BLOCKS 8

REHABILITATION DETAILS 8

Conclusion 8

References 10

Appendix Map A : EPC 910 ‘Rathdowney’ Location Map 11

Appendix Map B : EPC 910 ‘Rathdowney’ Partial Relinquishment Map 12

Appendix Map C: EPC 910 Historic Drilling Location & Topography Map 13

Linc Energy Ltd 32 Edward St Brisbane QLD 4000 - GPO Box 1315 Brisbane QLD4001 Telephone: (07) 3229 0800 Facsimile: (07) 3229 6800 Email: [email protected]

8 th February 2010

STATEMENT OF EXPLORATION PHILOSOPHY & OBJECTIVES Linc Energy Ltd is the holder of EPC 910, a tenement that was granted on 9th February 2005 and currently comprises 81 sub-blocks. EPC 910 is located approximately 40 km south of Ipswich, in the Clarence-Moreton Basin, approximately 1 hours drive from the city of Brisbane.

The primary objective within EPC 910 is the understanding of the potential coal resource contained within the Ipswich Coal Measures and assessing its potential for underground coal gasification (UCG) and underground mining. Previous exploration has consisted mainly of the drilling of petroleum and coal seam gas wells, which whilst useful do not have sufficient coverage of the area to adequately define potential coal resources.

Linc Energy’s planned exploration program will involve a wide spaced drilling investigation aimed at collaborating the historical drilling and evaluating the potential of any suitable coal resource for the UCG process and underground mining.

EPC 910 Partial Relinquishment Report 2010 1 8th February 2010

INTRODUCTION

Tenement Details Linc Energy Ltd is the holder of EPC 910. This tenement was granted on 9th February 2005 and originally comprised 160 sub-blocks. Previous relinquishment activities have reduced that number during this reporting period to 81 sub-blocks, the 2010 renewal relinquishment requires a further 50% (40) of the remaining sub- blocks to be relinquished by 8 th January 2010, leaving a tenement area of 41 sub- blocks. The relinquished sub-blocks are identified in red in Table 1, with the location of EPC 908 pre-relinquishment given in Appendix Map A and post-relinquishment in Appendix Map B .

BIM BLOCK SUB-BLOCKS BRIS 3419 E, F, G , H, J, K, L, M , N, O, P, Q, R, S, T, U, V, W, X, Y, Z ARMI 35 A, B, C, D, E, F, G, H, J, K, L , M, N, O, P, R, S, T, U, W, X, Y, Z ARMI 107 A, B, C, D, E, F, G, H, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y, Z ARMI 179 A, B, C, D, F, G, H, J, L, M, N, O

Table 1: Sub-Blocks of EPC 910 Rathdowney. N.B. Relinquished sub-blocks shown in red .

Location and Access EPC 910 is located approximately 40 km south of Ipswich, in the Clarence- Moreton Basin of south east between the townships of Beaudesert and Boonah ( Appendix Map A). The Mount Lindesay Highways passes through the south of the tenement and allows quick access to Brisbane and the Gold Coast. The tenement is also bisected by State Railway services.

EPC 910 Partial Relinquishment Report 2010 2 8th February 2010

EPC 910 is located within the Scenic Rim Regional Council, which was created following council amalgamation during March 2008. The Boonah Shire, Southern and part of Ipswich City merged to create the new entity, covering more than 4250 sq kilometers with a population of approximately 35000 people. Beaudesert is the main regional centre with over 5000 residents (SRRC 2009).

Location and Access Relinquished Sub-Blocks The relinquished sub-blocks comprise the western half of EPC 910 and are serviced by the Beaudesert-Boonah Road to the north and the to the south.

Climate, Topography and Land Use Long-term average annual rainfall trends are slightly above 900mm per year in the area around the EPC, with historical evidence showing heaviest rainfall generally occurring from November to March. Mean daily temperatures in Celsius, generally range within the low to mid-twenties, reflecting the sub-tropical nature of the region (BOM 2009).

Topographic gradients within the tenement are highly variable. Much of the tenement is hilly with topographic highs of between 200 and 400 metres (ASL). Topographic lows of slightly below 100 metres occur within the southern section of the tenement.

Much of the EPC area is used for agricultural pursuits which include cattle grazing and dairy farming. Native vegetation within the area is predominantly of the lush sub-tropical rainforest type.

Topography & Land Use Relinquished Sub-Blocks Typical elevations within the relinquished area vary from ~63m ASL to ~351m ASL. The land use primarily is for purposes of agricultural pursuits which include cattle grazing and dairy farming. Most of the area is hilly and uncleared with a large degree of vegetation remaining, being a lush sub-tropical rainforest type.

EPC 910 Partial Relinquishment Report 2010 3 8th February 2010

Historic exploration Historic information within the area (refer Appendix Map C), can be classified into 3 categories:

1. Company Stratigraphic Drilling. Total holes in tenure: 1

2. Company Drilling for Petroleum. Total holes in tenure: 2

3. Company Drilling for Coal Seam Gas: Total holes in tenure: 5

Company Stratigraphic Drilling 1 Company Stratigraphic drillhole has been drilled in the tenure. This was BHP BS001D, drilled in 1985. The hole was drilled to a Total Depth of 556.8 metres and reported 3 intersections that contained mainly dull coal with bright bands and coaly mudstone.

Petrographic and coal quality analyses of BHP BS001D were conducted, on the three main coal intersections. This was done with the aim of evaluating the coking coal component of the samples. The analysis indicated that the coking coal fraction is a medium to high volatile, medium rank with possible medium coking properties.

Company Drilling For Petroleum Two holes were drilled within the tenure for the purpose of determining the oil and gas potential of the area. In April, 1960 the Queensland American Oil Company drilled “The Overflow” No.1 to a depth of 912m and in February, 1982 Bridge Oil NL drilled Tamrookum Creek-1 to a depth of 1940m.

“The Overflow” No.1, located in the north western portion of the tenure, intersected minor coal seams and stringers between 180 and 460 metres.

Tamrookum Creek-1 which is located in the south eastern portion of the tenure, intersected coal seams and stringers at depths between 193 and 781m. Some of the seams, interpreted from geophysical logs, were of considerable thickness.

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Company Drilling for Coal Seam Gas A total of 5 wells were drilled in the tenure for the purpose of assessing the CSM potential of the area. Two wells were drilled in 1992 by Seamgas Enterprises Pty Ltd; Rathdowney-1 drilled to a depth of 534m and Rathdowney-2 to a depth of 822m. One well was drilled in early 1992 by Conoco Australia Pty Ltd; South Moreton-1 to a depth of 1052.5m. Two final wells were drilled in 2007 by Arrow Energy NL; Bush-1 to a depth of 634m and Mount Crumpet-1 to a depth of 476m. No other data is currently accessible for the 2 wells drilled by Arrow Energy.

Rathdowney-1 and 2, are both located in the south east portion of the tenure in the vicinity of the Tamrookum Creek-1 well. Rathdowney-1 intersected no significant coal but did experience a gas show at a depth of 334 metres where a major fracture zone was intersected. Rathdowney-2 intersected a zone of interbedded coal and carbonaceous from 624 to 631 metres. A gas show was also intersected similar to that in Rathdowney-1.

South Moreton-1 is located 2 kilometres west of Tamrookum Creek-1. Hand specimens recorded a net coal of 0.65 metres with the thickest seam being 0.17 metres. (Unknown 1996)

GEOLOGY OF THE AREA The area is largely covered by a veneer of Middle to Early Jurassic Marburg Formation, which is the basal unit of the Jurassic sequence in this area. This unit is underlain by the Late Triassic Woogaroo subgroup, which in turn is underlain by the Ipswich Coal Measures, the target Formation in this area.

The Ipswich Coal Measures lie within the Ipswich Basin and area that is still not entirely defined due to thickness of overlying cover. The Ipswich Basin is known to terminate to the west on EPC 910 at the West Ipswich Fault. The Ipswich Basin’s geology can be broadly divided into a lower volcanic sequence and an upper

EPC 910 Partial Relinquishment Report 2010 5 8th February 2010 sedimentary sequence, which is the late Triassic Ipswich Coal Measures (Day et al. 1974).

The Ipswich Coal Measures have been further divided into two sub-groups, the basal Kholo sub-group and overlying Brassall sub-group. The Kholo sub-group primarily comprises conglomerate, sandstone, shale and tuff, with minor coal, breccia and basalt. The Brassall sub-group comprises the Tivoli, Cooneana and Blackstone Formations. The Tivoli & Blackstone Formation’s sedimentary lithology is noted as containing coals among sandstones and shales.

As evidenced by Day et al. (1974), structurally the Ipswich Basin is associated with north/northwest trending folds and faults. The most major of the folds affecting EPC 910 is the South Moreton Anticline. The South Moreton Anticline trends in a north/south orientation and passes directly through EPC 910. Russell (1985) notes: that the anticline is comprised of doubly plunging anticlines along a singular axis.

Data from a number of petroleum exploration wells indicates the occurrence of a number of thick coal seams in this area. All of the wells penetrated the Ipswich coal measures to basement volcanics.

WORK COMPLETED

Program of activities statement 2009-2010 The program of works for EPC 910 for this reporting period involved:

Drilling, Resource Estimation, Scoping Studies.

Drilling activities scheduled for this period were delayed due to weather conditions and rig availability. Plans to commence exploration drilling in late 2009 early 2010, following conclusion of other Linc projects, stalled due to the summer wet season rains and uncertainty about the Queensland Government’s UCG policy. Due to the delay of drilling activities, no new data has been gathered for purposes of

EPC 910 Partial Relinquishment Report 2010 6 8th February 2010 resource estimation. Work has continued on preliminary resource estimations , through modelling using historical data from within the tenement and nearby areas.

Scoping studies and investigations have involved access of historical information and research of the local geology in literature. Preliminary field investigations have involved visits to the proposed exploration drill areas, for purposes of evaluating site access and planning.

Drilling and Exploration Program 2010-2011 Exploration plans for EPC 910 will focus on the definition of a possible coal resource, with sufficient extent and suitability for the process and application of UCG. Depth, thickness and coal composition are among the key criteria that affect a coal’s suitability to UCG processes and potential for underground mining. The exploration program will involve wide spaced drilling within EPC 910, aimed at providing further knowledge of the stratigraphy and UCG compatibilities of the coal resource within the tenement. Data gathered from drilling will be utilised for purposes of resource estimation .

The proposed program will allow Linc Energy to evaluate the potential for UCG exploitation and justify further drilling works and analytical studies on the potential development of UCG within the area.

The proposed program will also target known coking coals that were previously identified by BHP, with the aim of determining if the coals thicken laterally to a degree where they are suitable for underground mining.

Exploration summary in Relinquished Area & Reason for Relinquishment Linc Energy conducted no field exploration within the relinquished area. The reasons for relinquishing the chosen blocks was that given review of all available data, they were considered least prospective for Linc Energy’s purposes.

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RELINQUISHMENT OF SUB-BLOCKS As per the relinquishment schedule conditions for EPC 910, 40 sub-blocks were identified for relinquishment. These blocks are listed in Table 2 below:

BIM BLOCK SUB-BLOCKS BRIS 3419 F, G , L, M , Q, R , V, W, X ARMI 35 A, B, C, F, G, H, L , M, N, R, S, W, X ARMI 107 A, B, C, F, G, H, L, M, Q, R, V, W ARMI 179 A, B, F, G, L, M

Table 2: Relinquished Sub-blocks for this reporting period: EPC 910.

REHABILITATION DETAILS Linc Energy did not conduct any drilling or exploration on any of the sub-blocks relinquished during the period in which it has held this exploration tenement. As there was no drilling conducted by Linc on the area relinquished, Linc caused no contamination of land within this area. Accordingly, Linc has not conducted any rehabilitation on the area in question. In the same way, there is no requirement for ongoing rehabilitation, maintenance and management. Finally, Linc has met all applicable statutory responsibilities and there are no public safety liability issues to disclose on Linc Energy’s behalf.

CONCLUSION Extensive review of data pertaining to EPC 910 has confirmed the need for further resource assessment. The target formation is confirmed as the Ipswich Coal Measures, with a small likelihood of further suitable coal occurrences in other overlying formations. Due to the delay of drilling activities however, fresh sub- surface observations have not been made. Exploration delays experienced over this

EPC 910 Partial Relinquishment Report 2010 8 8th February 2010 year, have limited further understanding of the tenement to data gathering and analysis. However, planning, consultation and geological field investigations were also conducted in preparation for exploration drilling. Discounting further unforseen issues, 2010 will mark the beginning of the exploration program which will gather the necessary information regarding the possible coal resources suitable for UCG and underground mining, contained within the Ipswich Coal Measures of EPC 910.

Due to drilling delays and uncertainty in the Queensland Government’s Policy the annual expenditure for EPC910 for the period Feb 2009 to Feb 2010 hasn’t been met. In February 2009, the Queensland Government introduced a UCG policy ( Policy ) which effectively caused uncertainty with respect to the status of current tenements held by Linc Energy, including EPC 902. The effect of the Policy is that, until such time as a decision as to the future of UCG is made by the Queensland Government, no further UCG pilot projects will be permitted and, in addition, where there are overlapping petroleum and UCG tenures, preference rights to the underlying resource will be given to the petroleum tenure holder. EPC 910 is completely overlapped by Exploration Petroleum Permits & Petroleum Leases and accordingly, as a result of the Policy, preference rights to the underlying resource are currently required to be given to the petroleum tenure holders. Based on this, Linc Energy is uncertain as to the value or future of the tenement given that any preference decision, if required to be made, would fall in favour of the petroleum tenure holders. The implications of a preference decision in favour of the petroleum tenure holders would likely be to render the tenement no longer viable for UCG given the probable incompatibility of the conflicting technologies over the same area.

Whilst Linc expects that the uncertainties created by the Policy will be clarified once the Government has made a decision as to the future of UCG in Queensland, given the current uncertainty as to the status and security of EPC 910 which has been brought about by the Policy, and given that EPC 910 is completely overlapped by petroleum tenure, Linc Energy has not commenced field exploration efforts or drilling activity within EPC 910. Linc Energy expects to reassess its position upon

EPC 910 Partial Relinquishment Report 2010 9 8th February 2010 receiving clarification from the Queensland Government as to the future of UCG in Queensland and the treatment of overlapping petroleum and UCG tenures.

As a result of the expenditure for previous years having exceeded the level of commitment, the five year expenditure requirement for EPC 910 has been attained.

REFERENCES Australian Government Bureau of Meteorology, 2007, Climate Statistics for Australian locations, summary statistics BEAUDESERT CRYNA, viewed 4th February 2009, .

Day, R. W., Cranfield, L. C. and Schwarzbock, H., 1974, Stratigraphy and structural settings of Mesozoic basins in southeastern Queensland and northeastern New South Wales. In: A. K. Denmead, G. W. Tweedale and A. F. Wilson (Eds), A Symposium. Geological society of Australia, Queensland Division, Brisbane, pp. 319-362.

Russell, T. C., 1985, A review of the geology and hydrocarbon potential of authority to prospect 266P, Moreton, Ipswich, and Esk Basins, Southeast Queensland ), Bligh Oil and Minerals, Brisbane. QDEX report #15425.

Scenic Rim Regional Council, 2009, General Information, viewed 2 nd February 2009, .

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Appendix Map A : EPC 910 ‘Rathdowney’ Location Map

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Appendix Map B: EPC 910 ‘Rathdowney’ Partial Relinquishment Map

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Appendix Map C: EPC 910 Historic Drilling Location & Topography Map

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