(ACN 121 257 412)

PROSPECTUS for the offer by Orpheus Energy Limited of up to 50,000,000 Shares at 25 cents each with oversubscriptions of up to a further 10,000,000 Shares including the Rights Issue to existing Shareholders as at the Record Date

Lead Manager BBY Limited

IMPORTANT NOTICE ASX Code to be OEG. This document is important and should be read in its entirety. If you are in any doubt as to the course you should follow you should consult your stockbroker, solicitor, accountant or other professional adviser. This is a speculative investment.. Corporate Directory

Directors Independent Geologist – Indonesia Mr Wayne Douglas Mitchell, Chairman, Ravensgate CEO & Managing Director Level 3, 44 Parliament Place Mr Wesley Harder, Director – Exploration West Perth WA 6005 Mr Anthony Meacham King, Director Independent Geologist – Australia Proposed Directors Minarco-MineConsult Mr Nugroho Suksmanto Level 16, Australia Square Mr Michael Rhodes (alternate director to Nugroho 264-278 George St Suksmanto) Sydney NSW 2000

Company Secretary Auditor Mr Nathan Bartrop Bentleys Melbourne Audit Pty Ltd Level 7 114 William Street Registered Office Melbourne VIC 3000 Level 5, 44 Miller St North Sydney NSW 2060 Independent Accountant Stantons International Securities Share Registry Level 1 Security Transfer Registrars Pty Ltd 1 Havelock Street 770 Canning Highway West Perth WA 6000 Applecross WA 6953 Title Report – Indonesia Lead Manager Hadiputranto, Hadinoto & Partners BBY Limited The Indonesia Stock Exchange Building Level 17, 60 Margaret Street Tower II, 21st Floor Sydney NSW 2000 JI. Jend. Sudirman Kav.52-53 Jakarta 12190 Indonesia Sponsoring Broker Centre Capital Securities Pty Ltd Title Report – Australia 14 Macquarie Street Hetherington Exploration & Belmont NSW 2280 Mining Title Services Pty Limited Level 1, 503 Willoughby Rd Solicitors Willoughby NSW 2068 Whitttens Lawyers and Consultants Level 5 137 Bathurst Street Sydney NSW 2000

i CORPORATE DIRECTORY Indicative Timetable

Rights Issue Timetable Lodgment of Prospectus with ASIC and Announcement to ASX ...... 24 May 2011 Notice to Shareholders ...... 26 May 2011 Ex Date ...... 27 May 2011 Record Date ...... 2 June 2011 Opening Date ...... 3 June 2011 Despatch of Prospectus ...... 6 June 2011 Closing Date of Rights Issue ...... 21 June 2011 Orpheus Notifies ASX of Under Subscriptions ...... 22 June 2011 Issue and Allotment of Securities ...... 29 June 2011 Reinstatement to Official Quotation ...... 8 July 2011

Priority Offer Timetable Lodgment of Prospectus with ASIC and Announcement to ASX ...... 24 May 2011 Opening Date ...... 3 June 2011 Despatch of Prospectus to Coalworks Limited Shareholders ...... 6 June 2011 Closing Date of Priority Offer ...... 21 June 2011 Issue and Allotment of Securities ...... 29 June 2011 Reinstatement to Official Quotation ...... 8 July 2011

Public Offer Timetable* Lodgment of Prospectus with ASIC and Announcement to ASX ...... 24 May 2011 Opening Date ...... 3 June 2011 Closing Date of Public Offer ...... 27 June 2011 Issue and Allotment of Securities ...... 29 June 2011 Reinstatement to Official Quotation ...... 8 July 2011

* This public offer is conditional on shareholder approval being granted in accordance with the Notice of Meeting circulated to shareholders by Orpheus on 13 May 2011.

The above dates, other than the date for the lodgement of this Prospectus with ASIC, are indicative only and each or any of them may be varied without notice.

PROSPECTUS 1 Important Notices

This Prospectus has been issued by Orpheus Energy ways in which organisations should treat that information. Limited (Orpheus, OEG or the Company), and was lodged The personal information to be collected from investors on with ASIC and ASX on 24 May 2011 and is dated, 24 May the Application Form accompanying this Prospectus will 2011. Neither ASIC nor ASX take any responsibility for the be used to evaluate applications for Shares and, if an contents of this Prospectus. application is successful, to administer the Applicant’s security holdings, provide services to the Applicant and The Company has issued both a printed and an electronic otherwise effect appropriate administration for security version of this Prospectus and the electronic version may be holders. If the Company is obliged to do so by law, accessed at www.orpheusenergy.com.au. This Prospectus personal information will be passed on to other parties. should be read in its entirety before deciding to invest in the Shares offered by this Prospectus. The Board considers In making an application, the Applicant agrees that an investment in the Shares to be speculative and recom - the Company may use the information provided by the mends that you consult with your financial advisor as to Applicant on the Application Form for the purposes here the course you should follow with respect to the Shares. disclosed and may disclose it for those purposes to BBY No Shares (or other securities) will be issued on the basis Limited, Security Transfer Registrars Pty Ltd, related of this Prospectus after its expiry date, being 13 months bodies corporate, agents, contractors, employees, after the date of this Prospectus. servants, and third party service providers, including without limitation, mailing houses, professional advisers, This Prospectus only constitutes an offer in Australia ASX, other shareholders and regulatory authorities. or New Zealand. Where this Prospectus has been dispatched to, or accessed electronically outside Australia The Corporations Act requires the Company to include or New Zealand by Overseas Applicants, this Prospectus information about security holders (including name, is provided for information purposes only. See also section address and details of securities held) in its public register. 4 of this Prospectus entitled Details of the Offer under the The information contained in the Company’s public register sub-heading Overseas Applicants. must remain there even if that person ceases to be a security holder. Information contained in the Company’s The Company reserves the right not to accept an public register is also used to facilitate distribution pay - Application Form from any person if it has reason to ments and corporate communications (including financial believe that when that person was given the Application results, annual reports and other information that the Form, that person was not provided with a complete and Company may elect to utilise to communicate with its unaltered copy of this Prospectus and any relevant supple- security holders) and compliance by the Company for mentary or replacement Prospectus. If you have received legal and regulatory requirements. For instance, in certain an Application Form for the Shares without a complete circumstances details of security holder’s names and and unaltered copy of this Prospectus, please contact holdings must be disclosed by the Company in its annual the Company who will send you, free of charge, either reports. a printed or an electronic version of this Prospectus. An Applicant has a right to gain access to the information Notwithstanding any provision of this Prospectus, the that the Company holds about that person subject to Board may, from time to time and without giving any certain exemptions under the law. A fee may be charged notice, abridge or further abridge, extend or further extend for access. Access requests must be made in writing to any period or vary or further vary any date referred to in the Company’s registered office. this Prospectus for such period or to such later date as the Board thinks fit whether or not the period to be extended Electronic Prospectus has expired or the date to be varied has passed. This Prospectus will be issued in paper form and as an Definitions (usually with the first letter capitalised) appear electronic Prospectus. A copy of this Prospectus can be both in the body of this Prospectus (refer bolded terms) downloaded from the official website of the Company at as well as in the Glossary at section 15 of this Prospectus. www.orpheusenergy.com.au The offer is only available to persons receiving an electronic version of this Prospectus in Australia and New Zealand. Persons who receive the Privacy Disclosure Statement electronic form of this Prospectus should ensure that they By completing an Application Form accompanying this download and read the entire Prospectus. If you have Prospectus, investors will be providing personal information. received this Prospectus as an electronic Prospectus, The Privacy Act 1988 (Cth) governs the use of a person’s please ensure that you have received the entire Prospectus personal information and sets out principles governing the accompanied by the Application Forms.

2 IMPORTANT NOTICES Applications under the offer may only be made on regarding the Company’s present and future business paper copies of the Application Forms attached to or strategies and the environment in which the Company accompanying this Prospectus. The Application Forms will operate in the future. Matters not yet known to included in this Prospectus may only be distributed if the Company or not currently considered material to the they are included in or accompanied by a complete and Company may impact on these forward-looking statements. unaltered copy of this Prospectus. The Application Forms The statements reflect views held only as at the date of contain a declaration that the Investor has personally this Prospectus. In light of these risks, uncertainties and received the complete and unaltered Prospectus prior to assumptions, the forward-looking statements discussed completing the Application Form. The Corporations Act in this Prospectus might not occur. Investors are therefore prohibits any person from passing an Application Form to cautioned not to place undue reliance on these statements. any other person unless it is attached to or accompanied by a complete and unaltered hard or electronic copy of this Prospectus. The Company will not accept a JORC Statements completed Application Form if it has reason to believe that Please note that the exploration targets referred to in this the Applicant has not received a complete and unaltered Prospectus, denoted by the symbol ♦ are conceptual in copy of this Prospectus or if it has reason to believe that nature. Orpheus cautions the reader that the potential the Application Form has been altered or tampered with in quantity, grade or quality of the coal or mineral is any way. During the Offer Period, any person may obtain a conceptual in nature and shows that there has been hard copy of this Prospectus free of charge by contacting insufficient exploration work to define a JORC resource. the Company by e-mail at: [email protected] As at the date of this Prospectus it is uncertain if further exploration and associated resource development work will result in the determination of a JORC resource. Each Exposure Period target referred to in this Prospectus is properly classified as In accordance with Chapter 6D of the Corporations Act, this an exploration target in accordance with the JORC code. Prospectus is subject to an Exposure Period of seven (7) days from the date of lodgement of the Prospectus with Where coal or mineral resources have been referred to in the ASIC. This period may be extended by the ASIC for this Prospectus, the classifications are consistent with the a further period of seven (7) days. The purpose of this JORC Code, prepared by the Joint Ore Reserves Exposure Period is to enable this Prospectus to be Committee of the Australasian Institute of Mining and examined by market participants prior to the raising of Metallurgy, the Australian Institute of Geoscientists and the funds, which examination may result in the identification of Minerals Council of Australia, effective December 2004. deficiencies in this Prospectus. If this Prospectus is found to be deficient, Applications received during the Exposure Terms and Abbreviations Period will be dealt with in accordance with Section 724 of the Corporations Act. Applications received prior to the Certain abbreviations and other defined terms are used expiration of the Exposure Period will not be processed throughout this Prospectus. Defined terms are generally until after the Exposure Period. No preference will be identifiable by the use of an upper case first letter. Details of conferred upon Applications received during the Exposure the definitions and abbreviations used in this Prospectus are Period. contained in section 15 of this Prospectus entitled Glossary. The people and assets depicted in photographs in this Forecasts and Forward-looking Statements Prospectus are not employees or assets of the Company, The Company is predominantly a coal exploration and unless otherwise stated. Diagrams appearing in this development company. Given the speculative nature of Prospectus are illustrative only and may not be drawn exploration, coal development and production, there are to scale. significant uncertainties associated with forecasting future revenue. On this basis, the Directors believe that reliable forecasts cannot be prepared and accordingly have not included forecasts in this Prospectus.

Notwithstanding the above, the Prospectus includes, or may include, forward-looking statements including, without limitation, forward-looking statements regarding the Company’s financial position, business strategy and plans and objectives for its projects and future operations (including development plans and objectives) which have been based on the Company’s current expectations about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results, performance or achievements to differ materially from future events, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions

PROSPECTUS 3 Chairman’s Letter

ORPHEUS ENERGY LIMITED ACN 121 257 412 Level 5, 44 Miller St North Sydney NSW 2060

Dear Investor,

On behalf of the Board of Directors, I am pleased to offer you this opportunity to invest in Orpheus Energy Limited (Orpheus), a company whose focus is on coal production, exploration and development of coal deposits into production in Australia and Indonesia.

Orpheus Energy Group Pty Ltd (OPL), an entity which will be a wholly owned subsidiary of Orpheus following completion of the offer, is already pre stripping overburden to expose coal at its B26 project for a trial mining program supporting its feasibility study.

In this exciting growth phase, Orpheus is raising capital to fund the development and acquisition of its project portfolio, namely: the Indonesian B26 Project (B26), Hodgson Vale Coal Project in Queensland, the Ashford Limestone Project and the Wingen Bentonite Project in New South Wales. Specifically the funds will be used to:

p Drive aggressive project development to achieve early production at the B26 Coal Project in Kalimantan;

p Conduct resource assessments and project evaluation on the Hodgson Vale Coal Project;

p Proceed to develop the Ashford Lime deposit and potentially produce high value products;

p Proceed with the joint venture to drill and develop a trial mine for bentonite clay at Wingen.

Results from an initial drilling program conducted by Orpheus’s local Indonesian partner at B26 were impressive. Drilling at Block 2 has identified a JORC resource of approximately 1.13 Mt of thermal coal. Further, a coal exploration target of 1.3 Mt to 2 Mt is identified at Block 2 and trial mining has commenced.♦ Orpheus now plans to achieve trial production of coal as part of its feasibility study to construct a coal mine at Block 2.♦

Drilling is underway at Block 6 with a coal exploration target of 1.5 Mt to 2.5 Mt.♦

Going forward, Orpheus will utilise the strategic alliance framework with its local Indonesian partner to develop further coal projects in Indonesia, including in Kintap.

Orpheus’s focus on coal provides an exciting basis for future growth.

I recommend that you consider our Prospectus and I look forward to welcoming you as a shareholder.

Yours sincerely

Mr Wayne Mitchell Chairman & CEO

4 CHAIRMAN’S LETTER Contents

Corporate Directory ...... Inside Front Cover

Indicative Timetable ...... 1

Important Notices ...... 2

Chairman’s Letter ...... 4

Section 1 – Investment Highlights ...... 6

Section 2 – Key Projects ...... 7

Section 3 – Corporate Overview ...... 13

Section 4 – Details of the Offer ...... 18

Section 5 – Risks ...... 20

Section 6 – Independent Geologist’s Report – Indonesia ...... 25

Section 7 – Independent Geologist’s Report – Australia ...... 56

Section 8 – Financial Matters ...... 82

Section 9 – Investigating Accountant's Report ...... 90

Section 10 – Report on Mining Concessions – Indonesia ...... 111

Section 11 – Report on Tenements – Australia ...... 115

Section 12 – Material Contracts ...... 122

Section 13 – Additional Information ...... 133

Section 14 – Corporate Governance Policy ...... 137

Section 15 – Glossary and Interpretation ...... 140

Section 16 – Statement of Directors ...... 143

Notes ...... 144

Application Forms ...... 147

PROSPECTUS 5 SECTION 1

Investment Highlights

Investment Strategy Orpheus Energy Group Pty Ltd (OPL) has signed a strategic alliance (Strategic Alliance) with PT Mega Coal p PT Mega Coal has a portfolio of coal projects in which is a current producer of thermal coal in Indonesia Kalimantan such as Kintap which could provide joint and has a portfolio of mining concessions in Kalimantan. venture opportunities for Orpheus. A strategic alliance, with a strong local partner in Indonesia p strengthens Orpheus’s corporate strategy of early low cost The Strategic Alliance Agreement requires PT Mega coal production combined with significant opportunities to Coal and OPL to prepare a list of suitable coal acquire further Indonesian coal projects and at the same projects with project assessments. time balance the Orpheus risk profile by progressing the Australian coal and industrial minerals portfolio. Orpheus, p with its experienced management, provides participation An open pit target of 5 Mt to 20 Mt of thermal coal ♦ in a leading commodity, namely, coal in both the first and in the northern zone of the project area. second largest coal exporting countries in the world, p In 2008 Coalworks completed a drilling program of Australia and Indonesia. 5 holes and intersected up to 8m of cumulative coal in 2 holes providing encouragement for further Key Factors supporting an exploration. Two target areas are planned for the investment in the Company next phase of drilling.

p Block 2 contains a JORC resource of 1.13 Mt, with p A target of 20Mt to 40 Mt of exceptionally high quality additional drilling underway with a coal exploration limestone exists in the project area.♦ target of 1.3 Mt to 2.0 Mt.♦ p A number of value added products including Ground p In Block 6, drilling is underway with a coal exploration Calcium Carbonate (GCC) and products for the cement target of 1.5-2.5 Mt.♦ industry could be produced. p A total of 107 holes have been drilled over 4,489 metres that has enabled a preliminary mine plan to be outlined. p Plasminex has granted OPL an option to establish p A coal sales agreement has been signed for a joint venture to earn 50% of the Wingen Bentonite 25,000 tonnes of coal. Deposit from the present owner, Plasminex Pty Ltd. p Initial pre stripping of overburden has taken place to p The project is approximately 4 kilometres north east of expose the coal in readiness for transport to a barge Unimin’s Cressfield bentonite mine and it is believed loader for trial export shipments. the Wingen Bentonite Deposit can produce a similar p A calorific value of 5,950 to 7,100 kcal/kg (adb) has commercial grade of bentonite to the operating been defined for the exploration target over Block 2 Cressfield Mine. and Block 6 (on average) and is based on exploration results to date. There is also potential for coking coal in the B26 project area.♦ p Proximity to road and port. The truck distance from Block 2 mine to barge is approximately 26km.

6 INVESTMENT HIGHLIGHTS SECTION 2

Key Projects

Indonesian Coal Industry lower calorific value. Industry experts predict that much of Indonesia is the second largest thermal exporter of coal in the coal industry’s growth will be from sub bituminous coal. the world producing 198 million tonnes per annum in 2008 The coal at B26 is of export quality and bituminous in rank. which is forecast to rise. The major coal producing areas of Indonesia are in Kalimantan and Sumatra which are less Indonesia Coal Quality based on Specific Energy populated than Java. The coal industry in Indonesia has experienced high growth and is an important contributor (kcal/kg) to the Indonesian economy. Pricewaterhouse Coopers has reported that economic returns from coal in Indonesia were above the global sector average. In addition, it is encourag- ing that a new Indonesian mining law has replaced the 1967 mining law replacing the contract of work and kuasa pertambangan (mining concession) system with a more foreign investor friendly IUP system. The essence of the IUP system, which applies to both coal and minerals, is that it treats both local and foreign investors equally. Very High Quality (>7100 kcal/kg) – 1% Kalimantan is Orpheus’s initial focus which is part of Borneo, the third largest island in the world. Kalimantan is divided High Quality (6100–7100 kcal/kg) – 13% into the Indonesian provinces of East, South, West and Medium Quality (5100–6100 kcal/kg) – 62% Central Kalimantan. The B26 project being acquired by Orpheus is in East Kalimantan which is an established coal Low Quality (<5100 kcal/kg) – 24% mining region. Typically producers truck to port and then barge coal to a ship at sea. Indonesia is one of the leading Source: Indonesian Coal Mining Association exporters of sub bituminous coal or low rank coal which is Pie chart showing range of coal qualities of product considered to be growing in importance with lower coal produced from Indonesia. Based on initial environmental costs. Sub bituminous coal is geologically investigations Orpheus’s B26 project is high quality younger coal usually with a higher moisture content and (yellow section).

PROSPECTUS 7 Strategic Alliance with The presence of an Indonesian partner with extensive Existing Indonesian Producer alliances and community associations in key mining areas including the B26 project brings considerable support for OPL has signed a strategic alliance agreement (Strategic Orpheus to commence early coal production. Alliance) with PT Mega Coal which is a current producer of thermal coal in Indonesia and has a portfolio of coal projects in Kalimantan in areas such as Kintap which could B26 Thermal Coal Project provide potential joint venture opportunities for Orpheus. OPL has entered into a joint venture (the B26 Joint Venture) The Strategic Alliance provides: with two companies associated with the Indonesian p The Company intends to incorporate a special PT Mega Coal group to earn 51% of the B26 project in purpose entity to hold $5mil in funding to further Kalimantan with an existing coal deposit and preliminary the Strategic Alliance Projects; p Identification of synergies and efficiencies with respect B26 Location Map to Orpheus’s proposed management and development of the B26 project; p Preparation by OPL and PT Mega Coal of a list of suitable coal projects with a project assessment with respect to potential resource, project scope, Capex and Opex, and proposed timing for the various stages of each project, including consideration of the means by which infrastructure can be constructed for each project, methodologies to construct the mine, and infrastructure; p Consideration of potential for the execution of further coal Joint Ventures between PT Mega Coal and OPL; p Review of potential coal projects in Indonesia utilizing coal to liquids technology and the potential for creation of a consortium to develop a coal to liquids plant for such projects.

B26 Location Map

Source: Block 11 based on information provided by PT Mega Coal

8 KEY PROJECTS mine plan. (See section 12 of this Prospectus entitled identified. A 60,000 tonne stockpile is planned which will Material Contracts for details of the agreements consti- feed a conveyor loading coal onto barges (up to 8,000 tuting the B26 Joint Venture). tonnes) down river and out to Adang Bay where coal is unloaded onto a ship for sea carriage to offtake The purpose of the B26 Joint Venture is to contribute to customers. the mine development of a coal project known as “B26” referring to Blocks 2 and 6 south west of Balikpapan in Orpheus intends to continue with mine planning studies East Kalimantan. Block 2 contains a JORC resource of until bankable feasibility is complete which will include 1.13Mt, with additional drilling underway with a coal road, port and river transport studies to determine exploration target of 1.3Mt to 2.0Mt.♦ In Block 6, drilling a definitive Capex for the B26 project. The existing is underway with a coal exploration target of 1.5-2.5Mt.♦ Operation Production IUP on Block 2 allows mining in There is also potential for coking coal in the B26 project parallel with these studies and would see export coal area. To date, 107 holes have been drilled over 4,489 production occur during 2011. Orpheus targets up to metres. Additional coal areas are to be reviewed as part approximately 480,000 tonnes per annum export coal of the Strategic Alliance. It is proposed to progress the production from Block 2 of the B26 project. existing advanced project to bankable feasibility status. It is expected that the Capex and Opex for the B26 project The preliminary mine plan would see coal mined via open may make lower resource volumes economic for production. pit methods with no washing. Coal would be transported The B26 coal quality data obtained from outcrop and by road to the nearest river where it would be loaded onto drilling shows relatively marketable coal which is of export barges for transfer to a coal carrier at sea. Orpheus will quality and bituminous in rank. Proximity to road and port review all existing mine data and will re-create its own also provide competitive operating cost capability. database to advance the exploration coal target. Presently overburden at B26 is being pre stripped to expose the The current excavation work to pre strip overburden to coal to allow trial mining. Trial mining will: expose the coal provides a good foundation to achieve early coal production after the Listing Date. The acquisition cost p Prove the choice of mining method; to purchase 51% of the B26 project was USD$1,500,000 which has been paid by OPL to PT Mega Coal. p Provide performance testing on geotechnical aspects of pit and chosen equipment; Hodgson Vale Coal Project p Provide overall assessment of strip ratio to confirm The area which makes up the Hodgson Vale Project being project economics; acquired by Orpheus is presently held under Exploration Permit 1145 by Coalworks and will be transferred to p Provide access to commercial scale coal volumes Orpheus or its subsidiary following the Listing Date. to secure offtake arrangements. The area is approximately 10 km south of Toowoomba in A haul road exists from the mine to enable the haulage of South East Queensland. The former tenement holder of coal from the mine to the barge port which is a distance of the application area, Millmerran Coal Pty Ltd intersected approximately 26km. A site for the barge port has been a coal seam of about 20 metres at a depth of 40 metres

TOOWOOMBA

15

1º 58’

151º 54’ 27º 39’

N

HODGSON 55’ 151º

0 6 KM VALE EPC AREA 27º 44’

PROSPECTUS 9 Coalworks drilling at Hodgson Vale in 2008. Cumulative coal of up to 8m was intersected in 2 holes.

which appears to be part of the Walloon Coal Measures. and sulphur to improve the product. The calorific values The current target in this area of EPC 1145 is 5 to 20 Mt of the coal range from 22–24 MJ/Kg or higher which of export quality thermal coal.♦ Coalworks has drilled a 5 indicates it is suitable for sale as a medium grade export hole drilling program to test the potential to the south of thermal coal.♦ the postulated open cut area. The first 2 holes drilled in the “Tests of the coal, by the Joint Coal Board, place it amongst mid eastern portion of the EPC failed to intersect coal Australia’s best for conversion to liquid products such as although the third hole did intersect the Walloon coal petroleum and diesel fuel”. measures with coal plies. Coalworks did intersect cumul ative coal seams of approximately 8m in the fourth hole and 6.8m Key points include: in a fifth hole. Other historical holes have thick coal inter - sections, as well, providing encouragement for continuous p Nearest railway is 6 km. thick coal seams. Key hurdles for development will be p Nearest major road is 1 km. resource establishment, coal processing tests to produce a marketable product, planning development distanced from p Nearest town/city – Toowoomba 10 km. local dwellings and gaining coal to port capability access. p Nearest power line 4 km. The coal is a hard, perhydrous black coal having an in situ p Nearest coal loader 150 km (Brisbane Coal Terminal). ash content of 40%+ (inherent ash up to 15%). Sulphur is typically 0.5% to 0.7%. Washing will possibly reduce ash p Nearby rail link to Gladstone planned 400 km.

10 KEY PROJECTS It is also noted that the rail link through the Surat Basin is kaolin and precipitated calcium carbonate (PCC), mainly proposed to be upgraded following past announcements as filler, but increasingly in coating applications in printing that a 210 km railway line from Wandoan will be completed. and writing paper. The market for GCC in paper coating This $1 billion rail link will provide a direct link from the coal has shown a high rate of growth because of its brightness mining districts of the Surat Region (including Hodgson and good performance in high-speed paper machines, Vale) to the Gladstone Coal Loading Facilities. which has helped GCC to take market share from kaolin.

Orpheus plans the following project development: The plastics industry is the second largest user of GCC, accounting for an estimated 14.4Mtpy of consumption in p Geological modelling of existing data. 2007, compared with 10.2Mtpy in 2004. GCC is the most p Bulk sampling program at representative sites through - commonly used filler in plastics, but other minerals such out the project area to determine coal washability and as talc and alumina trihydrate (ATH) are used in more coal characteristics and develop possible process demanding applications. The market/global trend is for flow sheets and complete marketing studies. finer ground material as consumers use GCC less as filler to reduce costs, but more as a process aid and functional p In fill drilling program to establish a JORC resource. additive. GCC is the most commonly used filler and extender mineral in emulsion and semi-gloss paints; finer p Complete resource definition, engineering studies grades have also been developed that can be used in and other technical studies. gloss paints.

Ashford Limestone Project Wingen Bentonite Project Orpheus is acquiring from Coalworks the Ashford Limestone Deposit (EL 6511 (NSW).) The Ashford Limestone Project is stated to have an exploration target of between 20 and 40 million tonnes to a depth of 20 metres of high quality calcium carbonate which is an estimate based on two reports by Associate Professor Peter Flood of the University of New England (Ref GS 1992/203).♦ Licence holder, Coalworks previously commissioned international mining consultants, SRK Consulting in 2006 regarding whether a market exists for lime products who advised that Ground Calcium Carbonate (GCC) and other lime products would command a ready market.

Orpheus plans technical studies aimed at producing a mineral process flow sheet and progressing the studies to feasibility stage upon establishing a limestone resource with special emphasis on the market for GCC and other value added limestone products. In the south of Orpheus’s EL area previous work by another company Kallengur Lime Pty Ltd in 1989 suggests the limestone could also be used for decorative aggregate, glass manufacture and whiting manufacture. The potential market strategies for high value lime and general discussion of the lime market appears below.

Limestone Product Markets The Ashford Limestone deposit is a high purity limestone with results of up to 56%CaO (ie 99.9% CaCO3) and accordingly has the potential to produce the highly sought industrial filler, GCC. The strong market for GCC is demonstrated by this extract from Roskill: Wingen Bentonite Project Location Map “The market for ground calcium carbonate (GCC) expanded from around 56Mt in 2004 to almost 72Mt OPL has an option to establish a joint venture with in 2007, an average annual growth rate of nearly 9%. Plasminex to explore, develop and exploit bentonite, clays World demand for GCC is forecast to continue to grow and other minerals pursuant to tenements EL 7142 and at an average annual growth rate of 4% to 2012, to ELA 3657 near Wingen. Orpheus will target bentonite clay reach 87.4Mt.” which has many uses including drilling mud, impermeable liners, detergents, pelletising, bonding, cat litter, foundry Rising demand for paper pigments from the paper industry moulding sand etc. Preliminary exploration work has already has been the main driver behind the rapid growth in GCC been carried out by Plasminex to delineate drill targets and consumption since the early 1980s. GCC competes with conduct surface sampling.

PROSPECTUS 11 Four areas of interest in the EL area are targeted for In summary Orpheus believes: exploration by Orpheus. Firstly, work done by H. de Keyser in 1971 suggests six bentonite horizons based on surface p Low cost mining equipment and plant can achieve sampling. Orpheus wishes to conduct reconnaissance, mine production. data review and metallurgical testing to assess its ability to p Bentonite market is growing with increased emphasis upgrade to commercial products. Secondly, Orpheus plans on environmental uses. to drill the known bentonite horizons to delineate a bentonite resource to a sustainable quantity of material sufficient for p Potential exists for substantial infrastructure projects. development. Orpheus plans metallurgical testing to enable p Potential to facilitate CO2 reduction programs technical studies to produce a process flow sheet before for municipal waste, biogas industry and mine progressing the studies to feasibility stage. The objective rehabilitation. of this program will be to establish a sufficient bentonite resource which is economically viable with special emphasis And, subject to establishing an economic resource, plans: on the market for value added bentonite products. p Drilling program. Orpheus believes the project can deliver a high quality p Initial testing. industrial product similar to the Cressfield mine which lies close to the south west of EL7142 from a low Opex open p Bulk sampling. cut operation. Typical specifications are expected to be p 78 meq/ 100gm, swell volume 29 mls and moisture Scoping study. 19.7%–36.5% which has good potential to become p Complete feasibility study. a commercial product. p Mine development.

Bentonite outcrop on EL7142

12 KEY PROJECTS SECTION 3

Corporate Overview

Objectives He has worked in tropical and arid environments searching The Company’s objectives are that following the Listing for a range of mineral commodities including gold, copper, Date it will: coal and uranium for such major companies as Newmont Mining Inc., Placer Prospecting Ltd and Pancontinental (a) explore and develop (directly or via joint venture) Mining Limited and Gujarat NRE Coking Coal Ltd. He was the projects detailed in this Prospectus; a Founding Director & CEO of Zinico Resources NL and its successors for 5 years and Mr Harder is a founding (b) proceed with the Exploration and Development shareholder of Coalworks. Program in accordance with the Use of Proceeds and Indicative Exploration & Development Expenditure but all within and subject to the constraints of the Director expenditure programmes set out below; and Mr King is a professional Metallurgist and qualified geologist (c) proceed to acquire further coal and mineral projects with over 20 years operational and technical experience in Indonesia and Australia with specific emphasis on within the resource industry. A graduate of the University of energy. Cape Town South Africa, Mr King worked for Cominco in the mid 70s as geologist in the field carrying out exploration Following completion of the offer, the Directors consider programs and later held senior positions as Company that the Company will have enough working capital to Chemist for Ardlethan Tin, Gold Copper Exploration Pty carry out these objectives. Ltd and Great Northern Mining Corporation Ltd. During this time he completed another degree in Earth Science at Macquarie University, Sydney and in 1987 established Board of Directors and Key Management Tableland Analytical, of which he is principal providing mill, processing design, assay and metallurgical services to the resource industry. Mr King is a former director of Allegiance Mining NL where he was General Manager – Operations. Executive Chairman & CEO He has also been involved in design and construction of Mr Wayne Mitchell is a qualified accountant with over coal washing plants and has participated in a wide variety 30 years of extensive senior management experience in of resource projects. the natural resource sector; both in Australia and in South East Asia. In the early 1970's, Mr Mitchell and two partners were the initial promoters and developers of Thailand's major zinc deposit located at Mae Sot, Northern Thailand. This resource is now owned and operated by a Thai public Mr Bartrop is a Chartered Secretary and associate member company, Padaeng Industry Company Ltd. Mr Mitchell of Chartered Secretaries Australia. His previous role was as specializes in the areas of financial planning, fund raising Assistant Company Secretary at Mirabela Nickel Limited, a and project evaluation. He is also a past Chairman of listed nickel producer in Brazil. Prior to this, he worked at ASX for company Central Victorian Gold Mines N.L and a director 2 years as a Listings Adviser in Perth which involved the of Diversified Mineral Resources NL where he initiated and provision of interpretation and advice to existing and led the project team for the Burton Downs Coal project prospective listed entities and their advisers, in relation taken over by Portman Mining before being sold for more to the application of the ASX Listing Rules. than $200 million. Mr Mitchell is a co- founder and Mr Bartrop also has previous experience working in litigation chairman of Coalworks. and dispute resolution, as well as tax consulting and has a Bachelor of Laws & Bachelor of Commerce from the Director of Exploration University of Western Australia. Mr Harder is a former coal analyst with Jackson Ltd stockbrokers and has also worked with a number of stockbrokers, including Ord Minnett and Frank Renouf. He has also worked as a field exploration geologist for Mr Oastler is a Chartered Accountant with over 25 years fifteen years in Australia and its near neighbours including experience with various SME’s, listed and private company Sumatra and Irian Jaya in Indonesia, mainland Papua New groups as well as services to various governmental Guinea and New Britain Island, many parts of the Solomon agencies. Mr Oastler is also CFO of Coalworks Limited. Islands and Fiji. In Australia he worked in the states of New South Wales, Queensland, Northern Territory and Tasmania.

PROSPECTUS 13 Proposed Directors Marketing Manager Jakarta Office Mr Suksmanto is the Chairman and CEO of PT Mega Coal Since the early 1980s Mr Nietsch has worked in the coal International and PT Mega Coal Indomine. Mr Suksmanto and energy businesses, including for companies such as graduated with a Masters of Business Administration from Stinnes, Thyssen and Atel. From 2004 to 2007, Mr Nietsch the University of Southern California. Mr Suksmanto is an also worked in Indonesia for reputable coal trading houses. Indonesian national, who has held a number of Chairman Between 2008-2009 he was a ship broker and coal adviser roles for Indonesian companies and has a depth of for Vogemann GmbH of Hamburg. Mr Nietsch joined OPL experience working in the real estate and mining industry. in February 2011 as Marketing Manager.

(Alternate director for Mr Suksmanto) Management and Operations Orpheus will manage its operations, mining program and Mr Rhodes is a Director of PT Mega Coal International and head office under the supervision of its Executive Chairman PT Mega Coal Indomine. Mr Rhodes, is an Australian and CEO, Mr Wayne Mitchell. The Company’s head office citizen who has resided in Indonesia for the past 24 years, in North Sydney, with Jakarta and Bangkok offices have and has a depth of experience in the logistics and mining adequate facilities to administer its activities. The Company industries. will continue to conduct drilling and trial mining operations through drilling and mining contractors in Indonesia and Consultants Australia. Scheduling of work will revolve around time, weather and contractor availability. Contractors are selected based on quotations and review of qualifications Senior Advisor and Solicitor for suitability to the particular project. Professional geologists Mr Hagan majored in Geography, Mathematics and Law at supervise the location procedures in the field to comply the University of NSW in Australia and went on to establish both with Orpheus policy and applicable occupational his own law firm as a founding partner in 1982. Following his health and safety requirements. These activities include appointment as a director of Diversified Mineral Resources site mobilization, mapping, testing, sampling, general NL, Mr Hagan participated in the project development of field leadership and reporting. Other contractors such the $200 million Burton Downs Coal Project in Queensland as geoscientists, civil contractors, and field hands may be and other coal projects since that time. Mr Hagan closed engaged for surveying, hydrology, earthmoving, gridding, his legal practice in the early 90’s and founded public listed site preparation, camp construction, sampling and general company Allegiance Mining NL before working for 3 years field assistance. there as Chief Executive and Director. Part of Allegiance’s original exploration portfolio assembled by Mr Hagan became Tasmania’s Avebury Nickel Mine. In 2005 Mr Hagan co-founded listed company Zelos Resources NL (now part of Gujarat NRE Coking Coal Ltd) whose board and founders included Mr Neville Wran with backing from cornerstone investor Gujarat NRE Coke Ltd a public listed company in India capitalized at over $400 million. Mr Hagan is the co-founder of Coalworks Ltd.

Senior Consultant Mr Teng is a Certified Practicing Accountant, a fellow of the Australian Institute of Directors and an Associated Fellow of the Australian Institute of Management. Mr Teng has been employed by several manufacturing companies in senior accounting positions. Throughout the 1990’s he worked full time as a management consultant, involved with mergers, acquisitions and corporate restructuring. He has had several years experience on project development and investor relations and has a strong association with the investment community in Malaysia. He has also consulted with respect to a number of Initial Public Offerings and public company capital raisings and stock exchange practice. Mr Teng is a founding shareholder of Coalworks.

14 CORPORATE OVERVIEW Capital Structure The capital structure of the Company following the completion of the offer is shown below for 2 scenarios: Maximum Subscription showing capital structure if the offer closes fully subscribed and Minimum Subscription showing capital structure if the offer achieves the Minimum Subscription only:

Minimum Maximum Subscription [i] Subscription [ii] (Number) (Number) Details

Shares on issue prior to the Offer Completion 84,847,993 84,847,993 Shares issued: p pursuant to the Rights Issue** nil 10,760,493 p pursuant to the Priority Offer to Coalworks Shareholders^ nil 20,000,000 p pursuant to the Public Offer 50,000,000 29,239,507 Subscription Shares in total (25c issue price). 50,000,000 60,000,000 Total Shares on issue following the Offer 134,847,993 144,847,993

Options on issue prior to the Offer 52,460,416 52,460,416 Options Issues pursuant to the Rights Issue** nil 5,380,247 Total Options on issue following the Offer ***52,460,416 57,840,663

^ The above minimum subscription assumes no take-up of the Priority Offer to Coalworks shareholders and the full subscription assumes full take-up of the Priority Offer to Coalworks shareholders of 20,000,000 shares being a maximum of $5,000,000. ** The above minimum subscription assumes no take-up of the Rights Issue (with attaching options) by existing Orpheus shareholders. The full subscription assumes full take up of the Rights Issue (with attaching options) by existing Orpheus Shareholders. *** This assumes no take up of the Rights Issue (with the attaching options) by existing Orpheus shareholders.

Escrow Use of Proceeds Shares, and Options issued to interests associated with the The tables on the following pages set out how the former owners of the Coalworks assets being ‘Restricted Company intends, as at the date of this Prospectus, to Securities’ will not be listed while any applicable escrow apply the funds raised pursuant to this Prospectus over restrictions apply. Except to the extent that holders of these the first two years following the Listing Date: Shares and Options have supplied cash prior to the issue of this Prospectus the Directors do not intend to seek To the extent that funds raised pursuant to the offer may vary from either of the above scenarios (namely [i] or [ii]), quotation of these Shares and Options unless and until after the Board will commensurately adjust the application of the ASX grants approval to the Company. It is anticipated the funds having regard to the amount raised. However, that the Company will maintain Chess Holder Records it is anticipated that save for the line of fixed cost items (Including HIN) so that Restricted Securities can be entered (namely, the Other Expenses of the offer) the funds will be into a separate Chess holding (including a holding lock) applied in a broadly pro rata manner towards all line items or other arrangement permitted by ASX. The Company in the same proportion as shown in the tables on the will implement escrow restrictions in respect of the vendor following pages. securities in accordance with Chapter 9 of the Listing Rules or will comply with such other arrangement approved by ASX. Indicative Exploration & Development Expenditure All tables in this section are in Australian dollars.

PROSPECTUS 15 Minimum Maximum Subscription Subscription Use of Proceeds Description ($) ($)

Project Exploration and Development (refer table below and in Investment Highlights) 4,990,000 6,140,000 Brokerage, Prospectus and related costs (including unrecouped GST) 1,295,000 1,445,000 Investment in Strategic Alliance 5,000,000 5,000,000 Corporate Overheads, Management & Administration expenses 1,200,000 1,600,000 Cash Surplus from Public offering 15,000 815,000 Total Prospectus raising 12,500,000 15,000,000

Minimum Subscription Maximum Subscription Year 1 Year 2 Total Year 1 Year 2 Total ($) ($) ($) ($) ($) ($)

Project Exploration and Development Expenditure B26 3,700,000 100,000 3,800,000 4,450,000 100,000 4,550,000 Hodgson Vale 400,000 100,000 500,000 400,000 400,000 800,000 Ashford 150,000 190,000 340,000 150,000 190,000 340,000 Wingen 150,000 200,000 350,000 150,000 300,000 450,000

Investment in Strategic Alliance 5,000,000 – 5,000,000 5,000,000 – 5,000,000

Other Costs Brokerage and related costs (including unrecouped GST) 1,295,000 – 1,295,000 1,445,000 – 1,445,000 Corporate Overheads – Management and Administration expenses 600,000 600,000 1,200,000 800,000 800,000 1,600,000 Cash Surplus from Public offering 15,000 15,000 815,000 815,000 Total allocation of funds by year 11,295,000 1,205,000 12,500,000 12,395,000 2,605,000 15,000,000

Exploration 100,000 100,000 200,000 100,000 100,000 200,000 Trial Mine Development – – – – – – Mine Haul road 100,000 – 100,000 100,000 – 100,000 Port infrastructure/loading 300,000 – 300,000 550,000 – 550,000 Conveyor purchase 1,200,000 – 1,200,000 1,300,000 – 1,300,000 Mine site: Buildings 300,000 – 300,000 300,000 – 300,000 Mine site: Vehicles + Support equipment 500,000 – 500,000 600,000 – 600,000 Working capital 1,200,000 – 1,200,000 1,500,000 – 1,500,000 3,700,000 100,000 3,800,000 4,450,000 100,000 4,550,000

16 CORPORATE OVERVIEW Minimum Subscription Maximum Subscription Year 1 Year 2 Total Year 1 Year 2 Total ($) ($) ($) ($) ($) ($)

Drilling 275,000 55,000 330,000 275,000 275,000 550,000 Geophysical logging 20,000 5,000 25,000 20,000 20,000 40,000 Geological Assessment, Modelling 15,000 10,000 25,000 15,000 15,000 30,000 Coal Quality 30,000 – 30,000 30,000 30,000 60,000 Survey, Land Management 10,000 20,000 30,000 10,000 10,000 20,000 Contingency 50,000 10,000 60,000 50,000 50,000 100,000 Total 400,000 100,000 500,000 400,000 400,000 800,000

Drilling 100,000 140,000 240,000 100,000 140,000 240,000 Geophysical logging 15,000 20,000 35,000 15,000 20,000 35,000 Geological Assessment, Modelling 10,000 10,000 20,000 10,000 10,000 20,000 Assay 10,000 14,000 24,000 10,000 14,000 24,000 Survey, Land Management 5,000 1,000 6,000 5,000 1,000 6,000 Contingency 10,000 5,000 15,000 10,000 5,000 15,000 Total 150,000 190,000 340,000 150,000 190,000 340,000

Drilling 60,000 60,000 120,000 60,000 80,000 140,000 Regional Mapping 10,000 10,000 20,000 10,000 20,000 30,000 Geological Assessment, Modelling 15,000 20,000 35,000 15,000 10,000 25,000 Assay 45,000 60,000 105,000 45,000 80,000 125,000 Survey, Land Management 5,000 30,000 35,000 5,000 50,000 55,000 Contingency 15,000 20,000 35,000 15,000 60,000 75,000 Total 150,000 200,000 350,000 150,000 300,000 450,000

The exploration budgets in this Prospectus are subject to (e) it not being the intent of the Company to restrict its change and are contingent on circumstances, including: activities to the aforementioned projects and reserving the right to evaluate other opportunities as they arise; (a) the terms of the B26 and Wingen joint venture agreements – in this regard it is noted that under (f) it not being practicable for the Board to specify exactly these agreements summarised in section 12 of this how funds may be applied, as this will be influenced Prospectus entitled Material Contracts, the Company by the outcome of exploration yet to take place and has the right to contribute solely on the terms events as they unfold generally. specified in those agreements – the budgeted rates of expenditure for these projects assumes that the Nevertheless, the tables in this section represent statements Company will approve programmes and budgets at the date of this Prospectus as to the intended use of the consistent with the above; funds by the Company. The Company may seek to raise additional funds, if (b) results of exploration generally and other opportunities; appropriate. (c) expenditure being reallocated amongst existing The Directors consider that, upon completion of the offer, or new projects or to general working capital; the Company will have sufficient working capital to carry (d) factors relating to tenement conditions; out its stated objectives during the first two years following the Listing Date.

PROSPECTUS 17 SECTION 4

Details of the Offer

The Offer p For the Rights Issue, complete the Rights Issue A total of 50,000,000 shares will be offered by this Application Form. Prospectus at AUD$0.25 each and an over subscription of p For the Priority Offer, complete the Priority up to 10,000,000 Shares. Application Form. The offer is made up of three separate offers as follows: p For the Public Offer, complete the Public Offer Form. Application monies will be held in a separate bank account on behalf of Applicants until the Shares offered under this This offer consists of a non-renounceable entitlement offer Prospectus are issued. If any application is rejected in whole to existing shareholders of Orpheus on a 1 for 1 basis with or in part, the amount tendered in respect of Shares that a maximum issue of 10,760,493 Shares at an issue price have not been issued pursuant to the relevant application AUD$0.25 per Share. will be repaid to the unsuccessful Applicant, without interest.

Shareholders that participate in the Rights Issue will also be Issue of Shares entitled to one free option for every two shares subscribed for, exercisable at any time prior to 31 December 2011 at If your application is accepted, in whole or in part, the an exercise price of $0.20 per Listed Option. Any shortfall Company will issue Shares pursuant to your application under the Rights Issue will lapse but that part of the balance and dispatch either an issuer sponsored holding statement not taken up under the Rights Issue by existing Orpheus or a CHESS statement to you as soon as practicable after Shareholders will be offered to the Lead Manager, BBY the Closing Date together with any excess application Limited without the option entitlement. monies. The banking of application monies in a trust account does not constitute acceptance of your application.

No Shares will be issued pursuant to this Prospectus until: This consists of an offer to Coalworks shareholders to (1) the minimum subscription under the offer has been each subscribe for up to AUD$15,000 worth of Orpheus received; and (2) ASX has given the Company conditional Shares at an issue price of AUD$0.25 per share (up to approval to be reinstated to the Official List. 60,000 Shares) to a maximum aggregate amount of AUD$5,000,000 (up to 20,000,000 Shares). There is no option entitlement attached to this priority offer. Opening and Closing Date Any shortfall under this offer will be offered to the The proposed Opening Date for acceptances of the Rights Lead Manager, BBY Limited. Issue, the Priority Offer and the Public Offer will be 3 June 2011 (the Opening Date will be delayed if the mandatory 7 day Exposure Period required by the Corporations Act This offer consists of an offer to the public of up to is extended by ASIC). 50,000,000 Shares under this Prospectus and an oversub- p scription of up to 10,000,000 shares by way of a public offer The proposed Closing Date for acceptances of to new investors. Shares in this public offer will be offered the Rights Issue is 5:00pm (WST) 21 June 2011. at $0.25 per share. There is no option entitlement attached p The proposed Closing Date of the Priority Offer to this public offer. is 21 June 2011. NOTE: The number of Shares on offer to the public will be p The proposed Closing Date of the Public Offer the balance available after the take up of the Rights Issue is 27 June 2011. and Priority Offer outlined in points 1 and 2 above. The Board reserves the right at any time and from time to This public offer is conditional on shareholder approval time to change the offer opening and closing dates and time, being granted in accordance with the Notice of Meeting without giving notice. circulated to shareholders by Orpheus on 13 May 2011. Applications for Shares pursuant to this Prospectus will not Terms and conditions of Options are described in section be processed by the Company until after the expiry of the 13 of this Prospectus entitled Additional Information. Exposure Period. An application lodged prior to the expiry of the Exposure Period will be treated as though it was received immediately following expiry of the Exposure Acceptance Period. Copies of the Prospectus (without Application If you wish to participate in the offer, you must complete the Forms) are available during the Exposure Period through applicable Application Form accompanying this Prospectus the Company’s web site. in accordance with the instructions set out therein:

18 DETAILS OF THE OFFER Stock Exchange Listing Overseas Applicants and Quotation of Shares This Prospectus does not constitute an offer or invitation: The Company will, within 7 days after the date of this Prospectus, apply for admission to the Official List of ASX (a) in any jurisdiction where, or to any person to whom, and for its Shares to be quoted on ASX. If the application is it would be unlawful to issue this Prospectus; not made within 7 days after the date of this Prospectus or (b) to any person to whom, it would not be lawful if the Shares offered under this Prospectus are not granted to make such an offer or invitation. quotation within 3 months after the date of this Prospectus, the Company shall deal with applications in accordance No action has been taken to register or qualify the Shares, with the requirements of the Corporations Act. The fact or the offer, or otherwise to permit the public offering of the that ASX may grant quotation of the Shares is not to be Shares, in any jurisdiction outside Australia or New Zealand. taken in any way as an indication of the merits of the Company or the Shares. The distribution of this Prospectus within jurisdictions outside Australia or New Zealand may be restricted by law Brokerage fees and persons into whose possession this Prospectus comes should inform themselves about and observe any such The Company will pay a brokerage fee to BBY Limited restrictions. Any failure to comply with these restrictions may equal to 5% and a management fee of 1% plus associated constitute a violation of those laws. It is the responsibility of costs of the funds raised by BBY Limited as Lead Manager any Overseas Applicant to ensure compliance with all laws (plus GST). A summary of the terms of the brokerage of any country relevant to his or her Application and to obtain agreement between BBY Limited and the Company is all necessary approvals so that they may legally subscribe set out in section 12 of this Prospectus entitled Material for (and be issued) Shares pursuant to the offer. Contracts. Without limitation to the generality of the information Centre Capital will, subject to certain conditions, be otherwise provided in this Prospectus, the Shares have not entitled to a fee of $50,000 for acting as sponsoring been, and will not be, registered under the US Securities broker to the offer, 2.5 Million Shares and 1.25 Million Act of 1933 as amended (US Act), and may not be offered, Listed Options exercisable at 20c per option and expiring sold or resold: prior to 31 December 2011. (a) in the US or to, or for the account or benefit of, US No other fee is payable or has been paid by the Company Persons (as defined in Rule 902 under the US Act) as commission for subscribing or agreeing to subscribe except in a transaction exempt from the registration for or procuring or agreeing to procure subscriptions for requirements of the US Act and applicable US state Shares in the Company. securities laws; and

Assuming a raising of $15,000,000 pursuant to the offer, (b) outside the US, except to non-US persons in offshore it is estimated the following expenses will be the expenses transactions in compliance with Regulations of the of the offer. US Act.

Payable from offer proceeds to BBY Limited: The return of a duly completed Application Form will be taken by the Company to constitute a representation and p Brokerage & Lead Manager warranty that there has been no breach of any law, that all fees and related expenses $ 950,000 necessary approvals and consents have been obtained and Other Payable from offer proceeds: that the Company may legally issue Shares to the Applicant pursuant to this Prospectus. Overseas Applicants should p Sponsoring broker fee consult with their professional advisors as to whether any to Centre Capital $ 50,000 formalities need to be observed (either by themselves or the Company) to enable them to subscribe for the Shares p ASX listing fees $ 80,000 being offered pursuant to this Prospectus. p Prospectus, independent reports and other offer expenses $ 365,000

PROSPECTUS 19 SECTION 5

Risks

This section sets out certain key specific risks associated Sovereign Risk with an investment in the company. Nevertheless, this The Company’s projects are subject to the risks associated section does not exhaustively list the risks that may have in operating in a foreign country. These risks may include a material effect on the financial position and performance economic, social or political instability or change, hyperin- of Orpheus and the value of its securities, Orpheus’s flation, currency non-convertibility or instability and changes exploration, (and any future) development and mining of law affecting foreign ownership, government participation, activities, or ability to fund those activities. taxation, working conditions, rates of exchange, exchange control, exploration licensing, export duties, repatriation of An investment in the Shares is speculative due to the income or return of capital, environmental protection, mine nature of Orpheus’s business. The Board recommends safety, labour relations as well as government control over that potential Applicants consider the risks described mine properties or government regulations that require the below and information contained elsewhere in this employment of local staff or contractors or require other Prospectus, as well as consult with their professional benefits to be provided to local residents. advisors, before deciding whether or not to apply for the Shares. Regulatory Risk Prospective shareholders should have the financial ability The Company will need to obtain regulatory approvals and willingness to accept the risks and possible lack of and licences to undertake its operations in Indonesia and liquidity associated with an investment in a company of to maintain and renew tenure of its tenements through the type described in this Prospectus. The Shares are regulatory compliances. There is no guarantee that such only suitable for investors who understand the potential approvals and licences will be granted or such regulatory risk of capital loss, for whom an investment in the Shares compliances accepted. In addition, various conditions may constitutes part of a diversified investment portfolio, and be imposed on existing tenements and the grants of such who fully understand and are willing to assume the risks regulatory approvals and licences which may impact on the involved in investing in Orpheus. tenure or the cost or the ability of the Orpheus to mine the The value of any investment can go down as well as up and tenements. shareholders may lose their entire investment in Orpheus. While the relationship between Australia and Indonesia is The principal activities of Orpheus, and its subsidiaries, to considered to be the strongest between the two countries date have been limited to organisational activities, tenement for quite some time, there can be no assurance against acquisition, exploration planning and resource identification, social and economic uncertainty and no assurance that production and trial mining. Consequently, there is a limited the regulatory requirements will not change, which may operating history upon which to base an assumption that affect Orpheus’s operations. There changes may include, Orpheus will be able to successfully implement its business but are not limited to, foreign ownership of licences, taxation plans and may not achieve its business goals. and royalties and land access.

No representation is or can be made as to the future The Company’s tenements located in Australia and performance of Orpheus and there is no assurance that Indonesia, and are subject to legislative requirements of Orpheus will realise its aims. each particular country with respect to the processes for application, grant, conversion and renewal. Tenements are also subject to conditions, the payment of annual rent and General, Economic and Political Conditions the meeting of minimum annual expenditure commitments. The value of Orpheus’s securities is likely to fluctuate There is no guarantee that any applications, conversions depending on various factors including, but not limited to: or renewals for Orpheus’s tenements will be granted. (a) inflation, (b) interest rates, (c) domestic and international The inability of Orpheus to meet conditions, rent and economic growth, (d) changes to taxation legislation, expenditure requirements may adversely affect the interpretation and policies, (e) legislative change, (f) political standing of its tenements and it could lose title or interest stability, (g) disasters, (h) industrial disputes, (i) social in tenements. A summary of the conditions attaching to unrest, (j) war on a local or global scale, (k) mining industry the tenements in Indonesia is set out in section 10 of this conditions, (l) stock market conditions in Australia and Prospectus. elsewhere, (m) changes in investor sentiment towards particular market sectors, (n) acts of God, and (o) acts On 23 August 2010, the Minister of Natural Resources of terrorism. Mines and Energy, Mr Stephen Robertson MP, announced

20 RISKS a new policy framework aimed at protecting Queensland’s agreements, including terms of compensation, heritage strategic cropping land. At this stage and until policy survey and protection agreements or other agreement and draft legislation has been finalised Orpheus does not types may need to be negotiated with affected parties. know the extent of the impact on this policy on its future exploration and development activities in Queensland, in The Native Title Act prescribes procedures applicable to particular, the Hodgson Vale project located in Queensland. the grant of tenements which apply even in the case of, for Legislation is anticipated to be passed in 2011. instance, a granted exploration licence being ‘converted’ to, say, a mining lease. Compensation may become payable in respect of any impact which the grant of any tenements or Operational and Technical Difficulties other activities have on native title. A tenement holder may Possible operational and technical difficulties might be liable for the payment of compensation for the affect of unexpectedly be encountered in achieving Orpheus's mining and exploration activities on any native title rights objectives. These difficulties may be caused by failure to and interests that exist in the area covered by a tenement. achieve the economic grade or coal quality postulated by Compensation may be payable in forms other than money, geological interpretations to be used by Orpheus at any of including the transfer of property and the provision of goods Orpheus's Projects and may result in downgrading, termi - and services. nation or writing off of the respective exploration Project. It is not currently possible to assess whether compensation will be payable by Orpheus to native title holders in relation Expenditure risks to any of the tenements held by Orpheus, but such comp - The outcome of exploration programs outlined in this ensation could be significant. Prospectus will affect the future performance of Orpheus and value of the Shares. There will be no revenue from There may be sites and objects of significance to indigenous Orpheus's projects until a mine is approved and developed Australians located on the land relating to Orpheus’s through to production. Mine development requires detailed tenements. State and Commonwealth Aboriginal heritage budgeting based on a feasibility study to enable estimates legislation aims to preserve and protect these sites and of mine development expenditure. These estimates may objects from use in a manner inconsistent with Aboriginal vary and cause delays in development and changes in tradition. The Company proposes carrying out ‘clearance development plans. There are long lead times required in surveys’ before conducting any exploration work that would the purchase of mining equipment which leads to market disturb the surface of the land. The Company’s Tenements risk between ordering and purchase. In the event that any may contain some such sites of significance, which would project does not offer returns sufficient to increase the value need to be avoided or cause delays. It is possible that of the company, a business decision might be made that areas containing mineralisation or an economic resource the project is not worthy of further development and that may also contain sacred sites, in which case they may it should be written off. Commercial production may be remain unexploited. Access agreements will need to be curtailed or shut down for considerable periods of time, negotiated with affected parties. causing Orpheus to incur losses, due to any of the Native title, Aboriginal heritage or other indigenous matters following factors: are matters of substantial risk (giving rise to the threat that p Disruptions to the transport chain (road, rail, port certain tenements may not be granted, access to certain infrastructure and ocean freight). tenements may be denied or delayed in addition to potentially significant cost exposure in respect of things p Lack of market demand. such as negotiations, surveys, incentive payments and compensation to name but a few) as the legislative frame p Changes in government regulation both in Australia works provide torturous and frequently uncertain routes to and/or in Indonesia. the endeavour by both stakeholders (that is explorers/ p Production allocations. miners and indigenous peoples) to attain certainty. p Force majeure. It is not possible to quantify the financial or other impact native title and Aboriginal heritage will have upon Orpheus Native Title & Aboriginal Heritage – as, amongst other things, the processes involved with: Aboriginal Sites of Significance (a) identifying all and only the indigenous peoples with The Company’s activities in Australia are subject to the a relevant interest; Native Title Act and its interpretation. (b) registering an indigenous land use agreement; The Native Title Act legally recognises the title rights of indigenous Australians over areas where those rights have (c) obtaining access to land without infringing the not been lawfully extinguished. State and Commonwealth provisions of the Aboriginal Heritage Act; native title legislation regulates the recognition, application and protection of native title. Native title may affect the (d) are open ended, can involve substantial delay and cost status, renewal and conversion of existing tenements and there can be no certainty as to the outcome with and the granting of new tenements. Indigenous land use it being possible for projects to be entirely frustrated.

PROSPECTUS 21 This could be the case, for instance, even in circumstances deemed necessary by the Board to mitigate such risks. where: Exchange rate movements between the Australian dollar (a) a native title party consents to the grant of an explor - and the US dollar and the Indonesian rupiah respectively ation licence and assists the exploration endeavour may increase Orpheus’s expenses, as Orpheus’s exploration thereon (and the discovery of an otherwise economic costs will largely be denominated in Indonesian rupiah and deposit); US dollars.

(b) Orpheus, in order to exploit that discovery, applies for a mining lease (or other required approval, consent, Coal Markets and prices authority etc.) but such grant, approval, consent or If Orpheus's exploration is successful and results in coal authority is not forthcoming by reason of an objection production, the marketability of the coal depends on the by the same or another native title party; requirements and demands of the international marketplace. The Company may not be able to negotiate profitable (c) the Native Title Act 1993 (Cth) may have an effect on offtake agreements. Customers may default in their the tenements (or future tenements) held by Orpheus. contractual obligations. Potential defaults could include Delays may be experienced if evidence of native non-payment or failure to take delivery of contracted occupation or heritage exists on any land to which volumes. Should such a default occur, Orpheus may Orpheus requires access. When exercising a right or be unable to find other customers. permission for access to any land Orpheus is required to act so as not to disturb physical evidence of human Depressed coal prices would affect Orpheus's business. occupation or prehistoric or historic significance Future revenues, operating results, profitability, future rates without specific statutory permission. In Queensland, of growth and the carrying value of any properties held EPC 1145 Hodgson Vale excludes any land in which depend heavily on prevailing market prices for coal, any Native Title exists. substantial or extended decline in the price of coal would have a material adverse effect on the financial condition The Company has not undertaken any research or investi- and results of operations. Various factors beyond the gations into Native Title, other than as disclosed in the control of Orpheus will affect coal prices, including: Hetherington report at section 11 of this Prospectus. Reference should be made to the Hetherington report for p Exchange rates; further detail. p Domestic supplies of coal; Freehold Access p Economic conditions; Within Australia the interests of holders of freehold land p Marketability and quality of production; encroached by the tenements are given special recognition p by state specific mining legislation. As a general proposition, Consumer demand; a tenement holder must obtain the consent of the owner p Price trend for coal product types; of freehold land before conducting operations on the freehold land. There can be no assurance that Orpheus will p Price, availability and acceptability of alternate secure rights to access those portions of the tenements fuel sources; encroaching freehold land but, importantly, the grant of p Weather conditions; freehold extinguished native title so wherever the tenements encroach freehold land Orpheus is in the position of not p Government (local, state, federal) regulation. being affected by the Native Title Act albeit aboriginal heritage matters will still be of concern. Development and Mining Possible future development of a mining operation at Commodity and Currency Price Volatility any of Orpheus’s projects is dependent on a number of Commodity prices inherently fluctuate and are affected by factors including, but not limited to, the acquisition and/or numerous factors beyond the control of Orpheus, including delineation of economically recoverable mineral resources, global and regional demand for, and supply of, a particular favourable geological conditions, receiving the necessary commodity, forward selling by producers and the level of approvals from all relevant authorities and parties, seasonal production costs in major commodity-producing regions. weather patterns, unanticipated technical and operational Commodity prices are also affected by macroeconomic difficulties encountered in extraction and production factors such as expectations regarding inflation and interest activities, mechanical failure of operating plant and rates. Commodities are principally sold throughout the world equipment, unexpected shortages or increases in the in US dollars. price of consumables, spare parts and plant and equip - ment, cost overruns, access to the required level of As a result, any significant and/or sustained fluctuations in funding and contracting risk from third parties providing the exchange rate between the Australian and US dollars, essential services. and/or adverse movements in commodity prices could have a materially adverse affect on Orpheus’s financial position In the event that Orpheus commences production, its and performance. The Company may undertake measures operations may be disrupted by a variety of risks and hazards which are beyond its control, including environ-

22 RISKS mental hazards, industrial accidents, technical failures, Shortage of Capital labour disputes, unusual or unexpected rock formations, The funds raised by the offer will be used to carry out flooding and extended interruptions due to inclement or Orpheus’s objectives, as detailed in this Prospectus. hazardous weather conditions and fires, explosions and However, Orpheus will require additional capital to fund other accidents. No assurances can be given that Orpheus further exploration at Orpheus’s existing projects, undertake will achieve commercial viability through the development feasibility studies, develop mining operations, meet its future and/or mining of its projects. obligations and/or acquire new projects. The Company’s ability to raise further capital, either equity or debt, within Resource Estimates an acceptable time, of sufficient quantum and on terms acceptable to Orpheus will vary according to a number Resource estimates, including those contained in this of factors, including: Prospectus, are expressions of judgment only based on knowledge, experience and industry practice. Often these (a) prospectivity of projects (existing and/or future); estimates are appropriate when made but may change significantly when new information becomes available. (b) the results of exploration, subsequent feasibility There are risks associated with such estimates, including studies, development and mining; that coal mined may be of a different quality, tonnage or (c) stock market and industry conditions; and strip ratio from the estimates. Resource estimates are necessarily imprecise and depend, to some extent, on (d) the price of relevant commodities and exchange rates. interpretations which may ultimately prove to be inaccurate No assurance can be given that future funding will and require adjustment. Adjustments to coal or mineral be available to Orpheus on favourable terms, or at all. resource estimates could affect Orpheus’s development If adequate funds are not available on acceptable terms and mining plans. Orpheus may not be able to further develop its projects or assume further obligations in the future. Environment The Company’s projects are subject to Australian State Industry Risks and Commonwealth laws, the laws of Indonesia and The Company’s activities in Australia will be subject to the regulations regarding environmental matters and the Native Title Act (Cth) 1993, and its interpretation. Native title discharge of hazardous wastes and materials. As with all and Aboriginal land rights may affect Orpheus’s ability to exploration and mining projects, Orpheus’s projects are gain access to prospective exploration areas or its ability expected to have a variety of environmental impacts. to obtain mining titles. The Company intends to conduct its activities in an environmentally responsible manner and in accordance Compensatory obligations may be necessary in relation with all applicable laws and regulations. to settling native title claims lodged over any of the tenements held or acquired by Orpheus. The level of Kyoto Protocol and Carbon Taxes impact of these matters will depend, in part, upon the location and status of the tenements acquired by The Australian government's ratification of the Kyoto Orpheus. Uncertainty associated with native title issues Protocol to the UN Framework Convention on Climate may affect Orpheus’s plans. Change could adversely impact on the demand and price for coal in the future. Carbon taxes and carbon trading schemes may be introduced which could affect Orpheus's Liquidity and Realisation Risks profitability. Future sales and exports of Orpheus's coal could There can be no guarantee that an active market in be impacted with the implementation of any emissions Shares will develop or that the price of Shares will increase. targets. These are systemic risks which affect all coal Moreover, there may be relatively few buyers or a relatively producers in Australia. high number of sellers of the Shares on the ASX at any given time, which may increase not only the volatility of the market price of the Shares but also the prevailing market price at Clean up concerns which Shareholders can sell their Shares. This may result In relation to Orpheus's planned programs, issues could in Shareholders receiving a market price for their Shares arise from time to time with respect to abandonment costs, that is less than the price paid for their Shares. consequential clean up costs, environmental concerns and other liabilities. In most of these instances, Orpheus could become subject to liability if, for example, there is environ- Tax Issues mental pollution or damage from Orpheus's exploration There may be tax implications arising from the acquisition activities and there are consequential clean up costs at a of Shares, any possible receipt of dividends (both franked later point in time. It is not possible to quantify any such and un-franked) and the disposal of Shares. All prospective contingent liability and, whilst no guarantee can be given, investors should carefully consider these tax implications Orpheus has received no claims or advices which would and if uncertain as to the relevant taxation issues, obtain suggest that there is any particular exposure in relation to further advice from a qualified professional adviser. Tax any of its present interests. liabilities are the responsibility of each individual investor and Orpheus will not be responsible for any tax or related penalties incurred by investors.

PROSPECTUS 23 Orpheus’s operations in Indonesia are subject to Competition Risk Indonesian taxation laws which may change from time The Company faces competition in its business, to the to time. The operations of the Orpheus joint venture extent that there are new entrants or changes in strategy companies in Indonesia will be subject to normal by existing competitors of Orpheus. While Orpheus will Indonesian corporate tax, currently at the rate of 25%. undertake all reasonable due diligence in its business decisions and operations, Orpheus will have no influence In addition, dividends paid by an Indonesian corporate or control over the activities or actions of its competitors, taxpayer to a non-resident, such as the repatriation of which activities or actions may, positively or negatively, dividends to Orpheus are subject to Indonesian withholding affect the operating and financial performance of the tax. Indonesian withholding tax on dividends is currently projects and business of Orpheus. at the rate of 20%. However under a tax treaty between Australia and Indonesia this rate is currently varied to 15%. Insurance Risk Directors and Management Orpheus intends to adequately insure its operations in accordance with industry practice. However, in certain The Company is dependent on a small and skilled team circumstances, Orpheus’s insurance may not be of a to undertake the business of Orpheus and implement its nature or level to provide adequate insurance cover. The exploration and development programs. If Directors or occurrence of an event that is not covered or fully covered managers were to leave Orpheus, Orpheus may not be able by insurance could have a material adverse effect on the to find suitable replacements. Consequently, the exploration business, financial condition and results of Orpheus. and development programs and the management of Orpheus could be affected by the lack of suitable Directors, Insurance of all risks associated with mining investment, managers, employees or staff. development and production is not always available and where available the costs can be prohibitive. The responsibility of overseeing day-to-day operations and the strategic management of Orpheus is concentrated amongst a small number of key executives. The loss of Joint Venture Risk such key employees could have the potential to have a The Company may wish to operate certain projects with detrimental impact on Orpheus until the skills that are lost third parties through joint ventures and Orpheus may be are adequately replaced. adversely affected by the financial failure or default by a joint venture party. Major Shareholder Coalworks will hold, on closure of the offer, based on a minimum subscription, 24.2% of Orpheus’s Shares and as set out in section 8 of this Prospectus entitled Financial Matters. Coalworks has further announced that it may consider an in specie distribution of part of this 24.2% shareholding to its own shareholders which would reduce Coalworks interest below 24.2%.

If Orpheus seeks to undertake a further capital raising in the future, there is no guarantee that the major shareholders will participate in such capital raising. Should this occur, Orpheus may not be able to raise sufficient capital to meet its exploration and/or development objectives and may be required to reduce the scope of its operations.

24 DETAILS OF THE OFFER SECTION 6 Independent Geologist’s Report – Indonesia

PROSPECTUS 25                  ! "#  $ %& ! '% %(     !   

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26 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 

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PROSPECTUS 27               

 

         

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28 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 

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PROSPECTUS 29 

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30 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 

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PROSPECTUS 31 

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32 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 



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PROSPECTUS 33 

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34 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 

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PROSPECTUS 35 

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50 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 

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54 INDEPENDENT GEOLOGIST’S REPORT – INDONESIA 

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PROSPECTUS 55 SECTION 7 Independent Geologist’s Report – Australia

23 March 2011

The Directors Orpheus Energy Limited Level 5, 44 Miller Street North Sydney NSW 2060

Dear Sirs

Independent Technical (Geologist’s) Report

This Independent Geologists Report has been prepared by Minarco-MineConsult (‘MMC’) at the request of the directors of Orpheus Energy Limited referred as (‘the Company’ or ‘Orpheus’). for inclusion in a Prospectus to be released in April 2011 for the issue of shares in the Company upon listing on the Australian Securities Exchange (‘ASX’).

The report, in the form of an independent technical assessment, sets out MMC’s independent review of the geology, mineralisation and resources within three exploration tenements within Australia at Hodgson Vale in Queensland and Ashford and Wingen in New South Wales, that are to be divested by Coalworks Limited (‘Coalworks’) to Orpheus for the consideration of 25 million shares and 12.5 million options in Orpheus Energy.

MMC is part of Runge Limited, a global mining and software consulting group. Specialists from within Runge have contributed to this report and have the appropriate experience relevant to the style of mineralisation and type of deposits under consideration to qualify as Competent Persons as defined in the 2004 edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves.

MMC has conducted its technical review in recognition of the requirements of Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the Valmin Code, 2005).

This Independent Technical (Geologist’s) Report has been prepared in accordance with the relevant requirements of the listing rules of the ASX and the regulatory guidelines RG111 and RG112 issued by the Australian Securities and Investments Commission (‘ASIC’) in relation to the preparation of independent expert reports.

MMC has not been requested to provide an independent valuation nor has it been asked to provide an opinion on the fairness or reasonableness of the offer. The experts whose signatories are attached to this report do not hold an AFS licence and the opinions expressed in this report are solely of a technical nature. MMC has been paid, and has agreed to be paid, professional fees, by the Company for its preparation of this Report. None of MMC or its directors, staff or specialists who contributed to this report has any interest or entitlement, direct or indirect, in the Company, the relevant Assets; or the outcome of this report or the results of the stock exchange listing.

Minarco-MineConsult – Level 16, Australia Square, 264-278 George Street, Sydney, NSW 2000, Australia. PO Box H170, Australia Square, NSW 1215. Telephone: +61 2 82481555 Facsimile: +61 2 82481544 Website: www.minarco-mineconsult.com A.B.N. 17 010 672 321

56 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Figure 1 Location of Relevant Exploration Areas

PROSPECTUS 57 Coalworks holds a 100% interest in coal exploration tenement EPC 1145 at Hodgson Vale in the Clarence-Moreton Basin of Queensland and a 100% interest in a limestone prospect EL 6511 at Ashford in the New England district of New South Wales. A third exploration area EL 7142 at Wingen in the Upper Hunter Valley of New South Wales containing bentonite targets is to be obtained by the Company in assocoiation with Plasminex Pty Ltd a company associated with the share - holders of Coalworks. All exploration areas have been explored to varying stages and the occurrence of target minerals identified although no resources have yet been defined. The location of these exploration areas is shown on Figure 1.

In general MMC has found that:

p Exploration to date has not been sufficient to define resources for the deposits, however exploration targets have been identified within each area. The Company has in place suitable exploration programmes to confirm the likelihood of resources.

p The Hodgson Vale coal exploration permit (EPC 1145) covers an area of 5,100 ha south of Toowoomba, Queensland. This EPC was formerly part of a larger exploration permit held by Millmerran Coal Pty Ltd. Exploration to date has concentrated in the northern area where coal horizon targets up to 22 m have been identified although these horizons are splintered by numerous stony bands. Drilling by Coalworks shows the coal horizons to be variable in thickness but there is a central area showing combined coal sections up to 16 m that will be the subject of further in fill drilling to confirm the coal targets.

p A coal target of 20–38 million tonnes appears reasonable for open cut mining potential within the northern area of the Hodgson Vale deposit.

p The EPC 1145 exploration area is covered by a Tertiary basalt layer of varying thickness tending to be shallower in the north where the exploration has been concentrated and thicker to the south which has seen no exploration interest to date due to the emphasis on potential open cut mining areas. The Company will further explore the target area but will also drill a number of speculative holes in the south to test the presence of deeper coal. Earlier exploration campaigns by others over a wider area external to EPC 1145 have inferred the potential for underground mining targets.

p The coal, with stone bands excluded, has an ash of 37% (adb) and a specific energy of 19 MJ/kg. Beneficiation would be required for export markets. Alternate uses are to be assessed.

p The exploration targets over the EPC 1145 will also be investigated for underground coal gasification (UCG) potential. Indications are that depth and seam thickness, although a highly splintered seam, may satisfy the use of this technology. Permission has been granted by the Queensland Department of Mines and Energy to investigate the application of this coal utilisation. It has been demonstrated that the coal within the Walloon Coal Measures can support UCG and coal to liquids technology.

p The Ashford limestone tenement (EL 6511) covering an area of 1,149 ha contains an identified ribbon of outcropping limestone running north-south through the licence area. Exploration to date has identified a location of bright limestone of high purity CaO that will be targeted in a planned exploration programme over the next two years. Limestone targets of 40 million tonnes as well as extensive lower grade limestone are identified. Further investigation of markets will need to be completed to confirm commercial exploitation of the deposit.

p The Wingen bentonite exploration area is adjacent to and north of the Cressfield bentonite operation northwest of Scone in the Hunter Valley of New South Wales and contains identified near surface areas of up to six bentonite horizons separated by erosional gullies. Limited sampling to date from outcrops indicates the cation exchange capacity of the bentonite clays to be at least equivalent to those currently being mined in the region. An exploration programme to determine the thickness of the bentonite horizons and their extent will be conducted over the next two to three years. Markets available for the product will need to be ascertained.

p The exploration programmes and budgets that have been allocated to support these programmes are deemed reasonable and sufficient for the purpose of confirming the presence of resources.

Each of the exploration areas has been subject to varying degrees of historical exploration activity and show potential target locations that will be the subject of more detailed exploration by the Company.

Yours sincerely,

Philip Mitchell Meryl Peterson Bart Stone Executive Consultant Chief Coal Geologist Chief Geologist Minarco MineConsult Runge Limited Pincock Allen and Holt

58 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Table of Contents 1 Introduction ...... 54 1.1 Purpose of Report ...... 54 1.2 Capability and Independence ...... 54 1.3 Limitations and Exclusions ...... 54 1.4 Expert and Specialists ...... 54 1.5 Inspections...... 54 1.6 Terms ...... 54 1.7 Information Sources ...... 55 2 Hodgson Vale ...... 55 2.1 Location ...... 55 2.2 Regional Geology ...... 55 2.3 Exploration History ...... 56 2.4 Geology of EPC 1145 and Coal Quality ...... 57 2.5 Resource Potential ...... 57 2.6 Exploration Programme ...... 62 2.7 Conclusion ...... 62 3 Ashford Limestone Exploration Area ...... 62 3.1 Location ...... 62 3.2 Regional Geology ...... 62 3.3 Exploration History ...... 63 3.4 Geology and Mineral Quality...... 66 3.5 Resource Potential ...... 66 3.6 Exploration Programme ...... 66 3.7 Conclusion ...... 68 4 Wingen Bentonite Deposit ...... 68 4.1 Ownership and Title ...... 68 4.2 Location ...... 68 4.3 Regional Geology ...... 68 4.4 Exploration History ...... 68 4.5 Geology of Deposit...... 69 4.6 Mineral Quality ...... 69 4.7 Resource Potential ...... 71 4.8 Exploration Programme ...... 72 4.9 Conclusion ...... 72 List of Tables Table 2.1 Water Bores Penetrating Basalt ...... 56 Table 2.2 Coalworks Exploration Holes ...... 56 Table 2.3 Coal Quality (Hole MCPL338) ...... 57 Table 2.4 Exploration Budget – Hodgson Vale ...... 62 Table 3.1 Coalworks Exploration Ashford Limestone ...... 63 Table 3.2 Analytical Report of Ashford Limestone Deposit...... 66 Table 3.3 ALS Chemex Analyses of 64 Limestone Samples from Ashford...... 67 Table 3.4 Ashford Limestone Exploration Programme ...... 68 Table 4.1 Results of Wingen Maid Outcrop Samples ...... 71 Table 4.2 Wingen Exploration Budget ...... 72 List of Figures Figure 2.1 Hodgson Vale Location ...... 55 Figure 2.2 Coal Thickness, Water Bores and Exploration Hole Locations ...... 58 Figure 2.3 Cross Sections Northern Area of EPC 1145...... 59 Figure 2.4 Tertiary Basalt Layer Thickness...... 61 Figure 3.1 Location of Ashford Limestone Deposit ...... 64 Figure 3.2 Ashford Limestone Exploration and Outcrop Zone ...... 65 Figure 4.1 Location of Wingen Bentonite Exploration Area ...... 70

PROSPECTUS 59 1. Introduction The report is based mainly on information provided by Orpheus Energy, either directly from discussions or from This report has been prepared by Minarco-MineConsult reports, interviews and correspondence with other organi- (MMC) for inclusion in a Prospectus for the issue of shares sations whose work is the property of Orpheus Energy. in Orpheus Energy Limited (‘the Company’ or ‘Orpheus’) upon the listing of the Company on the Australian The report specifically excludes all aspects of legal Securities Exchange (‘ASX’). issues, commercial and financing matters, land titles and agreements, excepting such aspects as may MMC was instructed by the directors of the Company directly influence the technical assessment of the asset. to conduct an independent geologist’s review (‘ITR’) of the exploration tenements held by the Company or to be In MMC’s opinion, the information provided by Orpheus acquired by the Company upon listing. The tenements are Energy and its sub consultants was reasonable and nothing located in Queensland and New South Wales. This report discovered during the review suggested that there was sets out MMC’s technical assessment of the geology and any significant error, misrepresentation or omission in resources within these tenements. respect of that information. The report was prepared in accordance with the relevant requirements of the ASX Listing Rules and the ASIC Regulatory Guides on the independence of experts Due to the different types of mineral deposits being and contents of expert reports. reviewed, MMC has engaged persons who have specific knowledge of and experience in the exploration and assessment of the specific minerals to contribute to the report. Specialists with the relevant technical experience MMC operates as an independent technical consultant to be considered as ‘experts’ and competent persons providing geological services, resource evaluation, mining contributing are: engineering and mine valuation services to the resources and financial services industries. The diverse experience p Merryl Peterson is a geologist with 20 years experience covers all levels of mine assessment from designing in the coal industry in Australia and a member of the exploration strategies through to final feasibility studies and AusIMM. She has particular experience of exploration coal market assessment. MMC has extensive experience in and geological structure of coal measure strata within independent reporting and valuation of mines and mineral the coal basins of Queensland. She is familiar with the resources for financiers, capital markets and acquisitions. nature of deposits that are the subject of this technical Neither MMC nor the specialists assisting in the preparation assessment and has the appropriate qualifications of this report have had any previous engagement with the and relevant experience to be considered an expert Company. and competent person.

MMC has agreed to be paid professional fees and p Bart Stone is a member of the Society of Mining expenses for its preparation of this report. None of MMC, Engineers and Canadian Institute of Mining and its directors, staff or sub-consultants who contributed to Metallurgy (Recognised Overseas Professional this report has any direct or indirect interest in: Organisation) and has over 30 years experience in assessing coal and mineral deposits including p the Company or securities in the Company, bentonite and limestone occurrences in the USA and p Related Parties, Kenya. He is familiar with the nature of deposits that are the subject of this technical assessment and has p the Relevant Assets, and the appropriate qualifications and relevant experience to be considered an expert and competent person. p the outcome of the Company’s reinstatement on the ASX. Further details of persons who contributed to this report are included in Annexure A. MMC has independently assessed the Relevant Asset of the Company by reviewing the pertinent data, including resources, exploration history, mining potential and No site inspections were undertaken with respect to technical assessment reports. All opinions, findings and the preparation of this report. Meetings were held with conclusions expressed in this report are those of MMC representatives of Orpheus Energy to determine the nature and its specialist advisors. of the material available and seek information and reports The Specialists who contributed to the findings within this to assist in the evaluation of the exploration tenements. report have each consented to the matters based on their information in the form and context in which it appears. A glossary of terms is attached at the end of this report Drafts of this Report were provided to the Company, but in Annexure C. only for the purpose of confirming the accuracy of factual material and the reasonableness of assumptions relied upon in this Report.

60 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA The list of data that was referenced for this technical report The Hodgson Vale project lies within the Clarence-Moreton is included in Appendix B. Basin, with the coal seams occurring within the Middle to Upper Jurassic Walloon Coal Measures. These measures consist of interbedded sandstone, siltstone, shale, 2 Hodgson Vale mudstone and coal.

The coal tends to occur in thick banded intervals and The Hodgson Vale project area is held by Coalworks under with post-Jurassic erosion of the coal measures an uneven EPC 1145 and covers an area of 51 sq km. The project is surface has been formed, which has been covered by a approximately 10 km south of Toowoomba which is 160 thick sequence of Tertiary basalts. The basalt thickness is km by rail from the Port of Brisbane. The New England controlled by the paleo-topography and can be up to 100 Highway cuts across the north-west corner of EPC1145, m thick, with the thinnest section in the vicinity of Hodgson whilst the Toowoomba-Millmerran and Warwick railway line Creek. passes about 3 km northwest of the EPC. In places the basalt has intruded the coal measures Hodgson Creek, a major tributary of the Condamine River, resulting in the coal being heat affected and coked. It is flows from north-east to south-west through the EPC. The likely that these heat affected areas are where the coal location and general services within the area are shown on seams had been exposed near the erosional unconformity Figure 2.1. between the coal measures and the later basalt flows.

Figure 2.1 Hodgson Vale Location

PROSPECTUS 61 Coal Horizon Total Depth Base of Basalt Hole ID (m) (m) From (m) To (m) Thickness (m)

16412 61.3 44.8 57.0 57.0 0.9 17218 42.7 36.6 17932 91.4 0.0 36.6 59.7 23.1 30059 73.2 25.6 43.6 65.5 21.9 30060 67.1 26.2 40.8 62.5 21.7 32102 122.0 0.0 96.6 106.4 9.8 35139 45.7 38.1 42230971 107.6 104.0 106.0 107.6 1.6 36303 69.5 0.0 27.4 45.7 18.3 61123 45.7 0.0 64893 111.0 97.0 108.0 109.0 1.0 83732 137.5 130.5 94661 79.0 75.0 119764 91.0 ? 67.0 88.0 21.0

In 1971–1974 the Hodgson Vale area was part of the large uncertain, as a number of reports give different locations. 1,147 km2 Authority to Prospect (A-P) 112C held by The Geos Mining report (Geos Mining, 2008) used the Millmerran Coal Pty Ltd. Although a total of 262 holes locations derived from the Queensland Government were drilled over the prospect the drilling density in the database. All the water bore holes that intersected coal Hodgson Vale area was reported at averaging approxi- are in the northern part of the EPC. mately one hole in every 8 km2 (Haites, 1974). A single coal seam cored hole (MCPL338) was drilled within the The remaining 47 water bore holes across the area were current EPC 1145 boundary. This hole, located adjacent to to depths varying from 70 m to 218 m demonstrating the a water bore 30060, intersected some 20 m of coal at a thickness of the Tertiary basalt across the majority of the depth of 40.5 m correlating well with the nearby water tenement. bore, although stone bands are included in the composite In 1978 a further six open holes were drilled by Millmerran coal section. To date this is the only hole within EPC 1145 Coal (HV01-6), with one hole HV06 intersecting coal and that has been sampled for coal quality data. the remainder terminating in basalt. Hole HV06 was adjacent Prior to 1981 the Water Resources Commission had to the previously drilled MCPL338 and as expected drilled 61 water bores in the Hodgson Vale area, of which intersected a coal section including stone bands 22.7 m 14 penetrated the Tertiary basalt overlying the coal thick at a depth of 41 m similar to the earlier hole and measures. Nine of these holes were drilled to sufficient water bore. The five holes that terminated within the basalt depth into the coal measures to intersect and confirm the were shallow with depths ranging between 15 m and 44 m presence of coal. Although these holes have lithology logs, whereas hole HV06 was to a depth of 70 m. It is not they are rudimentary in the description of the stratigraphic known whether these holes were geophysically logged. sections and it is likely that the coal logged in these water In 2008 Coalworks drilled five open holes (HVE001-005), bores includes interbedded sediments within the interval, of which three intersected coal, whilst the other two as evidenced by adjacent later holes. The holes that terminated in basalt. These holes were all geophysically penetrated the basalt are included in Table 2.1. Five holes logged. The results for the holes that intersected coal are that were terminated shortly below the basalt horizon were provided in Table 2.2. insufficient in depth within the coal measure strata and did not penetrate coal. The holes demonstrate the variability of the stone band thicknesses between the coal plies within the coal horizons. The coal in hole 119764 was logged as being intruded The location of all holes within the exploration area is shown by basalt. The location of some of these water bores is in Figure 2.2 with those that intersected coal identified.

Coal Horizon Total Depth Base of Basalt From To Coal Horizon Coal Hole ID (m) (m) (m) (m) Thickness (m) Thickness (m)

HVE0003 195.0 111.0 124.0 133.3 9.3 1.0 HVE0004 207.0 71.0 86.45 136.45 50.0 8.05 HVE0005 91.4 0.0 36.6 59.7 23.1 6.8

62 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Coal IM Ash VM TS SE Description (m) RD (%) (%) (%) (%) (MJ/kg)

Including stone bands 19.15 1.76 5.9 52.7 23.4 0.38 12.85 Excluding stone bands 16.43 1.58 5.7 36.7 31.6 0.38 19.16

reported (Millmerran, 1983) that the coal within the larger The coal interval at Hodgson Vale occurs as a number of Authority to Prospect area was a potential source for a coal coal plies interbedded with bands of claystone, shale and to liquids. The reduced exploration target within EPC 1145 siltstone. The thickest development of the coal-bearing would not independently sustain such a venture however intersection is up to 23 m centred on holes 17932, 30059 as a result of interest in underground coal gasification (UCG) and 30060 in the central northern area, and it appears that technology and successful pilot plant demonstrations the cumulative coal thickness in this area is up to 20 m. at Kingaroy and Chinchilla in the Walloon Coal Measures of However, due to the lack of detail in the water bore lithology Queensland (Cougar Energy and Linc Energy), such logs the thickness of the coal bands within this interval is technology is not discounted for the Hodgson Vale deposit. not accurately known. The cumulative coal thickness decreases rapidly away from this centre of deposition, whilst the thickness of interbedded sediments increases, The Geos report outlined a prospective target area for and in the Coalworks hole HVE004, 350 m distant from exploration that could define open cut mining potential. this depocentre, the cumulative coal thickness is 8 m, The report estimated a target of 5-20 million tonnes of within a coal-bearing interval of 50 m. The presence of coal within this area. MMC has also estimated a potential lower seams has not been identified by the drill holes coal tonnage within this polygon shown on Figure 2.2 from which have been terminated at what appears to be the rudimentary model developed from the drill hole data. potential economic depths for possible open cut mining. The tonnage estimated is 38 million tonnes, however this is weighted by the 18 m thick intersection of coal in water Collar locations and lithology logs were provided by Orpheus bore 36303 (in the western part of the polygon), which for the water bores and the holes drilled by Millmerran Coal may in fact be interbanded coal and stone. A target of and Coalworks. From these a rudimentary geological model 20 million tonnes is therefore considered reasonable. has been created by MMC over the northern part of EPC In consideration of the potential for open cut development 1145 to assess the potential for resources. Each coal ply the New England Highway passes through the west of the has been assigned a numeric name, commencing from EPC and may sterilise part of the coal that could be able the first ply downhole, but no attempt at correlation of the to be recovered. plies has been attempted. This model allows total thick - ness of coal and inter-ply partings to be represented and The potential for underground coal targets has not been an estimate obtained of potential coal tonnes. With no assessed due to the lack of holes penetrating the overlying geophysical logging of the coal interval recorded in the basalt within the central and southern part of the licence water bores the seam sections depicted may in fact be area. This potential will be tested by drilling two open holes interbanded coal and sediments, giving an erroneously in the southern area as part of stage 2 of the exploration high coal thickness. A contour of the total coal thickness programme. (excluding stone bands) is shown in Figure 2.2, whilst cross sections through the deposit are shown in Figure 2.3. In support of the potential for UCG Coalworks has recently obtained permission from the Queensland Department of The overlying basalt flow has also been modelled. In several Mines and Energy to investigate UCG over the deposit. of the holes basalt occurs between the coal plies, and This permission is in accordance with a recent policy coking of the coal has been recorded in the lithology logs. enabling such projects within coal exploration and develop - Figure 2.4 is a contour of the basalt thickness over the ment licences areas. The coal seam thickness and seam complete EPC. The northwest corner of the tenement has depth are within the range suitable for this technology and basalt flows exceeding 200 m and 100m to the south and with an overlying basalt across the majority of the area south west. The basalt cover is thin or non existent in the surface subsidence would be minimal and hence ground central north coincident with the known coal sections that water inflow. The potential depends on the outcome of the have been intersected. exploration progamme to confirm sufficient resources, coal thickness trends and minimal in seam stone bands that One cored hole exists (MCPL338) with the coal interval could otherwise detract from the efficiency of the coal analysed as seven plies, including three stone bands gasification. totalling 2.7 m. The results summarised in Table 2.3 show the qualities on an air dried basis. The coal is relatively high In essence, insufficient exploration and coal quality testing in ash and low in energy and would require washing to a has been completed to date to provide a level of confidence lower ash value to meet export markets. Alternative uses for to ascribe resources to this tenement. the coal have not yet been assessed although it has been

PROSPECTUS 63 Figure 2.2 Coal Thickness, Water Bores and Exploration Hole Locations

64 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Figure 2.3 Cross Sections Northern Area of EPC 1145

PROSPECTUS 65 Figure 2.3 Cross Sections Northern Area of EPC 1145

66 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Figure 2.4 Tertiary Basalt Layer Thickness

PROSPECTUS 67 Minimum Subscription Maximum Subscription Stage 1 Stage 2 Total Stage 1 Stage 2 Total Activity ($) ($) ($) ($) ($) ($)

Drilling 275,000 55,000 330,000 275,000 275,000 550,000 Geophysical logging 20,000 5,000 25,000 20,000 20,000 40,000 Geological Assessment, Modelling 15,000 10,000 25,000 15,000 15,000 30,000 Coal quaility 30,000 30,000 30,000 30,000 60,000 Survey, land management 10,000 20,000 30,000 10,000 10,000 20,000 Contingency 50,000 10,000 60,000 50,000 50,000 100,000 Total 400,000 100,000 500,000 400,000 400,000 800,000

During 2009 Geos Mining compiled a literature search The Geos 2008 report recommends re-assessment of the of coal bed methane (CBM) data (Geos Mining, 2009). original water bore logs to ascertain whether these holes It was concluded that in the southern part of EPC 1145 provide a reliable representation of the coal seams. It may the Walloon Coal Measures are likely to be at depths of be that these holes are only useful to indicate the presence 150-200 m, for which the second stage drilling should be of coal, rather than an absolute measure of the thickness sufficient. The depths however are considered insufficient including intervening stone bands. A re-assessment should to contain high seam gas methane contents for CBM be followed by a number of exploration holes in the most exploitation. It has been suggested that there may some prospective area to firm up the coal tonnage. The proposed underground mining potential, but insufficient exploration exploration and analysis budget allocates between $500,000 has been undertaken to date to justify such a prospect. and $800,000 in a two stage progamme, concentrating in the northern area in the first instance with five drill holes, 3 Ashford Limestone Exploration Area two of which will be partly cored including geophysical logging and coal quality analysis. The second stage, depending on the outcome of the initial phase will consist The Ashford Exploration Licence (EL 6511) is located 10 of a minimum of two open holes in the southern part of km northwest of the town of Ashford in the north of New EL 1145 to confirm the presence of deeper coal and will South Wales (NSW) and approximately 180 km southwest proceed depending on the outcome of the first stage. of Wallangarra on the NSW/Queensland border. A rail Exploration will be expanded if the maximum subscription connection from Wallangarra to Brisbane exists with a is achieved. The expenditure appears reasonable and is route distance of 358.5 km. The location of the licence shown in Table 2.4. area is shown in Figure 3.1.

The licence covering an area of nine graticular units was granted to Shield Energy Limited, now Coalworks Limited, The central northern area of EPC 1145 has coal sections on March 3, 2006 for a two year period. The licence area up to 17 m within a total 22 m coal horizon identified, but was reduced to four units (1,149 hectares) on renewal for highly variable thickness ranges over the area. The relatively a further two years to March 2, 2010 with the northwest shallow depth and thinning Tertiary basalt cover indicate boundary truncated at the Kwiambal National Park and open cut potential. The coal with stone bands excluded the eastern half of the original area relinquished due to has an ash of 37% (adb) and a specific energy of 19 MJ/kg. being beyond the identified limestone zone. The licence Beneficiation for export or alternate markets will need to permits exploration for Group 2 minerals (non metallic) be assessed. which includes limestone. The annual expenditure of The southern portion of EPC 1145 holds little potential $14,000 is current under the conditions for the licence. for open cut coal. Many of the holes in the southern area have been drilled to greater than 100 m depth and have terminated in basalt. The two holes proposed under the The district geology of the Ashford area includes a second stage of the exploration program will confirm the deepwater marine sedimentary sequence of lithic presence or otherwise of deeper coal targets that have sandstone, mudstone, chert, jasper, volcaniclastic been inferred from regional drilling. greywacke and limestone that are part of the Late Devonian to Early Carboniferous Texas beds (Brown & Stroud 1997). The sedimentary sequence was primarily deposited as turbidite flows in a deep ocean environment.

68 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Permian granitoids of the Bundarra Plutonic Suite intrude the sedimentary sequence generating a contact The potential of the Ashford Limestone as a source of high metamorphic aureole which resulted in recrystallization of quality calcium carbonate has been known for many years, portions of the Ashford Limestone. Basalt dykes, possibly and prior target estimates of tonnes have been made with - related to the intrusion of the Bundarra Plutonic Suite are out distinguishing the grade of the limestone. Kallangur also known to have intruded parts of the Ashford Lime Pty Ltd drilled 118 holes in 1981-1983 to define the Limestone (Lishmund et al. 1986). Alluvium is present area containing the whitest limestone and a target estimate along drainage courses as the result of weathering, of 40 million tonnes of over 98% CaCO3 to a depth of 20 m erosion and deposition during the Quaternary period. was reported by Flood (1993) based on these drilling results.

The limestone deposit is in the form of a narrow north– Exploration by Coalworks in 2008 incorporated twelve south trending band that runs through the licence area shallow percussion drill holes within the central area of dipping steeply to the west and outcrops along a north the lease which was recognised as the most prospective south line approximately through the centre of the licence area identified from the earlier exploration work. This drilling area. The zone of limestone occurrence and the targeted indicated that purer limestone is located near the western drilling area are shown in Figure 3.1. edge of the outcropping Ashford Limestone. A total of 63 samples each over a section of one metre of limestone were analysed. The location of the holes is shown on Figure 3.2 and the drilling results in Table 3.1.

Hole Limestone Sample Depth Intercept Depth No. Intervals Hole ID (m) (m) Samples (m) Comment

AFP01 13.0 1 m to 3 m 0 Nil Minor limestone, mostly altered – not sampled

AFP02 14.0 Not reported 4 2 m – 4 m Hole terminated in dissolution cavity. 9 m – 11m Pale off-white limestone 0.7m intercepted

AFP03 9.0 6 m to 7 m 1 6 m – 7 m Off white limestone

AFP04 20.0 Not reported 18 2 m – 20 m Hole terminated in pale grey limestone. at 1 m intervals Pale grey to off-white limestone intercepted. Some iron staining evident

AFP05 15.0 Not reported 3 3 m – 4 m Hole terminated in pale grey limestone. 6 m – 7 m Of white limestone in upper 6 m of hole. 11 m – 12 m Substantial clay present.

AFP06 20.0 Not reported 6 3 m – 5 m Terminated in off-white limestone 13 m – 15m 18 m – 20 m

AFP07 20.0 Not reported 4 4 m – 6 m Terminated in pale grey limestone. 12 m – 14 m Minor off-white limestone below 12 m.

AFP08 17.0 10 m to 15 m 7 2 m – 3 m Terminated in dissolution cavity. 6 m – 7 m Pale grey limestone intersected to 10 m 10 m – 15 m and off-white limestone 10–15 m.

AFP09 3.5 2 m to 3.5 m 1 1 m – 3 m Terminated in dissolution cavity. Pale grey limestone present

AFP10 4.5 1 2 m – 3 m Terminated in dissolution cavity (adjacent to AFP09). Pale grey limestone present.

AFP11 20.0 3 m to 20 m 17 2 m – 20 m Pale grey to off-white limestone. at 1 m intervals Limestone soft below 11 m.

AFP12 8.5 Not reported 1 7 m – 8.5 m Terminated in dissolution cavity. Pale grey limestone. Substantial clay in upper 7 m.

PROSPECTUS 69 Figure 3.1 Location of Ashford Limestone Deposit

70 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Figure 3.2 Ashford Limestone Exploration and Outcrop Zone

PROSPECTUS 71 Analytical Report

SampleAl2O3 CaOFe2O3 K2OMgO MnO Na2O

ASH 001 0.09 56.0 0.06 0.01 0.29 <0.01 <0.01 ASH 002 0.05 55.6 0.02 <0.01 0.34 <0.01 <0.01 ASH 003 0.10 55.6 0.04 0.02 0.34 <0.01 0.01 ASH 004 0.48 54.3 0.16 0.02 0.27 <0.01 <0.01 ASH 005 0.05 56.4 0.03 0.01 0.32 <0.01 <0.01

a range of values for CaO where most fall within the The assay results of the sampled intervals listed in Table 3.1 designation of an acceptable quality limestone material. returned the best results in hole AFP011 with an intercept The available information is insufficient for a modern of 16 m grading 54.8% CaO, and in the 5 m intercept in resource estimate, or to confirm suitability for individual hole AFP08 showing 55.04% CaO. Pure limestone has a markets, but it does indicate that high quality limestone is chemical composition of 56% CaO, so these two holes available from this deposit. have very high grades of calcite (the mineral comprising limestone). Both holes were drilled in the northern part of Limestone markets in New South Wales and Queensland the drilled area. The brightness tests were encouraging have been increasing slowly with time, but are dominated with four samples tested, exhibiting results between 81% by the use of limestone in the cement industry. Additional and 89.27%. usage of limestone in the region include construction, general industrial limestone, agricultural limestone, ground Coalworks’ consultants, Geos Mining, have recommended calcium carbonate (GCC) and calcined limestone. The a scoping study of limestone applications, markets and potential for use in roadbed substrate is a potential use processing requirements for the two brightest samples which should be examined carefully. from the 2008 drilling program, and based on the results of the study, further drilling would be conducted using a small Limestone constitutes one of the most important industrial universal rig with R/C and diamond drilling capabilities. minerals in the world because of its versatility and use in MMC concurs with the suggestion of a scoping study, a wide variety of industry and industrial processes. In the but would strongly recommend that most efforts should USA, limestone comprises 69 percent (2009 USGS) of all be directed towards determining the potential to market of the crushed stone used. Most limestone crushed rock the material within one hundred kilometres of the Ashford is used in construction aggregates, mostly in highway EL site. Limestone marketing is most impacted by distance and road construction and maintenance (83%), cement to the purchaser/user and other characteristics have lesser manufacturing (11%), lime manufacturing (2%), agricultural significance. (2%) and 2% for special and miscellaneous uses. The low unit value of limestone dictates that most of it is produced very close to the primary users in highly urban environments. In very general terms, a 6.7 km limestone band with a width Because of similar levels of industrialization and urbanization, of 1 km and calculated to a depth of 100 m would contain Australia shows similar usage ratios for limestone as the an exploration target of 1.8 Billion tonnes of limestone, but United States. including substantial low grade limestone suitable only for agricultural lime. This estimate includes the approximate size of the Ashford Limestone within the confines of the MMC concurs with Orpheus Energy that further drilling of EL 6511 tenement. The percentage of this zone that would the exploration target area is warranted and an evaluation meet high brightness and high CaO content is unknown of the potential market within 100 km of the tenement site because most of the ‘upgrading’ to better quality is be undertaken. The extent of the cavity system identified in related to the metamorphic effects of the intrusive rocks. holes AFP09 and AFP10 within the most prospective section The estimate of Flood (1983) of 40 million tonnes is in the west requires further definition. The extension of possibly a more appropriate target for exploitation and the potential high quality limestone section north of hole was contingent on the planned exploration programme. AFP11 will be tested as part of the new drilling programme The recent sampling of the Ashford Limestone shows that together wth bulk sampling. The exploration expenditure samples ASH 001 through ASH 005 in Table 3.2 have the proposed for Ashford is shown in Table 3.4. necessary chemical analyses to produce a product across most of the spectrum of uses of high quality limestone Detailed marketing plans following the results of the drilling material. The 64 grab samples submitted to ALS Chemex and sampling programme in year 2. MMC concurs with laboratories in July 2008 presented in Table 3.3 show this exploration and assessment approach.

72 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Certificate of Analysis BR08093705 WEI-21 Recvd Wt. ME-ICP86 CaO ME-ICP86 MgO ME-ICPBB Al O ME-ICP86 Fe O ME-ICP86 SiO ME-GRA05 LOI Sample 2 3 2 3 2 Description Kg % % % % % % 0.02 0.01 0.01 0.01 0.01 0.01 0.01

AFD100 1.41 52.9 0.34 1.13 0.39 2.46 42.48 AFD101 1.47 52.4 0.35 1.48 0.39 3.04 42.10 AFD102 1.60 53.6 0.55 0.74 0.17 1.73 43.00 AFD103 1.35 54.4 0.39 0.49 0.21 0.87 43.42 AFD104 1.29 46.6 0.28 3.07 3.75 7.41 38.48 AFD105 1.27 49.8 0.28 2.83 1.06 4.95 40.67 AFD106 1.43 52.1 0.19 1.49 0.51 3.29 42.10 AFD107 1.77 51.1 0.24 2.28 0.74 4.06 41.21 AFD108 1.52 54.7 0.32 0.39 0.12 0.66 43.58 AFD109 1.56 52.3 0.40 1.29 0.96 2.51 42.25 AFD110 1.37 33.8 0.43 9.38 3.23 22.70 29.43 AFD111 1.44 41.7 0.38 6.00 2.66 13.30 35.20 AFD112 1.52 53.0 0.37 1.12 0.37 2.34 42.53 AFD113 1.65 54.5 0.39 0.33 0.20 0.67 43.60 AFD114 1.47 54.6 0.30 0.33 0.12 0.74 43.60 AFD115 1.53 54.3 0.28 0.41 0.18 0.97 43.50 AFD116 1.36 54.7 0.36 0.31 0.16 0.59 43.64 AFD117 1.70 54.5 0.38 0.36 0.18 0.79 43.54 AFD118 0.96 54.6 0.29 0.38 0.19 0.67 43.50 AFD119 1.51 54.5 0.31 0.41 0.15 0.89 43.51 AFD120 1.36 53.1 0.42 0.84 0.26 2.18 42.87 AFD121 1.44 54.1 0.37 0.45 0.54 0.90 43.34 AFD122 1.79 54.9 0.36 0.32 0.11 0.43 43.63 AFD123 1.70 48.9 0.30 2.84 0.95 6.46 40.01 AFD124 1.81 38.3 0.39 8.18 2.42 16.15 33.76 AFD125 1.55 49.8 0.28 2.55 0.75 5.45 40.68 AFD126 1.82 50.5 1.00 0.85 3.63 2.21 41.33 AFD127 1.77 52.3 1.29 0.47 1.11 1.41 42.96 AFD128 1.93 53.6 0.60 0.29 0.81 1.21 43.14 AFD129 1.84 54.1 0.70 0.22 0.47 0.48 43.65 AFD130 1.41 52.6 0.46 0.45 2.14 1.03 42.76 AFD131 1.74 53.7 0.42 0.32 1.25 0.72 43.11 AFD132 1.61 55.1 0.33 0.06 0.09 0.15 43.80 AFD133 1.74 54.6 0.33 0.18 0.33 0.72 43.57 AFD134 1.49 54.7 0.32 0.14 0.30 0.48 43.69 AFD135 1.81 54.4 0.36 0.23 0.25 0.84 43.57 AFD136 1.86 54.8 0.55 0.07 0.07 0.18 44.02 AFD137 1.82 54.8 0.53 0.07 0.03 0.31 43.93 AFD138 1.85 55.0 0.35 0.06 0.03 0.19 44.00 AFD139 1.86 55.1 0.35 0.03 0.01 0.09 43.99 AFD140 1.64 55.1 0.38 0.04 0.01 0.10 43.99 AFD141 1.91 55.0 0.40 0.05 0.02 0.13 44.00 AFD142 1.70 55.0 0.38 0.06 0.01 0.11 43.97 AFD143 1.40 53.9 0.37 0.38 0.28 1.33 43.25 AFD144 1.80 54.5 0.39 0.22 0.10 0.65 43.64 AFD145 2.37 53.6 0.36 0.76 0.26 1.84 42.81 AFD146 1.91 54.7 0.39 0.24 0.07 0.46 43.69 AFD147 1.83 54.8 0.43 0.18 0.05 0.29 43.80 AFD148 1.78 54.9 0.42 0.11 0.04 0.20 43.85 AFD149 2.31 54.8 0.43 0.11 0.04 0.19 43.92 AFD150 1.75 54.9 0.37 0.10 0.04 0.17 43.91 AFD151 2.40 54.8 0.35 0.14 0.07 0.29 43.88 AFD152 2.04 54.8 0.37 0.13 0.05 0.23 43.85 AFD153 2.28 54.4 0.37 0.32 0.06 0.64 43.63 AFD154 1.22 54.7 0.42 0.12 0.03 0.22 43.92 AFD155 1.59 54.9 0.42 0.08 0.03 0.15 43.97 AFD156 1.74 55.0 0.37 0.05 0.01 0.07 44.00 AFD157 1.66 54.8 0.47 0.06 0.02 0.11 44.03 AFD158 2.65 54.7 0.55 0.08 0.03 0.14 44.02 AFD159 1.86 54.7 0.51 0.09 0.05 0.19 43.97 AFD160 1.84 54.7 0.44 0.15 0.05 0.27 43.94 AFD161 1.78 54.9 0.39 0.09 0.03 0.16 43.99 AFD162 2.13 53.3 0.32 1.05 0.32 1.61 42.92 AFD163 Not Recvd

PROSPECTUS 73 Minimum Subscription Maximum Subscription Stage 1 Stage 2 Total Stage 1 Stage 2 Total Activity ($) ($) ($) ($) ($) ($)

Drilling 100,000 140,000 240,000 100,000 140,000 240,000 Geophysical logging 15,000 20,000 35,000 15,000 20,000 35,000 Geological assessment, resource estimation 10,000 10,000 20,000 10,000 10,000 20,000 Assay 10,000 14,000 24,000 10,000 14,000 24,000 Survey, land management 5,000 1,000 6,000 5,000 1,000 6,000 Contingency 10,000 5,000 25,000 10,000 5,000 15,000 Total 150,000 190,000 340,000 150,000 190,000 340,000

A bentonite deposit at Cressfield immediately southwest The Ashford deposit contains a potential target of approxi- EL7142 has been mined over a number of years. mately 40 million tonnes of higher grade Ca0 as well as The area supports a significant rural industry including substantial low quality limestone suitable for agricultural grazing and cropping. The topography rises from river use. Ashford is not near major urban markets for crushed valleys to significant ridge lines to the east and west with rock or cement, but there may be a captive market that the Liverpool Ranges further to the north. The surface in could be developed in closer proximity. the licence area is cut by creeks and erosional channels. To the west of EL7142 lies the Wingen Maid National Park Wingen Bentonite Deposit which borders on part of the EL boundary. The location of the exploration licence and application area is shown on Figure 4.1. The exploration licence EL7142 covers approximately 18 km2 (6 sub blocks) and was acquired in May 2008 for a period of two years. The initial area that was granted The Wingen prospect is located on the northern extension contained a Mineral Reserve that excluded the right to of the Permo-Triassic Sydney Basin. The stratigraphic units explore within part of the licence area. This reserve was in the area consist mainly of claystones, siltstones, sand - found to be an anomaly in the minerals titles record and stones and conglomerates with coal horizons of variable subsequently a new application for a larger exploration thickness and quality interspersed within the Permian units. area (ELA3657) including the current EL and Mineral The early Permian rock units contain coal equivalent to Reserve was made in February 2009 covering approxi- the Greta Coal Measures that outcrop east of Wingen 2 mately 72 km or 24 sub-blocks. The exploration titles while the late Permian sequences contain the Wollombi allow for the exploration of Groups 1, 2 and 5 minerals. and Wittingham Coal Measures which are part of the These are described as: Singleton Coal Measures Super-Group. These are the major coal producing units in the Hunter Valley. The p Group 1 elemental minerals (metallic) bentonite beds which have been derived from volcanic p Group 2 non metallic rocks occur within the upper half of the Singleton Coal Measures Super-Group. The more recent Triassic period p Group 5 clay minerals. Narrabeen Group overlies these upper coal measures.

The principal target is the occurrence of bentonite clay Coal had been mined at Bickham northeast of Wingen minerals. The exploration licence and the licence application in the early part of last century and more recently a bulk are owned by Plasminex Pty Ltd. Orpheus Energy Group sample trial pit was established in 2004. Pty Ltd has signed a farm in joint venture giving it the right to spend $500,000 to earn 50% of the exploration licence. The Triassic Narrabeen beds which overlie the bentonite horizons show a very shallow dip of 1 to 2 degrees to the north-west. However, at one location near the New England Highway the dips steepen rapidly with one dip at The exploration site is located 3 km southwest of the town 35 degrees potentially influenced by the regional Hunter of Wingen in the Upper Hunter Valley of NSW and 14 km Reverse Fault further to the east. north of the larger town of Scone. The Main Northern Railway line and the New England Highway services Wingen and run parallel to the long dimension of the Wingen Exploration Licence (EL 7142) and approximately Reconnaissance mapping of the area was conducted by 2 km to the east. The rail and highway skirt around the H. de Keyser for the NSW geological survey in September eastern and northern boundaries of the application area. 1971. His work indicated the presence of extensive

74 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA deposits of bentonite in the Upper Hunter Valley. into grits and coarse-grained sandstone. The underlying Later detailed exploration located one area of potential contact with the Permian sediments is not exposed commercial value and indicated the possibility of another but is unconformably based on drilling information in the Wingen Maid area. from the Cressfield area.

Further exploration activity over an area between Wingen 4. Singleton Coal Measures Super-Group: In the area of and Murrurundi was undertaken by Commercial Minerals the Wingen Maid only the upper part of the Singleton Pty Limited within EL573 in 1972 (Ref GS1973/291) to Coal Measures is represented. Conglomerate, grit determine the extent of the clay mineral occurrence in the and pebbly sandstone are the dominant lithologies area and noting that clay had been mined within the Wingen with minor bentonite, siltstone and shale. Pebbles area at the Wingen Flint Clay mine in the 1950’s. The EL573 composed of acid and intermediate porphyritic area included the Murulla and Blandford deposits that are volcanics are the dominant clast lithologies in the now included in the new licence application area. At the conglomerate and serve to distinguish it from the time several field samples were taken in the Wingen Maid overlying Narrabeen Group conglomerates which area using both auger and outcrop exposures in gullies. have red jasper and vein quartz as the dominant Clay sections of 0.7 m to 1.0 m thick were obtained with lithologies. two bulk samples tested although it was noted that the near surface material could have been altered or contam- Finer grained sediments are dominant in the middle inated. The results in general concluded the widespread portion of the exposed sequence in which pebbly occurrence of calcium bentonite in the area but the sandstone and coarse-grained sandstone are the topography is indented by erosion with the possible effect dominant lithologies. that the Wingen Maid area would result in a number of small open cast workings (Report GR/191). The exposed part of the unit is 90 to 120 metres thick. The dominance of coarse-grained sediments Subsequent to Keyser’s work and that of 1972, suggests a piedmont or alluvial fan environment with Exploration Licence No. 954 was applied for and a period periods of quiet water deposition as indicated by the of two and half weeks was spent in April, 1977 to conduct occurrence of shales and siltstone. detailed reconnaissance mapping of the project area. The results of this programme concluded that bentonite of Six bentonite horizons have been mapped in this commercial quality occurs in the Wingen Maid area, portion of the Singleton Coal Measures strata, the presumably equivalent in quality to the Cressfield bentonite upper five are of potential commercial interest. The and that further exploration drilling is undertaken. This was term ‘bentonitic horizons’ is preferable to ‘seams’ or not pursued. ‘beds’ because outcrops are sparse and the thick - ness or number of seams is unknown. Mapping was Plasminex has completed field sampling within the done by following outcrops of black heavily cracked exploration area during 2008/2009 taking a total of seven soil. This procedure served only to locate the bentonite surface samples from subcrop zones. horizons but gives no indication of the quality and thickness of individual seams. The few outcrops observed are generally of a cream massive bentonite indicating that surficial weathering has taken place. The sequence of lithologies in the Wingen Maid area is Grey sandy and white, biotite-bearing tuffaceous the following, progressing from youngest at the top to bentonite are also exposed. Where exposed the top oldest at the bottom: contact is gradational, with the bentonite becoming 1. Quaternary Alluvium: Gravels and silty alluvium occur increasingly contaminated by ferruginous material. along the channels of the major streams and as flood Seam thicknesses are unknown and even minimum bank deposits. Extensive scree (hillwash) deposits also thicknesses cannot be determined due to swelling occur at the foot of the cliffs bounding the Wingen at the outcrop. Drilling is the most effective method Maid. of determining bentonite thickness and providing unweathered samples for bentonite quality determi- 2. Tertiary Basalt: Outcrop of Middle Tertiary basalt is nation. restricted to erosional residuals on the Wingen Maid. Massive and vesicular dark grey olivine basalt predominates with minor scoria locally present Outcrop samples analysed in the Wingen Maid area indicating the potential for a nearby volcanic vent. (Ref GS1977/195) are shown in Table 4.1. These show a cation exchange capacity (CEC) ranging from 69 to 3. Narrabeen Group: Lower Triassic conglomerate, grit 90 meq/100 gm ( the average was 78 meq/100 gm and and cross-bedded sandstone form the Wingen Maid a swelling volume of 18ml to 45 ml (average 29 mls) on and are the prominent cliff-forming lithologies of the sodium carbonate treated clay. These results compared area. The conglomerate is polymictic with pebbles of favourably with the results obtained on Cressfield outcrop red jasper, white and green chert and vein quartz set samples whose average was 69 meq/100gm for CEC and in a sandy matrix. Through interbedding and fining 24 ml for swelling volume. upward sequences, the conglomerate grades upwards

PROSPECTUS 75 Figure 4.1 Location of Wingen Bentonite Exploration Area

76 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Moisture Alkalinity CEC Swelling Volume pH

Sample No. (%) (% Na2CO3) (Meq/100g) (ml)

PA1 30.7 4.63 85.4 35 PA2 28.4 2.12 78.2 31 PA3 22.8 2.11 76.7 18 PA4 31.8 2.11 85.8 30 PA5 25.9 2.59 77.7 42 PA6 27.5 8.26 68.6 20 PKve 1 36.5 4.60 78.0 21 PKve 2 19.7 2.25 69.0 19 PKve 3 24.3 1.29 77.9 30 PKve 4 31.4 1.92 70.3 22 B2 30.3 0.50 74.0 27 8.3 B3 34.7 1.0 90.0 32 8.5 B4 32.8 0.4 81.0 38 8.4 B5 17.8 5.1 81.0 22 9.2 B6 34.2 1.2 79.0 45 8.6 B7 33.0 3.5 75.0 36 9.1 B8 27.0 0.0 69.0 30 8.9 Ave 29.3 2.56 77.5 29 8.7 A 24 -0.19 72 27 B 29 1.2 67 22 5.1

Note: Samples PA1-PA6 and PKve 1 – Pkve 4 were analysed at Sandgate, B2 – B8 were analysed at S.O.R.D. Ave is the average of PA1 – PA6 and PKve 1 – Pkve 4. A is the average of Cressfield outcrop samples analysed at Sandgate and B the average of samples analysed at S.O.R.D.

The impact of surface weathering and contamination on rock, the environment in which it was deposited, and its samples is largely unknown. The higher pH of Cressfield post-formation history. Bentonite deposits are commonly samples suggests possible contamination of samples laterally extensive strata within volcanogenic sedimentary by organic matter possibly in the form of humic acids. sequences and range in thickness from a few centimetres However, even when compared to the cores from to tens of metres. MMC cannot emphasize too strongly the Cressfield material, the Wingen Maid outcrop samples importance of these combined influences on the character appear to be of equivalent quality. of saleable bentonite products. Typically, in MMC’s experience, surface samples are not an accurate reflection of the quality and engineering aspects found by drilling ‘Bentonite’ and ‘fullers earth’ are terms used for any because of the affects of weathering on cation chemistry. clay materials belonging to the smectite group, of which Smectite minerals are not stable at higher pressures and the most common mineral species is montmorillonite with depth and increasing burial by overlying rocks the which has a general chemical formula of (1/2Ca, smectite is transformed into mixed illite-smectite minerals Na)0.7(Al,Mg,Fe)4[(Si,Al)8O 0](OH)4.nH O (Deere et al., 2 2 with differing chemical and physical properties. The general 1992). Bentonite varieties are distinguished on the basis observation is that bentonite materials tend to be found in of their principal exchangeable cation: hence sodium-, geologically younger materials (Permian through Pleistocene calcium-, magnesium-(saponite), potassium- (meta- ages). bentonite) and lithium- (hectorite). Bentonite typically occurs in sedimentary or volcanic sequences where it forms in-situ by the alteration of volcanic ash or tuff, and most bentonite deposits form under marine conditions, or less frequently, Bentonite is relatively common in eastern Australia, partic- in alkaline lakes. ularly in Queensland and New South Wales. Australia currently produces about 100,000 tpa of bentonite, mostly The final chemical character of the bentonite depends on from Queensland. New South Wales produces about the combined influences of the chemistry of the primary 25,000 tpa and there is minor production from Western Australia.

PROSPECTUS 77 There are 34 occurrences of bentonite recorded in the Total world production of all types of bentonite in 2008 State of New South Wales (Ray et al. 2003). Holmes was 12,000,000 metric tonnes of which the United States (1983) conducted a detailed study on bentonite and fullers produced 4,870,000 tonnes. The average price obtained earth in New South Wales in the early 1980s. Most of the for swelling bentonite in 2008 was USD 52.39 per tonne. known deposits in NSW are calcium-bentonite, and are Bentonite production quantities have remained essentially considerably older geologically than the major overseas flat in the USA for the past five years, although the price deposits. Deposits in the Hunter Valley are either Permian has increased slightly each year. and derived from volcanic rocks in the coal measures, or Carboniferous and related to terrestrial volcanic rocks. They include deposits at Cressfield, Trida, Muswellbrook, A selective drilling program to delineate the extent, Raymond Terrace, Boggabri and Eraring. thickness and quality of the Wingen Maid deposits is essential to define a potential resource from which a The State’s (NSW) largest known bentonite resource is the reserve can be developed. The current owners have Arumpo deposit, located 40 km southeast of Pooncarie. embarked upon such an exercise for the next two to three The resource contains 70 Mt of sodium- magnesium years. MMC supports this approach with an emphasis on bentonite (Browns Creek Gold NL 1993). The Arumpo determining the extent and character of the bentonite deposit consists of several bentonite layers with individual horizons and their relevant chemical characteristics. thicknesses of 5m to 10m or more. These layers are Concurrently with the exploration, MMC is of the opinion developed over a northwest-trending area about 1 km that an investigation of the markets that may be available wide and several kilometres long and conformably overlie and the competitive threat that existing suppliers may the Pliocene Loxton-Parilla Sands of the Cainozoic Murray demonstrate should the project delineate a marketable Basin. They appear to have accumulated in a coastal bentonite should proceed. Because of a relatively low back-barrier setting fed by several volcanic eruptions. commodity price, bentonite marketing is strongly Growth faulting played a major role in determining their influenced by transportation costs. The Wingen Maid thickness and saline groundwater may have had a deposit (EL 7142 and ELA3657) benefits from having both significant influence on the formation of the bentonite a major highway and railroad line adjacent to their licenced (A. Mason pers comm., 2004). Mineral sands mining mineral area. The proposed exploration and assessment and exploration over the past few years has indicated that programme is outlined in Table 4.2. bentonite deposits are more common in the Murray Basin than previously recognized. Although the Arumpo deposit The exploration budget includes two stage programme is large by world standards, it is not comparable in size to with a total expenditure up to $450,000 to delineate the vast resources of sodium-bentonite in Wyoming (USA). the extent and quality of the clay horizons to confirm a resource and mining area with the aim to commence production after stage 2 of the programme. This The U.S.A. accounts for over half of the world’s production programme of exploration appears reasonable. of bentonites principally high swelling sodium bentonites found in Wyoming, Montana and South Dakota where they are associated with the burial of volcanic ash under several The properties of bentonite, which include hydration, hundred metres of marine sediments of Cretaceous Age. swelling, water absorption and viscosity, make it a valuable mineral for many applications. These properties vary The widespread occurrence of bentonite globally and the according to the dominant cations present. Sodium development of new deposits overseas is progressively (swelling) bentonite uses include drilling fluid (mud), water- eroding international trade in the commodity. Additionally, softening, bonding or pelletising agent, foundry-moulding flat or diminished demand in the major markets (foundry sand, and impermeable liner. Calcium (non-swelling) and iron ore pelletising and petroleum well-drilling muds) bentonite uses also include foundry-moulding sand as well has, until recently, decreased the market stimulus for as feed additives, pet product absorbents and detergents. further developments.

Minimum Subscription Maximum Subscription Stage 1 Stage 2 Total Stage 1 Stage 2 Total Activity ($) ($) ($) ($) ($) ($)

Drilling 60,000 60,000 120,000 60,000 80,000 140,000 Regional mapping 10,000 10,000 20,000 10,000 20,000 30,000 Geological assessment, modelling 15,000 20,000 35,000 15,000 10,000 25,000 Assay 45,000 60,000 105,000 45,000 80,000 125,000 Survey, land management 5,000 30,000 35,000 5,000 50,000 55,000 Contingency 15,000 20,000 35,000 15,000 60,000 75,000 Total 150,000 200,000 350,000 150,000 300,000 450,000

78 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Bentonite is produced by many countries and, in some the combination of economic expansion or contraction and industry is well-established, large-scale, and has a high legislative control exert significant influence. profile (e.g. sodium bentonite in the USA). Consumption of bentonite is closely linked to global economic activity. The existence of numerous bentonite deposits within the Major markets include drilling muds, whose demand is Wingen Maid area is well known however their extent and largely tied to activity in the oil and gas exploration industry; quality remains to be confirmed. The proposed exploration pelletising, whose main markets closely reflect demand for programmed to define a resource is supported by MMC iron and steel and thus linked to demand for consumer but it is also suggested that effort should be made on durables; pet litter absorbents, which is a function of determining the marketability and required characteristics of consumer affluence and environmental awareness; and the material in conjunction with the additional delineation the construction and pollution control industries, where a drilling and bentonite quality analysis.

Annexure A – Qualifications and Experience Barton G. Stone – Chief Geologist, Pincock Allen & Merryl Peterson – Chief Coal Geologist, Runge Limited Holt, 2006-Present BSc (Hons) (Geology), MSc (Environment), Grad Cert BSc (Geology), MBA (Cost control), Certified Bus Admin. MAusIMM, Member Geological Society of Professional Geologist (AIPG), Member SME and Australia Canadian Institute of Mining and Metallurgy Merryl has more than 30 years experience in coal geology Evaluated 31 coal operations (primarily coking coals) of and resource assessment as well as consulting assign - United Coal in Kentucky, Virginia and West Virginia to ments including due diligence and resource modeling and determine value for a potential purchaser. Examined coal evaluation. She has worked as a site geologist at Curragh operations in Central Utah (thermal coals) to evaluate and with RW Miller and Thiess Bros Pty Ltd. She has financial risk for banking group. Conducted due diligence extensive experience in geological software applications examination of coal operations (thermal coals) of Peace having managed the Minescape consulting group in River Coal, British Columbia. Conducted bentonite and Australia. Merryl is a competent person under the JORC limestone evaluations for the Crow Nation on their Code for reporting coal resources and heads a team of reservation in Montana (810,000 hectares). Conducted professional consultants. reserve and resource audits on Muskeg River Oil Sands deposits, iron deposits of Vale in Brazil and 25 deposits of Philip Mitchell – Consulting Mining Engineer lead-zinc for Glencore in Peru, Bolivia, Kazakhstan, Russia and Argentina. Evaluated Bor igneous complex in Serbia BE (Mining), Grad Dip Finance, First Class Mine to review potential expansion and growth of a number of Managers Certificate (Coal) – NSW & QLD, Member of porphyry copper-gold mines and deposits. Prior to his Australasian Institute of Mining and Metallurgy Pincock experience, Bart worked as an Environmental Phil has over 30 years operational and management associate for Norwest Corporation on coal, coal gasification experience in the mining industry and is experienced in and other large scale energy projects. Earlier in his career he mine planning, cost and capital budgeting, ventilation worked for the government of Kenya as a Project geologist design, equipment specification and hazard planning for evaluating metal and industrial minerals. He discovered the underground operations. Phil has undertaken a range of Kagundu fluorite deposits which became a major fluorite mining assignments from conceptual mine planning mine in the 1970s and later the ruby-sapphire deposits in through to final feasibility. He has conducted numerous Meru district which became commercial operations. His technical reviews, due diligence studies and valuations work assisted industry in Kenya in the evaluation limestone for coal asset acquisitions and advised financial institutions and gypsum deposits for industrial users in Kenya. on asset valuations. He has acted as a competent person and Expert for publicly listed companies. He has numerous roles as technical advisor to financial institutions.

PROSPECTUS 79 Annexure B – References Annexure C – Glossary of Technical Terms % percent Title Minserve, 2007. Hodgson Vale Coal Project Stage 1 ad air dried Report, prepared for Coalworks Al2O3 Aluminium oxide Geos Mining, 2008, Independent Technical Review for Coalworks Ltd Mineral Exploration Projects (Project 2159-1) ash The incombustible matter of coal

Geos Mining, 2009. Annual report for the period ending 20 basalt An igneous rock formed from molten Iava September 2009 EPC1145 Hodgson Vale (Project 2294-2) flows to the surface usually grey to black Millmerran Coal Pty Ltd. 1983. Summary report for and fine-grained due to rapid cooling Department of Mines Millmerran Coal Prospect ATP400C. bcm bank cubic metres or the in-place volume CR11784(A). of waste material overlying the coal before Coalworks Limited, 2009, Divestment to Orpheus Energy being disturbed Limited. Information Memorandum bentonite a clay consisting mostly of montmorillonite Haites, T. B., 1974, Relinquishment Report – Authority to and can be classified by its dominant Prospect 141C – Ramsay. Open File report to the element, such as potassium (K), sodium Department of Mines and Energy , CR4961 (Na), calcium (Ca), and aluminum (Al). Bentonite usually forms from weathering of O’Neill, D., 1979. Hodgson Vale – Authority to Prospect volcanic ash, most often in the presence of 203C – Report No. Q/79/5. Open File report to the water. Department of Mines and Energy , CR7134 Brown R.E. & Stroud W. J.1997. Inverell 1::250,000 breccia rock made of angular fragments of other Metallogenic Map SH156-5, Metallogenic Study and Mine rocks held together by mineral cement or Data Sheets. Geological Survey of New South Wales, a fine grained matrix Mineral Resources 25. calorific value the heat of combustion of a unit quantity Lishmund S. R., Dawood A. D. & Langley W. V., 1986. The of coal. The gross calorific value includes Limestone Deposits of New South Wales, 2nd Edn. all heat of vaporisation of water Geological Survey of New South Wales, Mineral Resources 25 CaO Calcium oxide Flood P. G., 1993. Exploration Report, EL4020, Ashford dilution the contamination of the coal by surrounding Area. Second Annual Exploration Geological Survey of rock during mining New South Wales, File GS1992/1993 (unpublished). dip angle which the strata is inclined from with Kallangur Lime Pty Ltd, 1983. Exploration Licence 14673 the horizontal Ashford Limestone Prospect Final Report, Geological Survey of New South Wales, File GS1981/469 dyke intrusion of volcanic material thrust upwards (unpublished). through the earths crust, generally in a near vertical plane Geos Mining, 2009, Exploration Licence EL6511 ‘Ashford’, 2nd Annual Report for the Period Ending 2nd fault dislocation of strata typically by vertical March 2009, Geos Mining Report No 2159-1 displacement Keyser de H., 1971 FE2O3 Iron oxide Commercial Minerals Pty Limited, 1972. Exploration FOB free on board Licence 573 Geological Survey of New South Wales, File GS1973/291. gar gross as received basis for coal energy on Plasminex Pty Ltd, 2009. Exploration Licence EL7142 1st a total moisture basis Annual Report for the Period Ending 21 May 2009. ha Hectare – 10,000 square metres Graham C., 1977. First Report on the Wingen Maid Bentonite Deposit, EL954, GS1977/195. igneous originating from a molten state Helen Ray, Geos Mining, personnel communication re IM Inherent Moisture Ashford Limestone. Inferred these are resources for which data Resources distribution is such that the continuity of the grade or coal seam thickness cannot be confidently interpreted. There is insufficient data to apply technical, economic or mine planning. Consequently these resources do not support reserve assessment.

80 INDEPENDENT GEOLOGIST’S REPORT – AUSTRALIA Indicated the nature of the geology and data availability Probable Measured and/or indicated resources which Resources allows a reasonable level of confidence in reserves are not yet proven but of which detailed estimating the resources. Mine planning and technical and economic studies have economic assessment can be applied for demonstrated that extraction can be reserves estimates. justified at the time of determination and under specific economic conditions JORC Code Australasian Code for Reporting of Exploration Results, Mineral Resources Proved Measured resources for which detailed and Ore Reserves prepared by the Joint reserves technical and economic studies have Ore Reserves Committee demonstrated that extraction can be justified at the time of determination and kcal/kg kilocalories per kilogram under specific economic conditions kg kilogram proximate a laboratory determination of moisture, volatile matter, ash and fixed carbon km kilometre, equivalent to 1,000 metres Recoverable an estimate of run of mine reserves which is K O Potassium oxide 2 Reserves the sum of Proved and Probable Reserves LOM the remaining life of mine until reserves are under the JORC Code depleted ROM run-of-mine being coal as mined, including m metre mining losses and dilution before beneficiation m2 square metre SE Specific Energy (also Calorific Value),

M million strike Line along which the strata is horizontal, perpendicular direction to dip Ma million years strip ratio the volume of waste material to remove MgO Manganese Oxide (bcm) per tonne of coal mined

Ml Mega litre, equivalent to 1,000 litres syncline A fold in the strata in a concave shape with the limbs at a higher level Mt million tonnes Tertiary The earliest period of the Cainozoic Era Mtpa million tonnes per annum beginning about 66.4 million years ago and ending 1.6 million years ago Marketable The tonnage that will be available for sale Reserves after beneficiation, if any, from the ROM thermal coal coal used in generating steam for electricity production production

Mining Coal Reserves TM Total Moisture Reserves tpa Tonnes per annum Measured Resources over which the distribution and Resources quality of data allows the estimation of tph tonnes per hour resources to a high level of confidence There is no reasonable doubt to the TS Total sulphur determination. This is the highest level waste material lacking sufficient grade to be of resource confidence. economic. Generally used for rock material MnO Manganese oxide above and between the coal seams

Na2O Sodium oxide ppm, ppb parts per million, parts per billion paleo ancient, reference to past geologic times

PCI Pulverised coal injection – coals for blast furnace injection

Permian the last period of the Paleozoic Era. The Permian period lasted from 290 to 248 million years ago

PROSPECTUS 81 SECTION 8

Financial Matters

Financial Background Summary Of Share Structure A ‘framework agreement’ was entered into between Consideration payable to Coalworks for the acquisition of Orpheus and Coalworks in 2009 to rename, restructure OPL, Hodgson Vale, Ashford and Wingen is to be totally and recapitalise the Company to pursue mineral satisfied by the issue of Shares and Options in Orpheus exploration and development and seek relisting on the ASX. (except for the nominal sum of $2.00 for OPL). It is The Company was released from a Deed of Company intended that the majority of the funds raised by the offer Arrangement in late 2010 following funds injected from will be applied to fund exploration and development of the Coalworks. The Company is now moving towards ASX respective projects (refer to Use of Funds table). The B26 compliance for requotation with agreements in place to project has already advanced to the stage of trial mining acquire from Coalworks two tenements in Australia and and trial shipment. Orpheus Energy Group Pty Ltd (OPL). OPL holds a Joint Venture agreement with PT Mega Coal (an Indonesian No forecasts or projections have been included in this coal mining company) to develop two coal concessions Prospectus as exploration and exploitation of such projects in Indonesia. OPL also has an option and joint venture has inherent risks which make verifiable projections very agreement for the Wingen Bentonite Project in NSW with difficult. Plasminex Pty Ltd (Wingen) The following Financial Information is presented in an The offer is made to raise funds for the development Executive Summary format to assist with understanding the and exploitation of these mineral tenements and coal alternative financial positions under a Minimum Subscription concessions. to this offer and a Full Subscription to this offer.

The pro-forma – Minimum Subscriptions and pro-forma Full Subscription positions shown include contracted transactions and assume transactions necessary or resulting from successful respective minimum and full subscription scenarios.

82 FINANCIAL MATTERS Proforma Statement Of Financial Position

UNAUDITED

Summary Consolidated

Statement of Financial Position

AS AT PROJECTED RELISTING DATE

Pro-Forma Minimum Subscription Pro-Forma Fully Subscribed Number of Shares$AUD Number of Shares $AUD

Cash 11,851,685 14,201,685 Receivables 61,989 61,989 11,913,674 14,263,674

Fixed assets 17,560 17,560 Bonds 13,519 13,519 Capitalised acquisition and exploration costs 8,116,962 8,116,962 TOTAL ASSETS 20,061,715 22,411,715

Trade and other payables 95,451 95,451 Total Current Liabilities 95,451 95,451 NET ASSETS 19,966,264 22,316,264

Current Issued Shares prior to listing* 84,847,993 18,456,194 84,847,993 18,306,194 Shares now offered by this Prospectus 50,000,000 12,500,000 60,000,000 15,000,000 Total Issued Shares 134,847,993 30,956,194 144,847,993 33,306,194 Reserves 2,059,422 2,059,422 Accumulated losses (14,372,352) (14,372,352) 18,643,264 20,993,264 Outside Equity interests 1,323,000 1,323,000 TOTAL EQUITY 19,966,264 22,316,264

* See Share Structure Post-Offer table below.

PROSPECTUS 83 Share Structure Post-Offer

Pro-Forma Minimum Subscription Pro-Forma Fully Subscribed Number of Shares% Total Number of Shares % Total

Shares on issue prior to 30 November 2010 53,801,663 53,801,663 Shares on Issue after the 1 for 5 consolidation of capital (per Resolution 4. General Meeting 30.11.2010) 10,760,493 8.0% 10,760,493 7.4% The following Shares Issues are to occur after the Capital Raising and ASX re-listing approval: p Issue Shares to Coalworks in consideration for: 25,000,000 18.5% 25,000,000 17.3% p OPL (the holder of the joint venture interests in the Indonesian Project and Wingen) p Australian Assets – Hodgson Vale, Ashford p Issue of Shares to Coalworks in satisfaction of the $1,000,000 liability of OPL to Coalworks. 10,000,000 7.4% 10,000,000 6.9% p Issue of Shares to Centre Capital in consideration for services in respect of the company reorganisation. 2,500,000 1.9% 2,500,000 1.7% p Issue of Shares to Past Directors issued to satisfy fees for time due to them. 337,500 0.3% 337,500 0.2% p Issue of Shares to Sept Rouges Limited for providing services with respect to corporate representation. 1,750,000 1.2% 1,750,000 1.2% p Issue of Shares pursuant to the conversion of Converting Notes issued by OPL in raising seed capital. 34,500,000 25.6% 34,500,000 23.8% Current Issued Shares prior to listing 84,847,993 62.9% 84,847,993 58.5% Shares offered by this Prospectus 50,000,000 37.1% 60,000,000 41.5% Balance before exercise of any share options 134,847,993 100.0% 144,847,993 100.0%

84 FINANCIAL MATTERS Options – (Pre-Existing, Listed, Promoter, and Broker Options)

Option Option Exercise Expiry MINUMUM FULLY Potential issue of further shares: Type Price Date SUBSCRIPTION SUBSCRIBED Upon the exercise of: p Options held by existing Orpheus shareholders (after the Pre Existing $2.625 08.09.2012 1,619,047 1,619,047 consolidation of capital per Resolution 4 at General Pre Existing $2.625 15.12.2011 47,619 47,619 Meeting of Orpheus on 30.11.2010) p Options Issued to Coalworks in consideration for acquisition of OPL and Australian Assets - Hodgson Vale, Ashford, Wingen. Listed $0.20 31.12.2011 12,500,000 12,500,000 p Options issued to Coalworks in satisfaction of the $1,000,000 liability of OPL to Coalworks. Listed $0.20 31.12.2011 5,000,000 5,000,000 p Options issued to Centre Capital in consideration for services in respect of the company re-organisation. Listed $0.20 31.12.2011 1,250,000 1,250,000 p Options issued pursuant to the conversion of Converting Notes issued by OPL in raising seed capital. Listed $0.20 31.12.2011 17,250,000 17,250,000 p Options issued to Past Directors issued to satisfy fees due to them Listed $0.20 31.12.2011 168,750 168,750 p Options issued to Sept Rouges Limited for providing services with respect to corporate representation. Listed $0.20 31.12.2011 875,000 875,000 p Promoter Options Promoter $0.20 30.09.2014 12,750,000 12,750,000 p Broker Options Broker $0.25 3 years from date of issue. 1,000,000 1,000,000 p Placement Options attached to Right Issue^ Listed $0.20 31.12.2011 ** 5,380,247 Potential additional shares issued based on exercise of options. 52,460,416 57,840,663

** Minimum Subscription assumes no Rights Issue take-up with attaching options. ^ Options will only attach to Rights Issue and not to Public Offer. As take-up of the Rights Issue by existing shareholders is unknown, no options under the Rights Issue have been included under the Minimum Subscription scenario.

Director’s Assumptions In drafting the Pro-forma Summary Consolidated Statement 3. The costs of the offer and other operating costs of Financial Position as detailed above, the directors have included in the Pro-forma Summary Consolidated used their best endeavours to show a balance sheet that Statement of Financial Position are an estimate of will correctly reflect the financial position of the company the costs likely to be expended as at the date of after the capital raising and upon re-listing of the company’s this Prospectus shares on ASX. In carrying out this task the Directors have made the following assumptions: 4. The costs associated with the offer, including brokerage, legal, the independent technical report 1. The proceeds of the offer will be received by the and the Investigating Accountants report and other Company prior to the re-Listing Date. costs relating to the compilation of this Prospectus are estimates and these costs will be offset against 2. There will be no legislative, taxation or regulatory the offer proceeds in accordance with Accounting changes in Australia or Indonesia and between the Standards. two countries, or in any other market in which the Company proposes to operate, that would materially 5. Foreign Exchange parity between Australian Dollars and adversely affect the Company; and United States Dollars.

6. Proceeds from the exercise of Options have not been included as the amount raised and timing is uncertain. The Proceeds of the exercise of Options would be added to working capital if and when received.

PROSPECTUS 85 Lease Liability: OPL has in place a lease on Offices at North Sydney which commenced on 1.02.2011 for 24 months with a 12 months option to extend after that. From the commencement of the lease, the first 2 months are rent free. As at 30.4.2011, the liability under the lease (excluding GST) was:

As at 30.4.2011 Due < 12 months (Rent til 30.4.2012) 12 months 70,245 Due > 12 months (Rent til 31.1.2013) 9 months 52,684 Total lease commitment 122,929

Statement Of Significant Accounting Policies (a) Basis of Accounting The condensed consolidated Statements of Financial (c) Exploration, Evaluation and Position have been prepared in accordance with Development Expenditure applicable accounting standards, the Corporations Exploration, evaluation and acquisition expenditure on Act 2001 and mandatory professional reporting areas of interest are assessed on a case by case basis requirements in Australia (including the Australian and may be capitalised to areas of interest and carried equivalents of International Financial Reporting forward where right of tenure of the area of interest is Standards) and we have made such disclosures as current and they are expected to be recouped through considered necessary. They have also been prepared sale or successful development and exploitation of the on the basis of historical cost and do not take into area of interest or, where exploration and evaluation account changing money values. The accounting activities in the area of interest have not yet reached policies have been consistently applied, unless a stage that permits reasonable assessment of the otherwise stated. The financial statements have been existence of economically recoverable reserves. prepared on a going concern basis that is dependent When an area of interest is abandoned or the directors on the Capital Raising being successful and/or the decide that it is not commercial, any accumulated Company raising additional capital to continue in acquisition costs in respect of that area are written off in business. the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting (b) Income Tax period and accumulated costs written off to the extent The charge for current income tax expense is based on that they will not be recoverable in the future. Where the profit for the year adjusted for any non assessable projects have advanced to the stage that directors or disallowed items. It is calculated using tax rates have made a decision to mine, they are classified as that have been enacted or are substantially enacted development properties. When further development as at balance date. Deferred tax is accounted for expenditure is incurred in respect of a development using the balance sheet liability method in respect of property, such expenditure is carried forward as part temporary differences arising between the tax bases of the cost of that development property only when of assets and liabilities and their carrying amounts in substantial future economic benefits are established. the financial statements. No deferred income tax will Otherwise such expenditure is classified as part of the be recognised from the initial recognition of an asset cost of production or written off where production has or liability, excluding a business combination, where not commenced. there is no effect on accounting or taxation profit or loss. Deferred income tax assets are recognised to (d) Plant and Equipment the extent that it is probable that the future tax profits Each class of property, plant and equipment is will be available against which deductible temporary carried at cost or fair value, less where applicable, differences will be utilised. The amount of the benefits any accumulated depreciation and impairment losses. brought to account or which may be realised in the The carrying amount of the plant and equipment is future is based on the assumption that no adverse reviewed annually by the Directors to ensure it is not change will occur in the income taxation legislation in excess of the recoverable amount of these assets. and the anticipation that the economic unit will derive The recoverable amount is assessed on the basis of sufficient future assessable income to enable the the expected net cash flows that will be received from benefits to be realised and comply with the conditions the assets employed and their subsequent disposal. of deductibility imposed by law. The expected net cash flows have been discounted to their present value in determining recoverable amounts.

86 FINANCIAL MATTERS Depreciation the date on which control is transferred out of the The depreciable amount of all fixed assets including Orpheus Group. Where there is loss of control of buildings and capitalised leased assets, but excluding a subsidiary, the consolidated financial statements freehold land, is depreciated on a straight line basis include the results for the part of the reporting period over their useful lives to the Company commencing during which Orpheus has control. from the time the asset is held ready for use. The asset’s residual value and useful lives are reviewed (j) Employee benefits and adjusted if appropriate, at each balance sheet date. Provision is made for employee benefits accumulated as a result of employees rendering services up to the An assets’ carrying value is written down immediately reporting date. These benefits include wages and to its recoverable amount if the asset’s carrying value is salaries, annual leave, and long service leave. greater than the estimated recoverable amount. Gains and losses on disposal are determined by comparing Liabilities arising in respect of wages and salaries, proceeds with the carrying amount. These gains and annual leave and any other employee benefits expected losses are included in the income statement. to be settled within twelve months of the reporting date (e) Trade and other accounts payable are measured at their nominal amounts based on remuneration rates which are expected to be paid Trade and other accounts payable represent the when the liability is settled. All other employee benefit principal amounts outstanding at balance date, liabilities are measured at the present value of the plus, where applicable, any accrued interest. estimated future cash outflow to be made in respect (f) Recoverable Amount of Non Current Assets of services provided by employees up to the reporting date. In determining the present value of future cash The carrying amounts of non-current assets are outflows, the market yield as at the reporting date on reviewed annually by directors to ensure they are national government bonds, which have terms to not in excess of the recoverable amounts from those maturity approximating the terms of the related assets. The recoverable amount is assessed on the liability, are used. basis of the expected net cash flows, which will be received from the assets employed and subsequent (k) Share Based Payments disposal. The expected net cash flows have been or will be discounted to present values in determining The Orpheus Group provides benefits to employees recoverable amounts. (including directors) of the Orpheus Group in the form of share-based payment transactions, whereby (g) Operating Revenue employees render services in exchange for shares Revenue represents interest received and or rights over shares (equity-settled transactions). reimbursements of exploration expenditures. The cost of these equity-settled transactions with employees is measured by reference to the fair value (h) Issued Capital at the date at which they are granted. The fair value Ordinary Shares are classified as equity. is determined by an internal valuation using Black- Incremental costs directly attributable to the issue Scholes or Binomial option pricing models. of new shares or options are shown in equity as a The cost of equity-settled transactions is recognised, deduction, net of tax, from the proceeds. Incremental together with a corresponding increase in equity, over costs directly attributable to the issue of new shares the period in which the performance conditions are or options, or for the acquisition of a business, are fulfilled, ending on the date on which the relevant included in the cost of the acquisition as part of the employees become fully entitled to the award (vesting purchase consideration. date). The cumulative expense recognised for equity- (i) Principles of Consolidation settled transactions at each reporting date until The pro-forma consolidated financial statements vesting date reflects (i) the extent to which the vesting comprise the financial statements of Orpheus and its period has expired and (ii) the number of awards that, subsidiary, OPL (the Orpheus Group). The financial in the opinion of the directors of the Orpheus Group, statements of the subsidiary are prepared for the will ultimately vest. This opinion is formed based on same reporting period as the parent company, using the best available information at balance date. consistent accounting policies. The existing subsidiaries No adjustment is made for the likelihood of market of Orpheus are assumed to be no longer part of the performance conditions being met as the effect of Orpheus Group for the purposes of the report. these conditions is included in the determination of fair value at grant date. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany No expense is recognised for awards that do not balances and transactions, including unrealised profits ultimately vest, except for awards where vesting is arising from intra-group transactions, have been conditional upon a market condition. Where an equity- eliminated in full. Unrealised losses are eliminated unless settled award is cancelled, it is treated as if it had vested costs cannot be recovered. Subsidiaries are consol- on the date of cancellation, and any expense not yet idated from the date on which control is transferred to recognised for the award is recognised immediately. the Orpheus Group and cease to be consolidated from However, if a new award is substituted for the cancelled award, and designated as a replacement award on the

PROSPECTUS 87 date that it is granted, the cancelled and new award Financial assets at fair value through profit and loss are treated as if they were a modification of the original Financial assets at fair value through profit and loss award. are financial assets held for trading. A financial asset is classified in this category if acquired principally (l) Critical accounting estimates and judgements for the purpose of selling in the short term. Assets In preparing Financial Reports, the Company has been in this category are classified as current assets. required to make certain estimates and assumptions concerning future occurrences. There is an inherent Loans and receivables risk that the resulting accounting estimates will not Loans and receivables are non-derivative financial equate exactly with actual events and results. assets with fixed or determinable payments that are not quoted in an active market. They are included Significant accounting judgements in current assets, except for those with maturities In the process of applying the Group’s accounting greater than 12 months after the balance sheet policies, management has made the following date which are classified as non-current assets. judgements, apart from those involving estimations, Loans and receivables are included in trade and which have the most significant effect on the amounts other receivables in the statement of financial recognised in the financial statements: position. Capitalisation of exploration Held-to-maturity investments and evaluation expenditure Held-to-maturity investments are non-derivative The Group has capitalised significant acquisition financial assets with fixed or determinable payments expenditure on the basis either that this is expected to and fixed maturities that the Company’s manage- be recouped through future successful development ment has the positive intention and ability to hold to (or alternatively sale) of the areas of interest concerned maturity. Held-to-maturity investments are included or on the basis that it is not yet possible to assess in non-current assets, except for those with whether it will be recouped. maturities less than 12 months from the reporting Significant accounting estimates and assumptions date, which are classified as current assets. The carrying amounts of certain assets and liabilities are Available-for-sale financial assets often determined based on estimates and assumptions Available-for-sale financial assets, comprising of future events. The key estimates and assumptions principally marketable equity securities, are non- that have a significant risk of causing a material adjust- derivatives that are either designated in this category ment to the carrying amounts of certain assets and or not classified in any of the other categories. liabilities within the next annual reporting period are: They are included in non-current assets unless Impairment of capitalised exploration management intends to dispose of the investment and evaluation expenditure within 12 months of the statement of financial The future recoverability of capitalised acquisition position date. expenditure is dependent on an number of factors, Recognition and derecognition including whether the Company decides to exploit the related lease itself, or, if not, whether it successfully Regular purchases and sales of financial assets are recovers the related exploration and evaluation asset recognised on trade date – the date on which the through sale. Factors that could impact the future Company commits to purchase or sell the asset. recoverability include the level of reserves and Investments are initially recognised at fair value plus resources, future technological changes, costs of transaction costs for all financial assets not carried at drilling and production, production rates, future legal fair value through profit or loss. Financial assets carried changes (including changes to environmental at fair value through profit or loss are initially recognised restoration obligations) and changes to commodity at fair value and transaction costs are expensed to the prices. statement of financial performance. Financial assets are derecognised when the rights to receive cash (m) Investments and other financial assets flows from the financial assets have expired or have The Company classifies its investments in the been transferred and the Company has transferred following categories: financial assets at fair value substantially all the risks and rewards of ownership. through profit and loss, loans and receivables, held- When securities are classified as available-for-sale to-maturity investments and available-for-sale financial are sold, the accumulated fair value adjustments assets. The classification depends on the purpose for recognised in equity are included in the statement which the investments were acquired. Management of financial performance as gains and losses from determines the classification of its investments at investment securities. initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

88 FINANCIAL MATTERS Subsequent measurement Loans and receivables and held-to-maturity invest- ments are carried at amortised cost using the effective interest method.

Available-for-sale financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the income statement within other income or other expenses in the period in which they arise.

Income from financial assets at fair value through profit and loss is recognised in the income statement as part of income from continuing operations when the Group’s right to receive payment is established.

(n) Asset retirement obligations The Group’s mineral exploration and development activities are to be subject to various Australian and Indonesian laws and regulations regarding the protection of the environment. As a result of these, the Group is expected to incur expenses from time to time to discharge its obligations under these laws and regulations.

Reclamation and closure costs are estimated based on the Group’s interpretation of current regulatory and operating licence requirements and measured at fair value. Fair value is determined based on the net present value of future cash expenditures expected upon reclamation and closure and subsequent annual recognition of an accretion amount on the discounted liability. Reclamation and closure costs are capitalised as mine development costs and amortised over the life of the mine on a unit-of-production basis.

PROSPECTUS 89 SECTION 9 Investigating Accountant's Report

90 INVESTIGATING ACCOUNTANT’S REPORT

3. Background

3.1 Orpheus Energy (previously AMFG) is listed on the ASX but its shares are suspended from trading. AMFG was placed into Administration on 19 January 2010 and was subject to a Deed of Company Arrangement. Its subsidiary Australian Motor Finance Limited (“AMFL”) the original main operating arm of the AMFG Group was placed into a Receivership status in January 2009 by the Bank of Adelaide. The bank has a charge over AMFL and the receivables held in a trust managed by AMFL. Prior to entering into the motor finance industry in mid 2008, the Company was a mineral explorer and its name was Bushveld Platinum Ltd and prior to that Catalyst Platinum Limited. All subsidiaries owned at the date of entering into Administration have been sold or are dormant with the intention of being struck off.

3.2 On 30 November 2010, AMFG as Orpheus Energy was then known as held a shareholders meeting to consider a number of resolutions. There were eighteen resolutions put to the shareholders. Resolution 1 related to the proposal to change the name of AMFG to Orpheus Energy Limited. Resolution 2 related to the proposal to adopt a new Constitution. Resolution 3 related to setting aggregate director fees at $200,000. Resolution 4 relates to the proposal to consolidate the capital of AMFG on a 1 for 5 basis (since completed). Resolution 5 related to the proposal to divest its shareholding interest in Australian Motor Finance Limited (“AMF”) and allow nominees of Coalworks Limited (“Coalworks”) to fund recovery proceedings by AMF. Resolution 6 related to the Orpheus Acquisition as noted below for the consideration of the issue of 25,000,000 post consolidated shares and 12,500,000 share options to Coalworks Limited. Resolution 7 related to a change on the nature and scale of activities of the Company and resolution 8 related to the proposal to allow an Equity Loan (up to $1,000,000 to be advanced by Coalworks) to be converted into shares and share options in Orpheus Energy as noted below. Resolution 9 sought the approval under Section 611(Item 7) of the Corporations Act 2010 relating to the issue of 25,000,000 shares (“Orpheus Acquisition Shares”) and 12,500,000 share options (“Orpheus Acquisition Options”), the issue of 5,000,000 shares (“Coalworks OE Shares”) by Orpheus Energy (and 2,500,000 share options(“Coalworks OE Options”) and the possibility of issuing a further 5,000,000 shares (“Additional Coalworks OE Shares”) by Orpheus Energy and allowing the exercise of up to another 2,500,000 share options (“Additional Coalworks OE Options”) to Coalworks. Further details are noted below. Resolution 10 related to the approval to allow the conversion of up to 30,000,000 Converting Notes that may be issued by Orpheus Energy Group Pty Ltd (“OEG”) a wholly owned subsidiary of Coalworks (all of the shares in OEG are being acquired pursuant to the Orpheus Acquisition) (along with up to 15,000,000 free attached Converting Share Options) to be converted into up to 30,000,000 ordinary shares (Converting Shares) in Orpheus Energy (and possibly the up to 15,000,000 share options being converted into up to 15,000,000 ordinary shares in Orpheus Energy at 20 cents each, on or before 31 December 2011). To 31 December 2010, OEG had issued 34,500,000 Converting Notes and thus 34,500,000 Converting Shares (and 17,250,000 Converting Share Options) are to be issued. Resolution 11 related to the proposal to issue up to 35 million post consolidated Placement Shares at not less than 20 cents each (this was part of the planned capital raising and the final issue price is to be 25 cents per Placement Share) and 17,500,000 post consolidated share options (exercisable at a price of 20 cents each, on or before 31 December 2011 (“Placement Options”) to investors to raise an initial up to $7,000,000 (now to be up to $15,000,000 including funds from a rights issue as noted below). On 23 March 2011, the shareholders approved the Placement of up to 55,600,000 shares at 50 cents each which effectively replaced the Resolution 11 approval which has been superseded by the resolution approved by shareholders on 23 March 2011. However in May 2011, due to changed circumstances, the Directors have now resolved to issue up to 60,000,000 shares at 25 cents each. Resolution 12 related to the proposal to issue up to 2,500,000 post consolidated shares at 20 cents each (“Issue Shares”) and 1,250,000 post consolidated share options (exercisable at 20 cents each, on or before 31 December 2011 (“Issue Options”) to various parties as consideration for the re-organisation and recapitalisation of Orpheus Energy. Resolution 13 related to the

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proposal to issue 12,750,000 share options (“Promoter Options”) exercisable at 20 cents each, on or before 30 September 2014. Resolution 14 related to the issue of 337,500 shares and 168,750 share options, (exercisable at 20 cents each on or before 31 December 2011) payable to certain directors and past directors of Orpheus Energy. Resolution 15 related to the issue of 1,750,000 post consolidated shares (“Corporate Shares”) and 875,000 share options exercisable at 20 cents each on or before 31 December 2011 (“Corporate Options”) to parties that have provided corporate services to the Company and assisted in its recapitalisation and the proposed acquisition of a 51% effective interest in the B26 Coal Project as further noted below and in the Prospectus. Resolutions 16, 17 and 18 related respectively to the appointments as director of Orpheus Energy, Messrs Wayne Mitchell, Wes Harder and Anthony King (all since appointed). It was also planned to undertake a 1 for 1 rights issue (“Rights Issue”) to all shareholders registered before the issue of any shares and share options proposed to be issued pursuant to resolutions 5 to 14 at 20 cents each (“Rights Issue Shares”) of which $500,000 (2,000,000 post consolidated shares) would be underwritten by Coalworks. The Rights Issue will now be undertaken at 25 cents per share on an adjusted 10,760,493 rights issue offering to raise up to a gross $2,690,123 but now forms part of the Capital Raising of up to $15,000,000 (minimum capital raising of $12,500,000 noted in section 1 of this report). However, the original shareholders will be entitled to one free attached share option for every two shares applied for, exercisable at 20 cents per share, on or before 31 December 2011. In the event that not all Rights Issue Shares (and free attached share options) are taken up by the original shareholders, the unsubscribed Rights Issue Shares will revert to the public issue without the share options. New investors who take up shares in the Placement will not be entitled to any free attached share options.

3.3 All original resolutions were approved by Orpheus Energy shareholders on 30 November 2010. Resolutions 6 and 9 in part related to Orpheus Energy acquiring from Coalworks, Coalworks legal and beneficial interest in:

x the Hodgson Vale Coal Project comprised in EPC 1145 (100%); x the Ashford Lime Project comprised in EL 6511; x a right to earn a 50% interest in the Wingen Bentonite Joint venture (Wingen Maid Project”) entered into by OEG and x 100% of the issued capital of OEG that has acquired rights to participate in further coal and industrial minerals projects (which includes a potential 51% interest in the B26 Coal Project in Indonesia.

(herein as referred to the Orpheus Acquisition Assets) for the consideration of the issue to Coalworks of 25,000,000 consolidated shares in AMFG (“Orpheus Acquisition Shares”) and 12,500,000 consolidated share options, exercisable at 20 cents each, on or before 31 December 2011 (“Orpheus Acquisition Options”) (since issued). Further details on the Orpheus Acquisition Assets are referred to in the Independent Technical (Geologist’s) Report (“Independent Geologist’s Report”) prepared by Minarco-MineConsult of Sydney NSW (“Minarco”) in Section 6 of the Prospectus. In addition, a valuation of the Orpheus Acquisition Assets (including OEG’s mineral asset interests) by Corvidae as trustee for the Ravensgate Unit trust trading as Ravensgate is forming part of Section 6 of the Prospectus. For the purpose of this report the proposed acquisition of all of the Orpheus Acquisition Assets from Coalworks is known as the Orpheus Acquisition. Resolution 6 referred to the Orpheus Acquisition and resolution 9 (part thereof) related to the proposal to issue the 25,000,000 Orpheus Acquisition Shares and allow the exercise of the 12,500,000 Orpheus Acquisition Options being issued to Coalworks as the consideration to acquire the Orpheus Acquisition Assets. The Orpheus Acquisition shares are being valued at a deemed 20 cents each (total $5,000,000) and the Orpheus Acquisition Options have been valued at $396,500. The Orpheus Acquisition in regard to the Hodgson Vale Coal Project and the Ashford Lime Project is pursuant to a Deed of Option whereby Orpheus Energy has the right to acquire such projects for the consideration noted above. The Option which originally was to be exercised by 30 September 2010 has been extended (twice) to 31 December 2011. The Orpheus Acquisition in regard to the acquisition of all of the shares in OEG was pursuant to a Deed of Option Over Shares whereby Orpheus

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Energy had the right to acquire such OEG shares for the consideration of $2 and the assumption of liabilities of OEG. The Option which originally was to be exercised by 30 September 2010 had been extended to 31 December 2010 and completion must occur by 30 April 2011. The Option was exercised on 15 December 2010 however the completion of the acquisition is subject to Orpheus Energy being admitted to the Official List of the ASX or receives conditional listing approval.

3.4 OEG to 31 December 2010 has issued 34,500,000 Converting Notes at an issue price of $0.10 each to raise a gross $3,450,000 that are to be converted into 34,500,000 ordinary shares in Orpheus Energy (along with 17,250,000 free attached Converting Share Options that may be converted into 17,250,000 shares in Orpheus Energy exercisable at 20 cents each, on or before 31 December 2011). Following the recapitalisation of Orpheus Energy by the consolidation of every 5 shares into 1 share the 34,500,000 Converting Notes issued are to be converted to 34,500,000 post consolidated ordinary shares in Orpheus Energy. Resolution 10 noted above allowed for the issue of up to 30,000,000 shares (and up to 15,000,000 free attached share options) to be issued to the Converting Note holders once Orpheus Energy acquires all of the shares in OEG, however 34,500,000 Converting Shares (and 17,250,000 Converting Share Options in Orpheus Energy) are now to be issued. The issue of the Converting Notes was to partly fund OEG earning up to a 51% interest in the B26 Coal Project (refer paragraph 3.7 below).

The shares in OEG are to be transferred to Orpheus Energy for a nominal consideration of $2 upon completion of the Capital Raising and approval from ASX for re-quotation of the Company’s shares on ASX. As noted elsewhere in this report, the Orpheus Acquisition consideration has been assessed at $5,396,500 being $5,000,000 for the 25,000,000 Orpheus Acquisition Shares and $396,500 for the Orpheus Acquisition Options on the basis that the Orpheus Energy shares to be issued will be issued on relisting (currently Orpheus Energy shares are near worthless).

OEG in April 2010 signed an Option and Joint Venture Deed with Plasminex Pty Ltd (“Plasminex”) whereby OEG had a 6 month option to ascertain the prospectivity of the Wingen Maid Project (a bentonite prospect covered by EL7142 and ELA 3657). Payment of the mining bond on ELA3757 by OEG is also envisaged in the Option. The Option and Joint Venture Deed was re-signed on 26 October 2010 and the option period extended for a further six month period to 26 April 2011 and then to 26 October 2011. OEG, if it exercises the option, must spend $500,000 on stage 1 (as defined) to earn a 50% interest in the Wingen Bentonite Joint Venture. It is proposed that Orpheus Energy will acquire the right by acquiring all of the shares in OEG. To date, commencement of the joint venture has yet to officially commence.

3.5 Resolution 8 and part of resolution 9 referred to the proposal for Orpheus Energy to issue 5,000,000 Coalworks OE Shares to Coalworks in consideration for Coalworks agreeing to forgive a converting loan (“Equity Loan”) of up to $132,557 that Coalworks has or will make to Orpheus Energy so that Orpheus Energy can repay all existing trade creditors and other liabilities and a further $367,443 of a debt owed by OEG to Coalworks. Coalworks had agreed to convert the Equity Loan Facility made to Orpheus Energy by issuing 5,000,000 Coalworks OE Shares as noted above. The repayment of the Equity Loan by way of the issue of up to 5,000,000 Coalworks OE Shares to Coalworks was as noted in resolution 7. Resolution 9 (part thereof) referred to the proposal to allow the issue of up to 5,000,000 Coalworks OE Shares to Orpheus Energy. OEG owed Coalworks approximately $1,135,837 as at 30 November 2010 but this has been reduced to $1,000,000 as at 28 February 2011 (“OEG Debt”) that includes the $132,557 noted above. Originally it was planned that $500,000 of the OEG Debt would be extinguished by the issue of the 5,000,000 Coalworks OE Shares and 2,500,000 Coalworks OE Options and the balance (that would be limited to a further $500,000) would either be paid in cash or may, at the election of Coalworks be settled by Orpheus Energy issuing further shares and share options to Coalworks. The limit of the OEG Debt was thus $1,000,000 that was be extinguished by the issue of 5,000,000 Coalworks OE Shares and either payment of $500,000 cash to Coalworks or the issue of a further 5,000,000 Additional Coalworks OE

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Shares by Orpheus Energy at a deemed issue price of 10 cents each at the option of Coalworks. If Additional Coalworks OE Shares were to be issued, Coalworks would be issued one free attached share option (“Additional Coalworks OE Options”) for every two Additional Coalworks OE Shares issued. Resolution 9 (part thereof) also referred to the proposal to allow the issue of up to 5,000,000 Additional Coalworks OE Shares to Orpheus Energy and up to 2,500,000 Additional Coalworks OE Options. Subsequently Coalworks agreed to extinguish the Equity Loan to its full value of $1,000,000 and 5,000,000 Coalworks OE Shares and 5,000,000 Additional Coalworks OE Shares (in effect ordinary shares in Orpheus Energy) are to be issued to Coalworks (in addition 2,500,000 Coalworks OE Options and 2,500,000 Additional Coalworks OE Options – all in affect ordinary share options in Orpheus Energy are to be issued to Coalworks).

3.6 OEG had signed a farm in Joint Venture Agreement in Kalimantan that includes an advanced coal project known as “B26” referring to Blocks 2 and 6 west of Balikpapan in East Kalimantan. Additional coal areas are to be reviewed as part of the Strategic Alliance agreement (refer below for further details). It is proposed to progress the existing advanced project to bankable feasibility status. OEG will drive an aggressive project management program to achieve early production at the B26 coal project in Kalimantan. The combination of management teams from OEG and its local Indonesian partner and its associations will focus on a low CapEx project within a short time frame. The B26 Project is held in the name of two Indonesian companies, PT Pola Andhika Realtor (“PAR”) and PT Berkah Bhumi Abadi (“BBA”). The combined carrying costs of the B26 Project in the 31 October 2010 unaudited balance sheets of PAR and BBA total approximately $9,387,600 using 13 December 2010 exchange rates between Australia and Indonesia. 51% represents a carrying value of approximately $4,787,676. Refer note 15 in relation to a lower valuation relating to the B26 Coal Project. In effect, via a Sale and Purchase Agreement of 18 November 2010, OEG is acquiring a 51% shareholding interest in PAR and BBA at a total cost of US$1,500,000. The acquisition of the shares in PAR and BBA are subject to certain conditions that include various regulatory matters that need to occur in Indonesia. To date, US$1,500,000 has been paid by Coalworks or OEG of which US$1,250,000 was paid for and is recorded in the books of OEG and US$250,000 was paid for by Coalworks on behalf of OEG by direction on completion of the transaction. The US$250,000 in the books of Coalworks will be reimbursed by Orpheus Energy subsequent to re-listing on the ASX. In the event that all condition precedents cannot be met by 31 December 2011, the US$1,500,000 is refundable to OEG. Royalties at the rate of US1.50 per tonne are payable on coal production. PAR has entered into a coal mining agreement with PT Tunas Bumi Menggala (PT TBM”) to establish a joint venture operation where PT TBM performs coal mining and coal selling, until 250,000 metric tonnes excavated has been sold and PAR and PT TBM shall receive 50% of the net profit from the coal selling proceeds.

3.7 OEG has signed a strategic alliance agreement with PT Mega Coal International (“Mega”) which is a current producer of thermal coal in Indonesia and has a portfolio of coal projects in Kalimantan which potentially could provide joint venture opportunities for Orpheus Energy. The strategic alliance provides:

¾ identification of synergies and efficiencies with respect to Orpheus Energy’s proposed management and development of the B26 Coal Project; ¾ preparation by Orpheus Energy and Mega of a list of suitable coal projects with a project assessment with respect to potential resource, project scope, CapEx and OpEx, and proposed timing for the various stages of each project, including consideration of the means by which infrastructure and be constructed for each project, and in particular methodologies to construct the mine and infrastructure and expected operating costs of each project; ¾ consideration of potential for the execution of further coal Joint Ventures between Mega and Orpheus Energy; and ¾ review of potential coal projects in Indonesia utilizing coal to liquids technology and potential for creation of a consortium to develop a coal to liquids plant for such projects.

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3.8 Potential investors should read the Prospectus in full that includes an Independent Geologist’s Report – Indonesia, an Independent Geologist’s Report – Australia, a Report on Mining Concessions - Indonesia and a Report on Tenements - Australia. We make no comments as to ownership or values of the current and proposed mineral tenement interests of the Orpheus Energy Group. Not all summaries of contracts entered into by the Company and OEG have been made in this investigating accountant’s report and thus potential investors and shareholders should read the Material Contract summaries in Section 12 of the Prospectus in full to gain a better understanding of the commitments and obligations of the Orpheus Energy Group, including the potential to issue further shares and share options not noted in this report.

3.9 As at 30 November 2010, there were 53,801,663 ordinary fully paid shares on issue in Orpheus Energy. Following shareholder approval on 30 November, the existing shares (and share options) on issue were consolidated on a 1 for 5 basis so that immediately prior to the issue of shares and share options pursuant to resolutions 6 to 15 as noted above there were, 10,760,493 shares on issue and there are now 84,847,993 shares on issue as noted below.

Following shareholder approval to resolutions 1 to 18 and the resolution passed on 23 March 2011 as noted above and after consummation, the movement in the issued capital of the Company could be:

Number Number Minimum Maximum Shares on issue 30 November 2010 53,801,663 53,801,663 1 for 5 consolidation of capital 10,760,493 10,760,493 Issue of shares that have taken place before lodgement of the Prospectus Issue of the Orpheus Shares 25,000,000 25,000,000 Issue of Coalworks and Additional Coalworks OE Shares 10,000,000 10,000,000 Issue of Issue Shares 2,500,000 2,500,000 Issue of Director Shares 337,500 337,500 Issue of Corporate Shares 1,750,000 1,750,000 Issue of Converting Shares from the conversion of Converting Notes issued by OEG 34,500,000 34,500,000 Shares on issue as at 31 March 2011 84,847,993 84,847,993 Issue of shares that will take place after the Capital Raising and approval for ASX listing is achieved Issue of Placement Shares 50,000,000 60,000,000 Balance before exercise of any share options 134,847,993 144,847,993 Potential issue of further shares Exercise of Coalworks OE Options and Additional Coalworks OE Options 5,000,000 5,000,000 Exercise of the Orpheus Acquisition Options 12,500,000 12,500,000 Exercise of the Issue Options 1,250,000 1,250,000 Exercise of the Rights Issue Options - 5,380,247 Exercise of Converting Share Options 17,250,000 17,250,000 Exercise of Promoter Options 12,750,000 12,750,000 Exercise of Director Options 168,750 168,750 Exercise of Corporate Options 875,000 875,000 Exercise of the BBY Options 1,000,000 1,000,000 Potential shares on issue 185,641,743 201,021,990

The above table excludes the 1,666,666 share options exercisable at $2.63. Refer the Material Contracts Section of the Prospectus for potential further issue of shares and share options by the Orpheus Group.

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4. Scope of Examination

4.1 You have requested Stantons International Securities to prepare an Investigating Accountant’s Report on:

a) The estimated statement of financial position of Orpheus Energy as at 30 April 2011; and b) Consolidated pro-forma statements A and B of financial position of Orpheus Energy at 30 April 2011 (unaudited) adjusted to include funds to be raised by the Prospectus and the completion of transactions referred to in note 2 of Appendix 2.

4.2 All of the financial information referred to above has not been audited however has been subject to audit review (except for the Statement of Financial Position to 30 June 2010). The auditor of Orpheus Energy (AMFG) qualified the audit report and disclaimed the financial statements to 30 June 2010. The proposed directors of Orpheus Energy are responsible for the preparation and presentation of the historical and pro-forma financial information, including the determination of the pro-forma transactions. We have however examined the financial statements and other relevant information and made such enquiries, as we considered necessary for the purposes of this report. The scope of our examination was substantially less than an audit examination conducted in accordance with Australian Auditing Standards and accordingly, we do not express such an opinion. Our examination included:

a) discussions with new directors and other key management of Orpheus Energy and OEG; b) a review of contractual arrangements; c) a review of publicly available information; and d) a review of work papers, accounting records and other documents.

5. Opinion

5.1 In our opinion, the pro-forma consolidated statement of financial position as set out in Appendix 2 presents fairly, the pro-forma consolidated statement of financial position of Orpheus Energy as at 30 April 2011 in accordance with the accounting methodologies required by Australian Accounting Standards on the basis of assumptions and transactions set out in Appendix 3. No opinion is expressed on the historical statement of financial position, as shown in Appendix 1, except to state that nothing has come to our attention which would require any further modification to the financial information in order for it to present fairly, the statement of financial position as at 30 April 2011.

5.2 To the best of our knowledge and belief, there have been no other material items, transactions or events subsequent to 30 April 2011 that have come to our attention during the course of our review which would cause the information included in this report to be misleading.

6. Other Matters

6.1 At the date of this report, Stantons International Securities or Stantons International does not have any material interest in Orpheus Energy either directly or indirectly, or in the outcome of the offer. Stantons International Securities were not involved in the preparation of any other part of the Prospectus, and accordingly, make no representations or warranties as to the completeness and accuracy of any information contained in any other part of the Prospectus. Stantons International Securities consents to the inclusion of this report (including Appendices 1 to 2) in the Prospectus in the form and content in which it is included. At the date of this report, this consent has not been withdrawn.

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Yours faithfully STANTONS INTERNATIONAL SECURITIES

J P Van Dieren - FCA Director

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APPENDIX 2 – UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 APRIL 2011

Orpheus Orpheus Orpheus Energy Energy Energy (estimated) Consolidated Consolidated Pro-forma A Pro-forma B $ $ $ Current Assets Cash - 11,851,685 14,201,685 Receivables 13,768 61,989 61,989 13,768 11,913,674 14,263,674 Non Current Assets Fixed assets - 17,560 17,560 Bonds - 13,519 13,519 Investments - - - Capitalised acquisition and exploration costs - 8,116,962 8,116,962 - 8,148,041 8,148,041 Total Assets 13,768 20,061,715 22,411,715 Current Liabilities Trade and other payables 89,801 95,451 95,451 Borrowings- owing to Coalworks 274,785 - - Total Current Liabilities 364,586 95,451 95,451 Total liabilities 364,586 95,451 95,451 Net Assets (Liabilities) (350,818) 19,966,264 22,316,264

Equity Issued capital 8,383,694 30,956,194 33,306,194 Reserves 979,952 2,059,422 2,059,422 Accumulated losses (9,714,464) (14,372,352) (14,372,352) (350,818) 18,643,264 20,993,264 Outside Equity interests - 1,323,000 1,323,000 Net Equity (Deficiency) (350,818) 19,966,264 22,316,264

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APPENDIX 2

CONDENSED NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

1. Statement of Significant Accounting Policies

(a) Basis of Accounting The condensed consolidated Statements of Financial Position have been prepared in accordance with applicable accounting standards, the Corporations Act 2001 and mandatory professional reporting requirements in Australia (including the Australian equivalents of International Financial Reporting Standards) and we have made such disclosures as considered necessary. They have also been prepared on the basis of historical cost and do not take into account changing money values. The accounting policies have been consistently applied, unless otherwise stated. The financial statements have been prepared on a going concern basis that is dependent on the Placement Capital being successful and/or the Company raising additional capital to continue in business.

(b) Income Tax The charge for current income tax expense is based on the profit for the year adjusted for any non assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantially enacted as at balance date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxation profit or loss. Deferred income tax assets are recognised to the extent that it is probable that the future tax profits will be available against which deductible temporary differences will be utilised. The amount of the benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in the income taxation legislation and the anticipation that the economic unit will derive sufficient future assessable income to enable the benefits to be realised and comply with the conditions of deductibility imposed by law.

(c) Exploration, Evaluation and Development Expenditure Exploration, evaluation and acquisition expenditure on areas of interest are assessed on a case by case basis and may be capitalised to areas of interest and carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future. Where projects have advanced to the stage that directors have made a decision to mine, they are classified as development properties. When further development expenditure is incurred in respect of a development property, such expenditure is carried forward as part of the cost of that development property only when substantial future economic benefits are established. Otherwise such expenditure is classified as part of the cost of production or written off where production has not commenced.

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(d) Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value, less where applicable, any accumulated depreciation and impairment losses. The carrying amount of the plant and equipment is reviewed annually by the Directors to ensure it is not in excess of the recoverable amount of these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employed and their subsequent disposal. The expected net cash flows have been discounted to their present value in determining recoverable amounts.

Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight line basis over their useful lives to the Company commencing from the time the asset is held ready for use. The asset’s residual value and useful lives are reviewed and adjusted if appropriate, at each balance sheet date.

An assets’ carrying value is written down immediately to its recoverable amount if the asset’s carrying value is greater than the estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.

(e) Trade and other accounts payable Trade and other accounts payable represent the principal amounts outstanding at balance date, plus, where applicable, any accrued interest.

(f) Recoverable Amount of Non Current Assets The carrying amounts of non-current assets are reviewed annually by directors to ensure they are not in excess of the recoverable amounts from those assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be received from the assets employed and subsequent disposal. The expected net cash flows have been or will be discounted to present values in determining recoverable amounts.

(g) Operating Revenue Revenue represents interest received and reimbursements of exploration expenditures.

(h) Issued Capital Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

(i) Principles of Consolidation The pro-forma consolidated financial statements comprise the financial statements of Orpheus Energy and its subsidiary, OEG (“the Group”). The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies. The existing subsidiaries of Orpheus Energy are assumed to be no longer part of the Orpheus Energy Group for the purposes of the report.

Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated

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from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which Orpheus Energy has control.

(j) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave.

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

(k) Share Based Payments The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an internal valuation using Black-Scholes or Binomial option pricing models.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award.

(l) Critical accounting estimates and judgements In preparing Financial Reports, the Company has been required to make certain estimates and assumptions concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate exactly with actual events and results.

Significant accounting judgements In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

ORP5379A/IAR Orpheus Energy 17 May 2011 Final

PROSPECTUS 101

Capitalisation of exploration and evaluation expenditure The Group has capitalised significant acquisition expenditure on the basis either that this is expected to be recouped through future successful development (or alternatively sale) of the Areas of Interest concerned or on the basis that it is not yet possible to assess whether it will be recouped.

Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised acquisition expenditure is dependent on an number of factors, including whether the Company decides to exploit the related lease itself, or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

(m) Investments and other financial assets The Company classifies its investments in the following categories: financial assets at fair value through profit and loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position.

Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity. Held-to-maturity investments are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets.

Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the statement of financial position date.

Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade date – the date on which the Company commits to purchase or sell the asset. Investments are

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102 INVESTIGATING ACCOUNTANT’S REPORT

initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed to the statement of financila performance. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

When securities are classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the statement of financial performance as gains and losses from investment securities.

Subsequent measurement Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Available-for-sale financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the income statement within other income or other expenses in the period in which they arise.

Income from financial assets at fair value through profit and loss is recognised in the income statement as part of income from continuing operations when the Group’s right to receive payment is established.

(n) Asset retirement obligations The Group’s mineral exploration and development activities are to be subject to various Australian and Indonesian laws and regulations regarding the protection of the environment. As a result of these, the Group is expected to incur expenses from time to time to discharge its obligations under these laws and regulations.

Reclamation and closure costs are estimated based on the Group’s interpretation of current regulatory and operating licence requirements and measured at fair value. Fair value is determined based on the net present value of future cash expenditures expected upon reclamation and closure and subsequent annual recognition of an accretion amount on the discounted liability. Reclamation and closure costs are capitalised as mine development costs and amortised over the life of the mine on a unit-of-production basis.

2. Actual and Proposed Transactions to Arrive at Pro-forma Unaudited Consolidated Statement of Financial Position

The audited Statement of Financial Position (Balance Sheet) of Orpheus Energy (audit report was qualified as they disclaimed the financial statements to 30 June 2010) as at 30 April 2011 along with a pro-forma consolidated Statement of Financial Position A assuming the following:

(a) the consolidation in capital on a 1 for 5 basis; (b) the acquisition of the Orpheus Acquisition Assets by way of an issue of 25,000,000 Orpheus Acquisition Shares at a deemed share price of 20 cents per post consolidated share (deemed value $5,000,000), the issue of 12,500,000 Orpheus Acquisition Options at a deemed fair value of $396,500; (c) the issue of 2,500,000 Issue Shares and 1,250,000 Issue Options to parties at a deemed value for the Issue Shares of $500,000 and an assesses fair value of the Issue Options of $58,500 and such costs expensed (the contract value was $25);

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PROSPECTUS 103

(d) the conversion of $1,000,000 of the Equity Loan made by OEG/Coalworks and the issue of 5,000,000 Coalworks OE Shares and 5,000,000 Additional OE Coalworks Shares at a deemed value of $2,000,000 (and the issue of free attached 2,500,000 Coalworks OE Options and 2,500,000 Additional Coalworks OE Options) and accounting for a loss of $1,000,000; (e) the issue of 50,000,000 Placement Shares at 25 cents each to raise a gross $12,500,000 (“Placement Raising”) and incur cash brokerage costs estimated at $800,000 and other capital raising costs estimated at $495,000 and assuming 5,380,247 share options will be issued at no cost; (f) the issue of 34,500,000 ordinary shares (Converting Shares) and 17,250,000 Converting Share Options from the conversion of 34,500,000 Converting Notes issued by OEG (eliminates a Converting Loan Debt of $3,450,000 due by OEG as at 31 December 2010; (g) the issue of 12,750,000 Promoter Options exercisable at 20 cents each, expiring on 30 September 2014 at a deemed fair value of $479,400; (h) the issue of 112,500 Director Shares at a deemed value of $22,500 as part consideration to eliminate pre-administration creditors and a further 225,000 shares to pay subsequent director fees for a value of $45,000 along with 168,750 Director Options with a deemed fair value of $7,945; (i) the issue of 1,750,000 Corporate Shares at a deemed value of $350,000 and 875,000 Corporate Options with a deemed fair value of $41,125; (j) OEG entering into a joint venture to acquire a 51% interest in two coal projects in Indonesia and the payment by OEG of a minimum of US$500,000 (equivalent to A$615,688) relating to the B26 Coal Project (all this occurred prior to 30 June 2010). A further US$1,000,000 was payable to earn an interest in the B26 Coal Project by paying the shareholders of PAR and BBA of which US$750,000 (then $757,193) has been paid in November 2010 and a further US$250,000 (say $250,000) was paid by Coalworks and will be reimbursed to Coalworks: (k) the payment of $100,000 to the Recovery Vehicle (a company to be set up as part of the divestiture of all of the shares in AMFL); (l) the Incurring further corporate and administrative costs of say $300,000; (m) assuming that the cash and receivables on hand at 30 June 2010 are used by the Administrators in part paying their costs and part payment of trade creditors as a full and final settlement of pre Administration debts; and (n) the issue of 1,000,000 share options to a broker exercisable at 25 cents each, on or before three years from date of issue and valued for IFRS purposes at $96,000 and expensed.

The consolidated pro-forma Statement of Financial Position B assumes all of the above, except that instead of raising $12,50,000 from the Placement Raising, the Company raises a gross $15,000,000, incurs cash brokerage costs of $950,000 and other capital raising costs estimated at $495,000 and issues 60,000,000 Placement Shares.

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104 INVESTIGATING ACCOUNTANT’S REPORT

Note 2 Orpheus Unaudited Unaudited Energy Consolidated Consolidated 30 April 2011 Orpheus Orpheus Energy Energy Pro-forma A Pro-forma B 30 April 2011 30 April 2011 $ $ $ 3. Cash Assets

The movements in cash assets are as follows: 30 April 2011 - - - Issue of Placement Shares pursuant to the Prospectus (e) - 12,500,000 15,000,000 Capital raising costs (e) - (1,295,000) (1,445,000) Cash acquired on acquisition of OEG (net of $2 for payment to acquire all of the shares in OEG) - 1,296,685 1,296,685 Payment of US$250,000 in relation to the B26 Coal Project acquisition (j) - (250,000) (250,000) Payment to Recovery Vehicle (k) - (100,000) (100,000) Corporate/ administrative costs (l) - (300,000) (300,000) - 11,851,685 14,201,685

4. Receivables (current) GST receivables and prepayments 13,768 61,989 61,989 - 61,989 61,989

5. Capitalised Acquisition and Exploration Costs

Capitalised acquisition costs (see note 15) re Hodgson and Ashford (b) - 5,396,500 5,396,500 B26 Coal Project (j) - 2,700,000 2,700,000 Other costs - 20,462 20,462 - 8,116,962 8,116,962

6. Investments

Shares in wholly owned subsidiary Orpheus Energy Group Pty Ltd - 2 2 Less eliminated on consolidation - (2) (2) - - - Loans to Orpheus Energy Pty Ltd (OEG) (d)(f)(j) - 6,700,000 6,700,000 Less eliminated on consolidation - (6,700,000) (6,700,000) - - - Total Investments - - -

OEG is planning to acquire 51% of the shares in PAR and BBA and has paid the US$1,500,000 (US$250,000 paid by Coalworks that will seek reimbursement out of the Capital Raising. In addition, OGE plans to acquire a 50% shareholding interest in Pelita and Prima.

ORP5379A/IAR Orpheus Energy 17 May 2011 Final

PROSPECTUS 105

Note 2 Orpheus Unaudited Unaudited Energy Consolidated Consolidated 30 April 2011 Orpheus Orpheus Energy Energy Pro-forma A Pro-forma B 30 April 2011 30 April 2011 $ $ $ 7. Trade and other payables Trade and other payables at 30 April Pre administration director fees 22,500 22,500 22,500 Other trade creditors and accruals 67,301 67,301 67,301 Owing to OEG 274,875 274,875 274,875 OEG Trade creditors - 28,150 28,150 Less: Eliminated on consolidation - (274,875) (274,875) Less: Eliminate directors fees (h) - (22,500) (22,500) 364,676 95,451 95,451

8. Borrowings Secured Owing to Coalworks by OEG - 1,000,000 1,000,000 Less: Repayment by the issue of the Coalworks OE Shares and Additional Coalworks OE Shares (and Coalworks OE Options and Additional Coalworks OE Options) to Coalworks - 2,000,000 (2,000,000) Less: Accounting for loss - 1,000,000 1,000,000 - - -

9. Issued Capital 10,760,493 shares as at 30 April 2011 post the 1 for 5 consolidation of capital (a) 8,383,694 8,383,694 8,383,694 25,000,000 Orpheus Acquisition Shares at a deemed 20 cents each (b) - 5,000,000 5,000,000 2,500,000 Issue Shares to various parties (c) - 500,000 500,000 5,000,000 Coalworks OE Shares and 5,000,000 Additional OE Coalworks Shares (d) - 2,000,000 2,000,000 50,000,000 Placement Shares pursuant to the Prospectus (includes Rights Issue Shares) (e) - 12,500,000 - 60,000,000 Placement Shares pursuant to the Prospectus (includes Rights Issue Shares (e) - - 15,000,000 34,500,000 Converting Shares (at a deemed 10 cents each) (f) - 3,450,000 3,450,000 337,500 Director Shares (h) - 67,500 67,500 1,750,000 Corporate Shares (i) - 350,000 350,000 8,383,694 32,251,194 34,751,194 Less: estimated share issue costs (e) - (1,295,000) (1,445,000) Pro-forma A (134,847,993 shares) 8,383,694 30,956,194 - Pro-forma B (144,847,993 shares) 33,306,194

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106 INVESTIGATING ACCOUNTANT’S REPORT

Note 2 Orpheus Unaudited Unaudited Energy Consolidated Consolidated 30 April 2011 Orpheus Orpheus Energy Energy Pro-forma A Pro-forma B 30 April 2011 30 April 2011 $ $ $ 10. Option Reserve

Balance at 30 April 2011 979,952 979,952 979,952 Issue of 12,500,000 Orpheus Acquisition Options (b) - 396,500 396,500 Issue of 1,250,000 Issue Options (c) - 58,500 58,500 Issue of 12,750,000 Promoter Options (g) - 479,400 479,400 Issue of 168,750 Director Options (h) - 7,945 7,945 Issue of 875,000 Corporate Options (i) - 41,125 41,125 1,000,000 Broker Options (n) - 96,000 96,000 979,952 2,059,422 2,059,422

As noted above, Coalworks will own a total of 12,500,000 Orpheus Acquisition Options, exercisable at 20 cents, each on or before 31 December 2011. There will also be on issue 1,250,000 Issue Options, 17,250,000 Converting Share Options, 168,750 Director Options and 875,000 Corporate Options, 2,500,000 Coalworks OE Options and 2,500,000 Additional OE Coalworks Options, all exercisable at 20 cents each, on or before 31 December 2011. There will also be on issue, 12,750,000 Promoter Options exercisable at 20 cents each, on or before 30 September 2014. There will also be 1,000,000 Broker Options exercisable at 25 cents each, on or before three years from date of issue. There is the possibility that if all shares are subscribed for under the Rights Issue that forma part of the Capital Raising, a further up to 5,380,947 share options will be outstanding, exercisable at 20 cents each, on or before 31 December 2011. Refer contingent liabilities section of the Prospectus in relation to the issue of further share options.

11. Accumulated Losses

Balance as at 30 April 2011 9,714,464 9,714,464 9,714,464 Issue of Issue Shares and Issue Options (c) - 558,500 558,500 Equity Loan conversion cost (d) - 1,000,000 1,000,000 Issue of 12,750,000 Promoter Options () - 479,400 479,400 Issue of post Administration Director Shares and Options (h) - 52,945 52,945 Issue of Corporate Shares and Options (i) - 391,125 391,125 Payment to Recovery Vehicle (k) - 100,000 100,000 Broker fees settled by share options (n) - 96,000 96,000

Further corporate and administration costs (q) - 300,000 300,000 Goodwill on consolidation expensed 1,679,918 1,679,918 9,714,464 14,372,352 14,372,352

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PROSPECTUS 107

12. Contingent Liabilities and Commitments

OEG entered into a contract with Surge Capital Corporation (“Sure”) in relation to a mandate on capital raisings for up to US$25,000,000 details of which are disclosed in the Material Contracts Section of the Prospectus. Further warrants (share options) may be issued to Surge that is equal to the number resulting from multiplying 5% (plus any applicable taxes) with the gross value of the amount raised and dividing it by the “warrant exercise price”. These share options would be exercisable for a 5 year period. The exercise price is equal to (i) the lowest warrant exercise price of an warrants issued to any name investor in the financing; or (ii) in the event of no warrants being issued to a named investor, the closing price of the company’ common shares on the day prior to financing, less any discount permitted by the rules of the ASX. For amounts over US$25,000,000, share warrants (options) will be issued equal to 3% on the same terms as noted but replacing 5% with 3%. Financing fees are also payable as noted in the Material Contracts Section of the Prospectus. The Company intends to establish a special purpose entity funded with $5,000,000 from the raising to further the objectives of the Strategic Alliance. The Strategic Alliance is constantly reviewing opportunities, such potential projects includes Blocks 5, 8, 9 and 10 at Kintap South Kalimantan in Indonesia amongst others. Based on discussions with the Directors and legal advisors, to our knowledge, the Company has no other material commitment or contingent liabilities not otherwise disclosed in this Investigating Accountant’s Report and in the Prospectus. Investors should read the Independent Exploration Title Report, the Legal Consultants Report on Mining Concessions and the Acquisition Review Report and the Material Contracts Section of the Prospectus for further possible contingencies and commitments. A number of tenements may be subject to royalty payments on production of minerals. For details on proposed exploration commitments on mineral tenements, refer to the Independent Reports and Section 3 in the Prospectus.

13. Rental Of Premises Commitments

The Company has not entered into a lease of premises agreement as at 28 February 2011. OEG had a rental lease agreement that expired on 31 January 2011 at the rate of $27,500 per annum but this was not extended. OEG has signed a new lease agreement to rent premises at the rate of $6,439.15 inclusive of GST for a period of 12 months from 1 February 2011 and a bond deposit of $12,878.25 (inclusive of GST) has been paid. The first two months are rent free. OEG may extend the rental period by 12 months.

14. Management Agreements

The Company has entered into employment contracts with Wayne Mitchell as Executive Chairman effective from the date the Company’s securities are readmitted to quotation on the Official List of ASX. A Letter Agreement has been entered into between the Company and Wesley Harder to act as Executive Director. A summary of the financial details on the employment contracts is outlined in the Material Contracts Section of the Prospectus. The Material Contracts Section also refers to other service agreements with Anthony King, Tony Teng, Chris Hagan, David Oastler and Thomas Nietsche or their associated companies.

15. Acquisition of the Orpheus Acquisition Assets including all of the shares in OEG

The Company on completion of the issue of the Placement Shares will acquire:

x the Hodgson Vale Coal Project comprised in EPC 1145 (100%) (“Hodgson”); and x the Ashford Lime Project comprised in EL 6511 (“Ashford”)

by way of the issue of 25,000,000 Orpheus Acquisition Shares in Orpheus Energy and the issue of 12,500,000 Orpheus Acquisition Options exercisable at 20 cents each, on or before 31 December 2011. The deemed cost of acquiring Hodgson and Ashford was a

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108 INVESTIGATING ACCOUNTANT’S REPORT

total of $5,396,500 being $5,000,000 allocated to the 25,000,000 Orpheus Acquisition Shares and $396,500 being allocated to the 12,500,000 Orpheus Acquisition Options.

Ravensgate, an independent geological consulting firm as at 31 July 2010 provided a range of market values of the interests in the Orpheus Acquisition Assets (excluding the shares in OEG). Ravensgate ascribed a range of values as follows:

Low Preferred High $ $ $ Hodgson Vale (100%) 2,400,000 5,500,000 8,600,000 Ashford Lime (100%) 580,000 800,000 870,000 Wingen Bentonite (100%) 640,000 780,000 910,000 B26 Indonesian Coal Project (100%) 2,250,000 2,700,000 2,900,000 5,870,0009,780,000 13,280,000

A 50% interest in the Wingen Bentonite JV and a 51% interest in the B26 Coal Projects results in values ascribed by Ravensgate were as follows:

Low Preferred High $ $ $ Hodgson Vale (100%) 2,400,000 5,500,000 8,600,000 Ashford Lime (100%) 580,000 800,000 870,000 Wingen Bentonite (50%) 320,000 390,000 460,000 B26 Indonesian Coal Project (51%) 1,150,000 1,400,000 1,480,000 4,450,000 8,070,000 11,400,000

Set out below is the un-audited balance sheet of OEG as at 30 April 2011 along with a pro- forma OEG balance sheet that assumes the acquisition of a 51% shareholding interest in two Indonesian companies that collectively own the B26 Coal Project referred to in the Prospectus. The actual consideration payable to acquire 100% of the shares in OEG is $2. It is noted that Orpheus Energy is obligated to repay $1,000,000 of the loan owing by EOG to Coalworks by way of the issue of 5,000,000 Coalworks OE Shares and 2,500,000 Coalworks OE Options and 5,000,000 Additional Coalworks OE Shares 2,500,000 Additional Coalworks OE Options.

OEG Unaudited OEG 30 April 2011 Pro-forma Consolidated Unaudited 30 April 2011 $ $

Current Assets Cash assets 1,296,687 1,296,687 Trade, other receivables and prepayments 48,221 48,221 Total Current Assets 1,344,908 1,344,908 Non Current Assets Plant and equipment at WDV 17,560 17,560 Owing by Orpheus Energy 274,785 274,785 Deposits paid re investment- B26 1,622,881 - B26 Indonesian Coal Project at preferred valuation - 2,700,000 Bonds 13,519 13,519 Mineral capitalised costs 20,462 20,462 Total Non Current Assets 1,949,207 3,026,326 Total Assets 3,294,115 4,371,234

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PROSPECTUS 109

OEG Unaudited OEG 30 April 2011 Pro-forma Consolidated Unaudited 30 April 2011 $ $ Current Liabilities Trade and other payables 28,150 28,150 Borrowings- Coalworks 1,000,000 1,000,000 Converting Notes 3,450,000 3,450,000 Owing to parties to acquire an effective 51% of the B26 Coal Project 250,000 250,000 Total Current Liabilities 4,728,150 4,728,150 Total Liabilities 4,728,150 4,728,150 Net Assets (Liabilities) (1,434,035) (356,916) Equity Issued Capital 2 2 Accumulated (Losses) / Profits (1,434,037) (1,679,918) Parent entity equity (1,434,035) (1,679,916) Outside equity interests - 1,323,000 Total Equity (Deficiency) (1,434,035) (356,916)

The outside equity interests of PAR and BBA would equate to $1,323,000 being 49% of the $2,700,000 valuation attributable to a 100% interest in the B26 Coal Project. The Orpheus Acquisition Assets that include the Indonesian joint ventures/ mining assets may not turn out to be commercially viable and thus losses may be incurred. The 7 June 2010 Heads of Agreement (“HOA”) between OEG, PT Mega Coal Indomine, PT Persada Kharisma Kenanga, PAR and BBA results in US$1,500,000 being paid by OEG so that OEG ends up owning 51% of the share capital of PAR and BBA, that between them own the B26 Coal Project in Indonesia. The funds are due to be paid on the listing of OEG on the ASX (via the re-quotation of all of the Orpheus Energy shares). We have been informed that the loans to the existing shareholders of PAR and BBA are to be forgiven (approximately equivalent to around $10.5 million) and that there are no tax consequences. This assertion has not been verified by us. OEG is able to seek verification of these matters prior to the acquisition by OEG of 51% of the shares in PAR and BBA. No adjustments have been made to account for the potential acquisition of 50% of Pelita and Prima as noted in the Background Section 3.6 of this report. No details have been obtained on the financial information of Pelita and Prima.

On acquisition of a 100% shareholding interest in OEG by Orpheus Energy, the net assets being acquired (using unaudited 30 April 2011 figures) are as follows:

Cash 1,296,687 Receivables 48,221 Owing by Orpheus Energy 274,785 Capitalised acquisition costs of Tenements 2,720,462 Plant and equipment 17,560 Bonds 13,519 Less: Payables - other (28,150) Owing to Coalworks (1,250,000) Converting Notes (3,450,000) Minority interests (1,323,000) Net Liabilities (1,679,916) Cost of investment in OEG 2 Goodwill on consolidation expensed 1,679,918

The resultant excess of fair value of net liabilities on consolidation over the cost of the investment is taken to the income statement.

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110 INVESTIGATING ACCOUNTANT’S REPORT SECTION 10 Report on Mining Concessions – Indonesia

HADIPUTRANTO, HADINOTO & PARTNERS Hadiputranto, Hadinoto & Partners MEMBER FIRM OF BAKER & MCKENZIE INTERNATIONAL The Jakarta Stock Exchange Building Power II, 21st Floor Sudirman Central Business District JI. Jenderal Sudirman Kav. 52-53 Jakarta 12190, Indonesia Tel: +62 21 515 5090/91/92/93 Fax: +62 21 515 4840/45/50/55 www.hhp.co.id PRIVATE AND CONFIDENTIAL

30 March 2011 Our ref: LDD

The Directors Orpheus Energy Group Pty Limited Level 1, 44 Miller St North Sydney, NSW 2060 Australia

LEGAL CONSULTANT’S REPORT ON MINING CONCESSIONS

Dear Sirs,

1. INTRODUCTION

Orpheus Energy Group Pty Ltd. (“OEG”) has requested Hadiputranto, Hadinoto & Partners, Jakarta to prepare a report regarding the good standing of title to two coal mining concessions in Kalimantan, Indonesia held by PT Pola Andhika Realtor (“PAR”) and PT Berkah Bhumi Abadi (“BBA”).

The scope of this Report is limited to: p a review of the corporate standing of PAR and BBA; p a review of the mining concessions held by PAR and BBA. This Report is not, and should not be considered to be, a full legal audit of or a full due diligence on PAR and BBA or the mining concessions that they hold. We have not sought to investigate any taxation and accounting matters.

The information contained in this Report is prepared based on our review of documents made available to us by PAR and BBA (“Documents Reviewed”). The list of these documents will be provided separately with our Acquisition Review Report dated 29 March 2011.

This report is subject to the assumptions and qualifications set out in Schedule 1 of this Report.

We have not conducted public searches for any litigation actions which may have been commenced against PAR and BBA. We have, however, reviewed all of the Documents Reviewed to determine whether any litigation actions or disputes have been mentioned.

Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss Verein.

PROSPECTUS 111 In Indonesia generally “public” searches can take several weeks (depending on the search and on location), and the results are often unreliable due to the fact that the majority of records are kept in manual filing systems, and documents are often lost or misfiled.

This Report may not be copied, circulated, quoted or divulged to, or used by or relied upon by, any person or entity other than OEG without the prior written consent of Hadiputranto, Hadinoto & Partners, Jakarta (Reference: Luke Devine).

2. CONFIRMATION OF CORPORATE STANDING OF PT PAR AND PT BBA

PAR is a limited liability company established under Deed of Establishment No. 1 dated 1 August 1990 made before Tien Norman Lubis, SH., Notary in Bandung, which has been approved by the Minister of Law and Human Rights (“MoLHR”) pursuant to its Decree C2-6321.HT.01.01.TH’91, dated 2 November 1991 which has been registered in the Company Registry and has been announced in the State Gazette No. 13 Supplement No. 626 dated 14 February 1992. We have seen no evidence from the Documents Reviewed that PAR has been liquidated or dissolved.

BBA is a limited liability company established under Deed of Establishment No. 70 dated 23 November 2004 made before Agustinus Sandimin, SH., Notary in Tanah Grogot as been amended by Deed No. 27 dated 14 April 2005, which has been approved by MoLHR pursuant to its Decree No.C-15846 HT.01.01.TH.2005, dated 8 June 2005 and has been announced in the State Gazette No. 93 Supplement No. 27457 dated 20 November 2009. We have seen no evidence from the Documents Reviewed that BBA has been liquidated or dissolved.

Based on the register of shareholders maintained by PAR and our review of the corporate documents of PAR, the current shareholders of PAR are:

Number Nominal Value Percentage Shareholders of Shares (Rp) (%)

PT Persada Kharisma Kenanga 39,930 39,930,000,000 96.4 Jose Rizal Idham 1,500 1,500,000,000 3.6 Total 10,000 10,000,000,000 100

Based on the register of shareholders maintained by BBA and our review of the corporate documents of BBA, the current shareholders of BBA are:

Number Nominal Value Percentage Shareholders of Shares (Rp) (%)

PT Mega Coal Indomine 43,822 43,822,000,000 99.9 PT Mega Coal International 3 3,000,000 1 Total 300 300,000,000 100

3. THE MINING CONCESSIONS

PAR obtained a Operation Production Mining Business Permit (Izin Usaha Pertambangan Operasi Produksi) from the Regent of Paser Regency pursuant to his Decree No.545/14/Operasi Produksi/Ek/

112 REPORT ON MINING CONCESSIONS – INDONESIA V/2010 dated 7 April 2010 (“Operation Production IUP”). This concession is for a period of 5 years. From 5 June 2008 until 4 June 2013, and covers 164.97 Ha (located in the Tiwei Village, Districts of Long Ikis and Paser Regency, East Kalimantan Province). This Operation Production IUP authorizes PAR to undertake construction, mining, processing and refining and transportation and selling activity.

Pursuant to the provisions of the Indonesian mining laws and regulations in force at the time the PAR licences were issued, these licences can be revoked by the issuing authority in the event that the holder of the licences fails to comply with any obligations under those licences and the prevailing laws, and does not remedy within the cure period granted by the issuing authority. We have seen nothing in the Documents Reviewed that indicates that the issuing authority has revoked PAR’s mining concessions. PAR management has confirmed that they have not received any notice of non-compliance from the Regency of Paser. In addition, we have conducted searches of the mining concession maps maintained by the Ministry of Energy and Mineral Resources in Jakarta, and those maps record PAR as the holder of mining concessions matching the details set out above. Under the Law No 4/2009 on Mineral and Coal Mining passed on 12 January 2009 (“New Mining Law”) and its subsequent implementing regulations, all mining concessions issued prior to the introduction of the New Mining Law are required to be adjusted to become Izin Usaha Pertambangan (IUPs), being the form of mining business licence introduced under the New Mining Law, by 30 April 2010. We have seen a recommendation letter from the Ministry of Energy and Mineral Resources to the Regional Government of Paser Regency (the issuer of the previous mining licenses) which confirms that the Regional Government was allowed to proceed with the adjustment of the previous mining license to become an IUP. Although not mandated by the regulations (which are largely silent as to the process of adjustment of pre-existing mining licenses to IUPs), in our experience, the issuance of this letter is a necessary step of the adjustment process prior to the new IUP being issued by the relevant Regional Government. Accordingly PAR has obtained the Operation Production IUP. The New Mining Law and its implementing regulations are silent as to the consequences of a pre-New Mining Law mining licence not being adjusted to become an IUP by 30 April 2010. We are aware, however, that despite the fact that the deadline has passed, the Ministry of Energy and Mineral Resources continues to recognise the validity of IUPs which are issued after the 30 April 2010 deadline.

BBA obtained an exploration mining business license (Izin Usaha Pertambangan Eksplorasi) from the Regent of Paser Regency pursuant to his Decree No. 545/3/Eksplorasi/Ek/2010, dated 27 October 2010 (“Exploration IUP”). This concession is for a period of 1 year i.e. from 27 October 2010 until 27 October 2011, and covers 1,951.57 Ha (located in the Tiwei and Belimbing Village, Districts of Long Ikis and Paser Regency, East Kalimantan Province).

Pursuant to the provisions of the Indonesian mining laws and regulations in force at the time the BBA licences were issued, these licences can be revoked by the issuing authority in the event that the holder of the licences fails to comply with any obligations under those licences and the prevailing laws, and does not remedy within the cure period granted by the issuing authority. We have seen nothing in the Documents Reviewed that indicates that the issuing authority has revoked BBA’s mining concessions. BBA management has confirmed that they have not received any notice of non-compliance from the Regency of Paser. In addition, we have conducted searches of the mining concession maps maintained by the Ministry of Energy and Mineral Resources in Jakarta, and those maps record BBA as the holder of mining concessions matching the details set out above. Similar to the PAR existing mining licence, the BBA mining licence has been adjusted to become an IUP. Unlike PAR, no recommendation letter was issued by the Minister of Energy and Mineral Resources.

Yours faithfully, Hadiputranto, Hadinoto & Partners

PROSPECTUS 113 SCHEDULE 1 ASSUMPTIONS AND QUALIFICATIONS

We have assumed unless otherwise stated in this Report: (i) the genuineness of all signatures, seals and dates and the correct identity and legal capacity and authority of all signatories and corporate officers and the due execution and validity of all documents in accordance with applicable laws; (ii) the authenticity, completeness and factual accuracy of all documents and corporate records presented as originals and the conformity with the originals of all documents and corporate records presented as copies; (iii) any document submitted to us continues unamended and is in full force and effect; (iv) that the original documents still exist and have not been varied, cancelled or superseded by some other document or agreement or action of which we are not aware; (v) that all corporate records and other documents inspected by us are genuine, complete, up-to-date and accurate and no material documents relevant or related to them have been withheld from us, whether deliberately or inadvertently; (vi) that all facts stated in the document sent to us on which we have relied in providing this Report are and continue to be correct and no relevant matter was withheld from us, whether deliberately or inadvertently; (vii) for each document to which a corporation is a party, that such party had been, and at all relevant times, remained duly incorporated and had at all relevant times the necessary corporate power, all corporate authori- sations, and all such authorisations had been validly obtained, to enter into such document, and each such documents was validly executed and was entered into for that party’s respective corporate benefit and that such party was solvent at the time it entered into such document; and (viii) no laws other than the laws of Indonesia will affect the contents of this Report; (ix) the issuance of each authorization, approval and consent from any governmental authority obtained by or on behalf of PAR or BBA and relied upon in this Report, falls within the competence of such governmental authority, has been duly authorized, executed and delivered and has not been revoked or terminated; and (x) we express no legal opinion as to any laws other than the laws of the Republic of Indonesia as currently in force and we have assumed that there is nothing in any law of other jurisdictions that affects our Report. The making of each of the above assumptions indicates that we have assumed that the subject of each assumption is true, correct and complete in every respect. While we are not aware of any of the assumptions above being incorrect, we have not made any inquiry to verify any assumption. No assumption is limited by any other assumption.

This Report is subject to the following qualifications and disclaimers: (i) our investigations have only concerned, and our Report relates only to, the matters reviewed by us which are the subject of this Report; (ii) we are unable to advise OEG that the documents sent to us comprises all of the information and material in existence which may be relevant and we have relied on the information provided to us in that regard; (iii) we have not made any independent investigations or searches other than those specifically referred to in this Report on the areas for which we were assigned responsibility. Such records and registers may not be complete or up to date in that documents might not be filed at the relevant offices immediately, might no longer be on file, might be replaced, or might otherwise not appear on the file; (iv) we have not gone beyond the scope of our instructions and have only performed the legal documentary review in the manner agreed. The statements made in this Report are specifically limited by reference to that scope and manner of performance; (v) there may be other information or documents not known to us which would affect the contents of this Report. All information in this Report is made subject to these qualifications and disclaimers.

114 REPORT ON MINING CONCESSIONS – INDONESIA SECTION 11 Report on Tenements – Australia

1 INTRODUCTION Basic details of Exploration Permit for Coal No 1145 (“EPC 1145”) are set out in the Schedule.

The following report has been prepared independently Coalworks Limited is currently the registered holder of the and in compliance with the Valmin Code. legal interest in EPC 1145.

Hetherington Exploration and Mining Title Services Pty Limited (“HEMTS”) has been instructed by Orpheus EPC 1145 has only been granted in respect of non-Native Energy Limited (“the Company”) to conduct searches Title land. An initial review of the background land tenures of, and outline the rights conferred by the titles in which within EPC 1145 indicates that the majority of the back - the Company has an interest in New South Wales and ground land tenures are exclusive (non-Native Title land), Queensland, as set out in the attached Schedule (“the and therefore are included in the current tenement grant. Schedule”). The non-exclusive land tenures, referred to as Native Title land (areas not included in the current grant), appear to comprise less than 2 per cent of the tenement area. Russell Hetherington has approximately 33 years experience in exploration and mining tenement manage - There are no other exclusions with respect to EPC 1145. ment across Australia. Russell Hetherington is a member of the Australian Mining and Petroleum Law Association and a member of the Business Law Section of the Law The following conditions apply to EPC 1145: Council of Australia. p General Conditions;

p HEMTS is independent from the Company within the Specific Conditions; meaning of the Valmin Code. HEMTS’s costs of preparing p Conditions of the relevant Environmental Authority this report have been calculated at its normal charge out (“EA”) (see Section 2.1.5 below). rate. The General Conditions set out the obligations and 2 COMMENTARY ON THE TENEMENTS procedures with which the holder of EPC 1145 must comply during exploration. These conditions address issues such as notification of landowners before commencing exploration and other matters concerning relationships with landowners. Unless stated otherwise, the following information was obtained from the Queensland Department of Employ - The Specific Conditions require the holder of EPC 1145 ment, Economic Development and Innovation (“DEEDI”), to follow a specific program of works and expenditure the Queensland Department of Environment and Resource commitments outlined in the EPC 1145 grant document. Management (“DERM”) and the National Native Title The Specific Conditions also detail areas that are specif- Tribunal (“NNTT”). ically excluded from EPC 1145 upon grant. Information on specific exclusions is detailed in Section 2.1.2 above.

PROSPECTUS 115 The conditions of the relevant EA issued in respect to EPC Annual Exploration Reports must be lodged in respect of 1145 form part of the relevant conditions of grant. It is a EPC 1145 within one month of the anniversary date of condition of the EA that the holder of the EPC complies grant. A Statement of Expenditure conducted on with all conditions contained in the Code of Environmental exploration is also due at the same time. Compliance for Exploration Permits and Mineral Develop - ment Licences 2001 (“the Environmental Code”). Whenever the holder relinquishes any subblocks from EPC 1145, it is required to lodge a relinquishment report. This report is due for submission within 2 months of DEEDI accepting the relinquishment. EPC 1145 has been applied for and granted over non- Native Title land only (refer to Section 2.1.2 above). Compliance with the reporting requirements and expendi - ture commitments of EPC 1145 is important because Reference should be made to Table 2 which provides a those matters are considered by DEEDI when determining summary for the current Native Title status for EPC 1145. whether or not to renew EPC 1145. Further, compliance Reference should be made to the following paragraphs for with such requirements and commitments may also affect details of the Native Title category and how this category DEEDI’s decision to renew EPC 1145 in full, or to require a will affect exploration on EPC 1145. reduction in area. Non-compliance with these conditions could also give rise to “show cause” action which may lead to termination of EPC 1145 by DEEDI. Native Title Agreement Native Title There are no outstanding expenditure or reporting EPC No Category Party Comment requirements for EPC 1145 as at the date of this report.

EPC 1145 Exclusive None No Native Land Recorded Title In accordance with the newly introduced land access requirements requirements of the Mineral Resources Act 1989 (QLD) (“the MRA”), an Initial Notice of Intention of Entry to conduct preliminary activities must be served on each Exclusive Land affected landowner at least 10 business days prior to the EPC 1145 was granted in respect of exclusive land intended entry. If advanced activities (that is, high impact tenures only. Exclusive land tenures are land tenures where exploration) are to be carried out a Conduct and Native Title rights have been extinguished. As a result, no Compensation Agreement must be entered into. The Native Title conditions attach to EPC 1145, as Native Title period to negotiate this agreement can take up to 50 land is not included in the tenement grant. Initial searches business days, with an automatic referral to the Land indicate that the majority of the background land tenures Court, if an agreement is not reached. (approximately 98 per cent) within EPC 1145 are categor - ised as exclusive land and therefore included in the current grant. The holder of EPC 1145 is required to make annual rental payments to DEEDI in respect to the retained area of EPC 1145. EPC 1145 has been issued with a Level 2 (Code Compliant) EA. The required security deposit is listed The rate of rental is subject to annual increases commen- in the Schedule. It is a requirement for a Level 2 (Code surate with appropriate price indices. The current rent rate Compliant) EA that the holder complies with all conditions (GST does not apply) is $123.35 per sub-block for EPC of the Environment Code when conducting exploration 1145 (Schedule 5 Mineral Resources Regulation 2003 activities on EPC 1145. (QLD)).

The Environmental Code imposes various exclusion zones As at the date of preparing this report, there are no around Category A and Category B Environmentally outstanding rental payments in respect to EPC 1145. Sensitive Areas (“ESA”) within which exploration activities involving the use of machinery cannot be performed (1,000 metres for Category A and 500 metres for Category Section 156 of the MRA deals with recording of agree - B). The Environmental Code also refers to Category C ments, arrangements, dealings or interests in EPC 1145 ESA, within which exploration activities cannot be and provides that an agreement, arrangement, dealing or performed unless the holder has obtained consent from interest recorded under Section 156 shall, subject to being the relevant administrative authority. otherwise legally enforceable, take priority over other EPC 1145 does not appear to be affected by any unrecorded or any subsequently recorded agreement, Category A,B or C ESA’s. arrangement, dealing or interest. EPC 1145 does not currently have any dealings (agreements, interests or caveats) recorded against it. It is a condition of EPC 1145 that the holder complies with the relevant expenditure commitments. The expenditure The Company advises that it has an interest in EPC 1145 commitments for EPC 1145 are set out in the Schedule. pursuant to a Deed of Option dated 26 October 2010.

116 REPORT ON TENEMENTS – AUSTRALIA Pursuant to the terms of the Deed of Option the Company may by notice in writing exercise the option to purchase the whole estate in EPC 1145. Unless otherwise stated, the following information has been obtained from the New South Wales Department of Industry and Investment (“the Department”), the NNTT, No Annual Royalty Return or associated royalty payments the New South Wales State Heritage Register and the are required in respect of EPC 1145, unless mineral Aboriginal Heritage Information Management System production has occurred. In the case of standard explor - (“AHIMS”). ation activities conducted on EPC 1145, this is unlikely. Much of the information obtained from the Department has been obtained from the Department’s Tenement Activities conducted under the authority of EPC 1145 are Administration System (“TAS”). This report is subject to required to comply with the Aboriginal Cultural Heritage the proviso that TAS may contain errors and is not always Act 2003 (QLD) (“ACH Act”). reliable. Where possible, the information obtained from TAS has been verified against other available information, such The ACH Act provides that there exists a “cultural heritage as Exploration Licence Instruments, electronic maps, etc. duty of care” and, therefore, all reasonable and practicable measures must be taken to ensure that Aboriginal cultural The New South Wales tenements (“the NSW Tenements”) heritage is not harmed (Section 23 ACH Act). The “Cultural are comprised of Exploration Licences No’s 6511 (1992) Heritage Duty of Care Guidelines”, published by Gazette (“EL 6511”) and 7142 (1992) (“EL 7142”) (collectively on 16 April 2004, outline how the cultural heritage duty of referred to as “the NSW Exploration Licences) and Explor - care requirement is met. ation Licence Application No 3657 (1992) (“ELA 3657”).

If a breach of the cultural heritage duty of care is The NSW Exploration Licences have been granted, and demonstrated, the maximum penalties are $750,000 ELA 3657 has been applied for, pursuant to the terms of for a corporation and $75,000 for an individual. the New South Wales Mining Act 1992 (“the NSW Mining Act”). It is recommended that an assessment of any proposed exploration activity be compared against the “Cultural Basic details of the NSW Tenements are set out in the Heritage Duty of Care Guidelines” in order to determine Schedule. whether, or to what extent, Aboriginal cultural heritage may be affected by the activity. It is also recommended that a Coalworks Limited is the registered holder of EL 6511. search of the Cultural Heritage Register and Cultural Plasminex Pty Ltd (“Plasminex”) is the registered holder of Heritage database be conducted prior to commencement EL 7142 and the registered applicant in respect to ELA of exploration activities. 3657.

The current term of EL 7142 has expired but the licence continues in force pending the determination of an Rehabilitation of any current and future exploration distur- application for renewal. Renewal has been sought over an bances will be necessary and the relevant requirements for unreduced area of 6 units, for a further period of two rehabilitation are detailed in the Environmental Code. years. Pursuant to Section 114(6) of the NSW Mining Act, the area of land over which an Exploration Licence may be The activities conducted under the authority of EPC 1145 renewed is not to exceed half the area over which the are likely to result in the creation of environmental liabilities renewal of the Exploration Licence was in force when the for the holders. The environmental liabilities will commence application for renewal was made, unless the Minister is when exploration causes on-site ground disturbance. satisfied that special circumstances exist to justify the When any disturbed area has been satisfactorily rehabil- renewal of the licence over a larger area. It is Department itated, the environmental liability in respect to that area will policy that upon renewal of an exploration licence, special cease. circumstances do not need to be demonstrated if the The holders of EPC 1145 may apply to renew the Exploration Licence comprises 4 or fewer units. tenement for a further term. Any renewal application Plasminex has lodged ELA 3657 over land that also should be lodged between six months and three months concerns the entire area of Plasminex’s current EL 7142. prior to the relevant expiry date. Rent as outlined at Pursuant to Section 19(1)(c) of the NSW Mining Act, an Section 2.1.8 above is payable annually on the anniversary Exploration Licence cannot be granted in satisfaction of of grant of EPC 1145. ELA 3657 over that part of the land that also concerns EL The MRA requires the holder of EPC 1145 to periodically 7142 otherwise than to, or with the consent of Plasminex. reduce the area of the tenement. Reference should be This is due to the fact that part of the land concerning ELA made to the Schedule for details of the reduction 3657 also concerns EL 7142 for the same group of requirements applicable to EPC 1145. minerals. As Plasminex is the registered applicant for ELA 3657 and the registered holder of EL 7124, pursuant to Pursuant to Section 139 of the MRA, the holder of EPC Section 19(3)(a) of the NSW Mining Act, upon grant of an 1145 may make an application to DEEDI to vary these Exploration Licence in satisfaction of ELA 3657, EL 7142 reduction requirements. ceases to be subject to that land.

PROSPECTUS 117 The grant of EL 6511 allows exploration for Group 2 granted in satisfaction of ELA 3657, that area of Mining minerals, which are non-metallic minerals such as agricul - Reservation No 3179 will be excluded from the Exploration tural lime, bauxite, limestone, phosphates etc. The grant of Licence area (Section 18 NSW Mining Act). EL 7142 allows exploration for Group 1 minerals, which are metallic minerals such as copper, gold, lead, nickel etc, Group 2 minerals, which are non-metallic minerals such as State Forests are not excluded from Exploration Licences, agricultural lime, bauxite, limestone, phosphates etc and but exploration activities within State Forests are subject to Group 5 minerals, which are clay minerals such as specific requirements. bentonite, shale, kaolin and structural clay etc. Forests NSW is a public trading enterprise within the New The conditions of the NSW Exploration Licences allow South Wales Department of Primary Industries, and is a exploration by all methods (although certain methods “landholder” for the purposes of the NSW Mining Act. It is require additional approval by the Environment Branch of therefore necessary to enter into an access agreement the Department or other Government instrumentalities). with Forests NSW before commencing prospecting in a State Forest (Section 140 NSW Mining Act). It is proposed that an Exploration Licence granted in satisfaction of ELA 3657 will allow exploration for Group 1 State Forests are exempted areas for the purposes of minerals, which are metallic minerals such as copper, gold, Section 30 of the NSW Mining Act. This provision requires lead, nickel etc, Group 2 minerals, which are non-metallic the consent of the Minister for Mineral and Forest minerals such as agricultural lime, bauxite, limestone, Resources before carrying out exploration activities within phosphates etc and Group 5 minerals, which are clay exempted areas. Such consent would entail environmental minerals such as bentonite, shale, kaolin and structural assessment by the Department of the proposed explor - clay etc. ation. It would also be expected that such consent would be granted only in consultation with Forests NSW and subject to the terms of an access agreement reached with The terms of the current Exploration Licence instruments Forests NSW. in respect to the NSW Exploration Licences excludes land vested in the Commonwealth of Australia and land subject State Conservation Areas are also exempted areas under to any National Park, regional park, historic site, nature the NSW Mining Act. Pursuant to the requirements of reserve, karst conservation reserve or Aboriginal area at Section 30 of the NSW Mining Act and Section 47J(7) of the date of the grant of the Exploration Licence. the National Parks and Wildlife Act 1974 (“NPW Act”), the licence holder may not exercise rights pursuant to the Time does not permit an investigation into whether there is licence within State Conservation Areas except with the any land vested in the Commonwealth of Australia, historic consent of the Minister for Mineral and Forest Resources, site, nature reserve, regional reserve, karst conservation given with the approval of the Minister for the Environment. reserve or Aboriginal area, although it is considered According to Department guidelines, a Review of Environ - unlikely that there are large areas of such land within the mental Factors must also be prepared and submitted for NSW Tenements. approval at least 6 weeks prior to the commencement of any prospecting operations. National Parks Approximately 4.3 per cent of EL 6511 has been excluded There are no areas of State Forest or State Conservation by the Kwiambal National Park, situated on the north- Areas within the land concerning the NSW Tenements. western boundary of EL 6511.

Approximately 7.7 per cent of EL 7142 has been excluded The original grant of EL 6511 was as a Low Impact by the Wingen Maid Nature Reserve, situated on the Exploration Licence, which allowed for only a limited range western boundary of EL 7142. of prospecting operations which would not effect Native Title land (if it existed). On 22 May 2007 EL 6511 was Approximately 2.3 per cent of ELA 3657 concerns the subsequently converted to a standard Exploration Licence Wingen Maid Nature Reserve on the south-western allowing all methods, and as a result became subject to a boundary. Should an Exploration Licence be granted in new set of conditions. satisfaction of ELA 3657, any area of the Wingen Maid Nature Reserve that coincides with ELA 3657 will be The current conditions attached to the NSW Exploration excluded. Licences relate to environmental management of exploration, drilling requirements, reporting requirements, Mining Reserves expenditure commitments, clearing of vegetation, rehabili- Approximately 6.5 per cent of EL 7142 has been excluded tation of disturbed land and lodgement of security by Mining Reservation No 3179 and approximately 1.6 deposits. In respect to the lodgement of security deposits percent of the ELA 3657 area overlaps Mining Reservation the licence holder is required to maintain an amount as No 3179. prescribed by the licence conditions for this purpose. Details of current securities maintained in respect to the Mining Reservation No 3179 prohibits Exploration NSW Exploration Licences can be found in the Schedule. Licences, Mining Leases and Assessment Leases being granted over that land. Should an Exploration Licence be

118 REPORT ON TENEMENTS – AUSTRALIA In addition to the foregoing, the following conditions apply house, within 50 metres of the relevant garden or on the to the NSW Exploration Licences: land subject to the relevant improvement (Section 31 NSW Mining Act). p Condition 6 of EL 7142 provides that the licence holder must not carry out any operations in sensitive areas without the written approval of the Department NSW Mining Act and subject to any conditions that may be stipulated. There are currently no other applications or titles that co- p Condition 8 of EL 6511 and EL 7142 requires the exist with EL 6511. licence holder to undergo the Right to Negotiate process prior to exploring on Native Title Land. Plasminex is currently the holder of ELA 3657 and EL 7142. EL 7142 concerns the same land as part of ELA p Condition 9 of EL 7142 stipulates that the licence 3657 for the same groups of minerals (see Section 2.2.1 holder must not clear, drain or fill the land or construct above). a levee on a wetland without written approval of the Department. Approval may be granted subject to Exploration Licence No 5888(1992), currently held by conditions and is subject to the concurrence of the Bikham Coal Company Pty Limited for Group 9 minerals, Director-General of the Department of Planning. partially overlaps 1 unit of the ELA 3657 application area. “Wetlands” means wetlands mapped as such under Should an Exploration Licence be granted in satisfaction of the State Environmental Planning Policy No 14 – ELA 3657, in the event of conflicting exploration rights for Coastal Wetlands (“SEPP 14”). No land mapped as different minerals, any party to an operational conflict wetland under SEPP 14 appears to be located within between the licences may apply to the Land and Environ - EL 7142. Accordingly, Condition 9 appears to be of ment Court for a determination of the matter (Section 293 no consequence to operations conducted on EL NSW Mining Act). 7142. Exploration Licence No 7506(1992) currently held by p Special Condition No 48 of EL 7142 provides that the Macquarie Energy Pty Ltd for Group 8 minerals, overlaps licence holder must report any drilling in the area to the full ELA 3657 application area as well as the full area the Coal Advice Division of the Department. Copies of of EL 7142. Should an Exploration Licence be granted in English and geophysical downhole logs must also be satisfaction of ELA 3657, and in the event of conflicting supplied to the Coal Advice Division in digital format exploration rights for different minerals, any party to an as directed in the Department’s guidelines titled operational conflict between the licences may apply to the “Exploration reporting: A guide for reporting on Land and Environment Court for a determination of the exploration and prospecting in New South Wales”. matter (Section 293 NSW Mining Act). Petroleum (Onshore) Act 1991 (NSW) The area of EL 6511 co-exists with Petroleum Exploration Compliance with the expenditure and reporting require - Licence No 475(1991) currently held by Drequilin Pty ments of an Exploration Licence is important because Limited. In the event of any operational conflict between those matters are considered by the Department when these titles, any party to the dispute may apply to the Land determining whether or not to renew that Exploration and Environment Court for a determination of the matter Licence, and if so, whether to renew the Exploration (Section 73 Petroleum (Onshore) Act 1991 (NSW)). Licence in full, or to require a reduction in the Exploration Licence area upon renewal. The area of EL 7142 and ELA 3657 partially co-exist with Petroleum Exploration Licence No 456(1991) currently The current annual expenditure commitment for the NSW held by Macquarie Energy Pty Ltd. In the event of any Exploration Licences is noted in the Schedule. All reporting operational conflict between these titles including any and expenditure commitments have been complied with Exploration Licence granted in satisfaction of ELA 3657, to date in respect to the NSW Exploration Licences. any party to the dispute may apply to the Land and Environment Court for a determination of the matter (Section 73 Petroleum (Onshore) Act 1991 (NSW)). It is necessary to enter into a written access agreement with a landholder prior to carrying out exploration on land which is owned or occupied. A landholder is entitled to There are currently no encumbrances registered against compensation for all compensable loss caused to such the NSW Exploration Licences. Encumbrances cannot be land by exploration (Section 263(1) NSW Mining Act). In registered in respect to Exploration Licence Applications. the event that an agreement cannot be reached with the landholder, the matter can be referred to arbitration, and if The Company advises that it has an interest in EL 6511 not resolved, to the Land and Environment Court for pursuant to a Deed of Option dated 26 October 2010. determination. Pursuant to the terms of the Deed of Option the Company may by notice in writing exercise the option to purchase It is necessary for the holder of an Exploration Licence to the whole estate in EL 6511. obtain the prior written consent of the owner of any dwelling house, garden or improvement before carrying The Company advises that it has an interest in EL 7142 out exploration within 200 metres of the relevant dwelling and ELA 3657. Further investigations have indicated that

PROSPECTUS 119 the Company intends to obtain an indirect interest in EL place declared as such by the Minister administering the 7142 and ELA 3657. The Company has entered into a NPW Act, because that place is deemed to have special Deed of Option to Purchase Shares dated 26 October significance to Aboriginal culture. An Aboriginal place may 2010, whereby the Company has an option to purchase or may not contain Aboriginal objects. all the shares in the capital of Orpheus Energy Group Pty Ltd. Orpheus Energy Group Pty Ltd currently holds an Aboriginal places and objects are registered on AHIMS equitable interest in EL 7142 and ELA 3657 pursuant to at the Department of Environment, Climate Change and an Option and Joint Venture Deed dated 26 October 2010 Water. A search of AHIMS indicates that there are no with Plasminex Pty Ltd, the current registered holder of EL places or objects located within or in close proximity to 7142 and ELA 3657. If the option to purchase shares in the NSW Tenements. Orpheus Energy Group Pty Ltd is exercised by the Company, then at that point Orpheus Energy Group Pty Pursuant to Section 86(2) and (4) of the NPW Act, it is a Ltd will become a wholly owned subsidiary of the strict liability offence to harm an Aboriginal object, or harm Company. or desecrate an Aboriginal place. It is also an offence to harm or desecrate an Aboriginal object that the person knows is an Aboriginal object pursuant to Section 86(1) of the NPW Act. It may be necessary to apply for an The issue of whether or not a Native Title Claim applies to Aboriginal Heritage Impact Permit if the activities contem- the land subject to the NSW Tenements is irrelevant to the plated in exercising rights under the NSW Tenements are requirement to comply with the Native Title processes likely to cause damage to Aboriginal objects or places. prescribed by the Native Title Act 1993 (Cth) (“the NTA”) if The prohibitions contained in Section 86(1), (2) and (4) of the relevant land is land where Native Title exists or may the NPW Act apply whether or not the Aboriginal place or exist (“Native Title land”). The threshold question when Aboriginal object has been registered on the AHIMS. considering Native Title issues is therefore whether or not the relevant land is Native Title land or, in other words, A defence is available to a person charged with a strict whether or not Native Title has been extinguished. If Native liability offence pursuant to Section 87 of the NPW Act. Title has been extinguished, then it is not necessary to Pursuant to Section 87(2) of the NPW Act, the defendant consider whether or not there is a Native Title Claim in must show that the defendant exercised due diligence to respect to the relevant land before carrying out determine whether the act or omission constituting the exploration. alleged offence would harm an Aboriginal object, and reasonably determined that no Aboriginal object would If Native Title has not been extinguished, then it will be be harmed. (except in very specific circumstances) necessary to comply with Native Title processes before carrying out It should be emphasised that the issue of Aboriginal exploration. The presence of a registered Native Title Claim places and objects is entirely separate to that of Native simply means that it will be necessary to reach an agree - Title. ment with the Native Title Claimants before proceeding with the relevant exploration activity. This may not be the case where there is currently no registered Native Title Claim, although in that case it is still necessary to undergo The State Heritage Inventory indicates that the Wallangra the “Right to Negotiate” process prescribed by the NTA or Homestead may be close to or within the boundary of other Native Title process. EL 6511.

As a general statement, it can be said that Native Title The State Heritage Inventory indicates that there area has been extinguished in much of New South Wales. several heritage sites that may be close to or within the Nonetheless, it is likely that the NSW Tenements contain boundary of ELA 3657, part of which also encompasses at least some Crown land. The status of any Native Title in EL 7142. land cannot be determined with certainty until a thorough The geographical location of some entries on the State search of each parcel of land is carried out. Such searches Heritage Inventory is unclear and the Company must are beyond the scope of this report. exercise normal caution when carrying out exploration The NSW Exploration Licences have been granted with on the NSW Exploration Licences and any Exploration the “Minister’s consent” condition included. This means Licence granted in satisfaction of ELA 3657. If the that before carrying out exploration on Native Title land, Company comes across what may be a heritage item in the Minister’s consent must be obtained. The Minister will the course of exploration, it should check with the local not grant consent until the “Right to Negotiate” process Council and/or the New South Wales Heritage Council. prescribed by the NTA has been undergone.

There are currently no registered Native Title Claims The holder has an ongoing obligation to comply with the affecting the NSW Tenements. terms and conditions of grant of the NSW Exploration Licences and any Exploration Licence granted in satisfaction of ELA 3657, including satisfaction of the An Aboriginal object is any material evidence relating to expenditure conditions, unless otherwise varied by the Aboriginal habitation of an area. An Aboriginal place is a Department.

120 REPORT ON TENEMENTS – AUSTRALIA Rehabilitation of any current and future exploration distur- consent to conduct activities on Native Title land, the bances will be necessary and will need to be conducted in “Right to Negotiate”, Native Title consultation, negotiation accordance with the conditions of the NSW Exploration and compensation payments and cultural heritage site Licences and any Exploration Licence granted in satis - clearances should be anticipated. faction of ELA 3657, as well as any conditions of any additional consent that might be issued in accordance The holder of the NSW Exploration Licences and any with the requirements of law or those conditions. Exploration Licence granted in satisfaction of ELA 3657 may apply to renew the licence for further terms. A renewal The activities conducted under the authority of the NSW application should be lodged between two months and the Exploration Licences and any Exploration Licence granted relevant expiry date of the licence (Section 113(2)(a) NSW in satisfaction of ELA 3657 are likely to result in the Mining Act). creation of environmental liabilities for the holder. The environmental liabilities will commence when exploration The NSW Mining Act requires the holder of the NSW causes on-site ground disturbance. When any disturbed Exploration Licences and any Exploration Licence granted area has been satisfactorily rehabilitated, the environ- in satisfaction of ELA 3657 to periodically reduce the mental liability in respect to that area will cease. current area by half upon each renewal. Pursuant to Section 114(6) of the NSW Mining Act, the holder of the If exploration is conducted on Native Title land, additional NSW Exploration Licences may make an application to costs in respect to making an application for the Minister’s the Department to vary these reduction requirements.

RUSSELL HETHERINGTON

22 December 2010

Schedule of Tenements

Tenement State Registered Application Grant Expiry Status Area Security Expenditure Encumbrances Minerals Holder/Applicant Date Date Date Commitment (pa) Required Held Exploration Permit QLD Coalworks – 21 Sep 2007 20 Sep 2013 Current Y4 – 17 $10,000 $10,000 Year 1 and 2 Nil Coal for Coal No 1145 Limited combined Y5 –17 – $305,000 Y6 – 17 Year 3 – $50,000 (subblocks) Year 4 – $290,000 Year 5 – $240,000 Year 6 – $500,000 Exploration Licence NSW Coalworks 21 Oct 2005 03 Mar 2006 02 Mar 2012 Current 4 units $10,000 $10,000 $7,000 Nil Group 2 No 6511 (1992) Limited Exploration Licence NSW Plasminex 29 Jan 2007 21 May 2008 21 May 2010 Renewal 6 units $10,000 $10,000 $20,000 Nil Group 1, No 7142 (1992) Pty Ltd Pending Group 2 and Group 5 Exploration Licence NSW Plasminex 17 Feb 2009 – – Application 24 units – – – – Group 1, Application Pty Ltd Group 2 No 3657 (1992) and Group 5

PROSPECTUS 121 SECTION 12

Material Contracts

Orpheus has, either directly or via its wholly owned otherwise liquidated damages are payable by Orpheus to subsidiary, entered into various agreements (collectively BBY. Material Contracts) which the directors regard as being material and required to be disclosed or as being of Under the terms of the mandate, Orpheus agrees to sufficient interest to potential investors to justify disclosure indemnify BBY for certain matters arising directly or in this Prospectus. Particulars of Material Contracts follow indirectly from the services BBY is providing and Orpheus to the extent that adequate disclosure is not set out is liable to reimburse BBY for expenses incurred in the elsewhere (see specifically section 13 of this Prospectus capital raising. entitled Additional Information under the subheading Interests, Fees and Benefits and section 4 of this 2. Centre Capital Securities Mandate Prospectus entitled Details of the Offer under the subheading Brokerage Fees). By letter dated 7 December 2009, AMFG (now Orpheus) confirmed the engagement of Centre Capital: A person or entity subscribing for securities offered by (a) as brokers to the issue to provide broking services this Prospectus will be deemed to have acknowledged and facilitation of transactions envisaged by the Orpheus, or its subsidiaries being a party to and being Framework Agreement (which is described in this bound by each of the Material Contracts. Details of the material contracts section); Material Contracts (to the extent material for disclosure purposes and not otherwise disclosed in this Prospectus) (b) with respect to the capital raising of $2 million to be are set out below. raised by way of rights issue, and a separate place - ment or such increased amount as the Board may determine. 1. Equity Capital Markets Mandate By letter dated 16 November 2010, Orpheus has engaged The fee payable by AMFG (now Orpheus) to Centre BBY Limited for 24 months to: Capital is: (a) act as Orpheus’s financial advisor for equity capital (a) on completion of AMFG (now Orpheus) relisting on market initiatives; and the ASX, Centre Capital to an issue raising at least $2 million and all or part of the assets proposed for (b) promote Orpheus to BBY’s investors and broker acquisition in the Framework Agreement being networks; and acquired by AMFG (now Orpheus): (c) assist in undertaking, arranging and managing capital (i) a broker fee of $50,000; raisings. (ii) 2,500,000 ordinary shares in Orpheus; and In consideration for managing the pre Initial Public Offering (IPO) and IPO capital raisings, Orpheus has agreed to: (iii) 1,250,000 2 year options exercisable at 0.20c on or before 31 December 2011. (a) pay BBY a management fee of 1% calculated by taking 1% of the number of shares issued in equity (b) 6% brokerage on monies raised by Centre Capital capital market initiatives multiplied by the issue share other than through shares underwritten. price per share; The mandate expires if the Framework Agreement is (b) issue BBY with 1,000,000 options in Orpheus at an terminated. exercise price in line with the IPO price to expire 3 years from the date of issue, if at least $3 million is 3. Sept Rouges raised pre-IPO; and By email dated 10 August 2010 Sept Rouges, AMFG (now (c) pay BBY a placement fee of 5% calculated by taking Orpheus) and OPL agreed to the following: 5% of the number of shares issued in equity capital market initiatives multiplied by the issue share price (a) Sept Rouges facilitate introductions* to parties per share less $1.18 million previously raised. controlling assets that AMFG (now Orpheus) and/or OPL may be interested in acquiring such as B26 If Orpheus resolves to raise capital by way of equity or (b) Upon AMFG (now Orpheus) acquiring a controlling hybrid securities within 12 months of the termination or stake in B26, AMFG (now Orpheus) will issue to Sept expiration of the agreement, Orpheus must offer BBY the Rouges: lead role in managing and arranging such capital raisings

122 MATERIAL CONTRACTS (i) 1.75 million fully paid ordinary shares in Orpheus; (g) the rights issue of shares being undertaken by AMFG (now Orpheus) to its shareholders on a 1 for 1 basis; (ii) 875,000 options in Orpheus exercisable at 20 cents per option on or before 31 December (h) the placement of shares; 2011. (i) the repayment by AMFG (now Orpheus) of any * NB: Sept Rouges facilitated an introduction money lent to AMFG (now Orpheus) by Coalworks or between the directors of Orpheus and the OPL; directors of PT Mega Coal. (j) payment to Coalworks of the aggregate of liabilities incurred by Coalworks or OPL on account of either 4. Framework Agreement the affairs of AMFG (now Orpheus) or OPL; By agreement dated 21 October 2009 between AMFG (k) readmission of AMFG (now Orpheus) to the official list (now Orpheus), Coalworks and OPL, the parties agreed, of the ASX; subject to shareholder and statutory compliance, to effect the following: (l) payment of approved creditors. (a) Coalworks to transfer to AMFG (now Orpheus): Advances made by Coalworks shall be made pursuant to the Equity Loan Facility Agreement and AMFG’s (now (i) Hodgson Vale Coal Project comprised of EPC Orpheus) obligations shall be secured by a first ranking 1145. fixed and floating charge. (ii) Ashford Lime Project comprised of EL 6511; Amounts advanced under the Equity Loan Facility (iii) possibly the joint venture in respect of the Agreement shall be repayable on demand and will not be Wingen Bentonite Project; made prior to the relisting of AMFG (now Orpheus). (iv) entire issued capital of OPL, Coalworks may discharge its obligation to make an and seek to arrange for the following projects to be advance by procuring OPL to make the advance, and any offered to AMFG (now Orpheus) for acquisition: such advance, shall be deemed made by Coalworks under the Equity Loan Facility Agreement. (i) Bowen River Coal Project being EPC 968; (ii) Wilpeena Coal Project being EPC 959; 5. Deed of Variation to Framework Agreement (iii) Speculation Creek Project being EPC 1032, By deed dated 26 October 2010 between OPL, (collectively the Queensland Projects) or such other Coalworks and AMFG (now Orpheus), the Framework projects arranged for offer by Coalworks to AMFG Agreement was varied as follows: (now Orpheus), for consideration of the following (a) the date for completion was extended to 30 April being issued or paid to Coalworks: 2011; (i) 25 million ordinary fully paid shares in Orpheus; (b) in lieu of the Queensland Projects referred to in the (ii) 12.5 million options to subscribe for shares in Framework Agreement, they were substituted for any Orpheus; and projects acquired in respect of the Strategic Alliance between OPL and PT Mega Coal; (iii) $2 cash. (c) simultaneously with the acquisition by AMFG (now (b) Coalworks to advance to AMFG (now Orpheus) Orpheus) of all the shares in OPL, AMFG (now $132,557 to be applied and paid by Coalworks Orpheus) will satisfy redemption of any unsecured directly paying specified recipients or up to $22,500 notes issued by OPL by issuing shares in AMFG (now worth of post-consolidation shares at an issue price Orpheus) at the rate of one post consolidation share of 20 cents per share; in AMFG (now Orpheus) for each 10 cent invested by a note issued by OPL; (c) the AMFG (now Orpheus) shares and options being consolidated on a “5-1” basis from 53,801,663 (d) to extend the grant of options by Coalworks to AMFG shares to 10,760,332 shares and from 19,225,418 (now Orpheus) to acquire the Hodgson Vale Coal options to 3,845,084 options; Project, Ashford Limestone Project and shares in OPL to 30 December 2010. (d) the issue of the said consideration and securities under the Equity Loan Facility Agreement, and, to the extent relevant, conversion of same into fully paid 6. Deed Facilitating AMFG (now Orpheus) ordinary shares; Transition (e) the name of AMFG (now Orpheus) being changed to By deed dated 6 April 2010 between OPL, Coalworks, Orpheus Energy Limited; AMFG (now Orpheus) and the administrators of AMFG (now Orpheus), it was agreed that Coalworks and OPL (f) divesting AMFG (now Orpheus) of all shares or other would pay the administrators the sum of $64,057. This interests it holds in Australian Motor Finance Ltd sum was required to pay AMFG (now Orpheus) pursuant (AMFL) and entry into an agreement to fund compen- to a Deed of Company Arrangement to satisfy the claims sation recovery proceedings in respect of AMFL;

PROSPECTUS 123 of creditors subject to certain director appointments and (a) in relation to the first AUD $500,000 advanced, resignations being effected and the convening of a general 5,000,000 shares and 2,500,000 options in AMFG meeting of shareholders as envisaged in the Framework (now Orpheus); Agreement. (b) in relation to the balance advanced (up to a deemed maximum of AUD $500,000), either the balance in 7. Deed of Option Over Shares cash or a convertible note having a face value equal By deed dated 26 October 2010 between OPL, to the balance. Coalworks and AMFG (now Orpheus), it was agreed that: (a) Coalworks grants AMFG (now Orpheus) an option to 10. Deed of Option purchase from Coalworks all the shares in OPL for By deed dated 26 October 2010 between Coalworks and $2.00; AMFG (now Orpheus), it was agreed that: (b) It is a condition precedent to completion that AMFG (a) Coalworks grants AMFG (now Orpheus) an option to (now Orpheus) is admitted to the official list of the purchase from Coalworks the following tenements: ASX or receives conditional listing approval. (i) Exploration Permit EPC 1145 at Hodgson Vale, (c) Completion shall occur 7 days after commencement Queensland; of official quotation of AMFG (now Orpheus) on the (ii) Exploration License 6511 at Ashford, New South ASX; Wales, (d) Upon completion, all liabilities of OPL (up to a for $5,555,000. maximum of $500,000) shall be assumed by AMFG (now Orpheus); and (b) The $5,555,000 to be satisfied by the issue to Coalworks of: (e) If AMFG (now Orpheus) fails to pay such liabilities after completion, Coalworks may pay the same on (i) 25,000,000 fully paid ordinary shares in AMFG behalf of AMFG (now Orpheus) and such amount (now Orpheus); and shall be a debt due by AMFG (now Orpheus) to Coalworks. (ii) 12,500,000 options to subscribe for shares in AMFG (now Orpheus) at an exercise price of 20 This option was exercised on 15 December 2010. cents per share on or before 31 December 2011. (c) It is a condition precedent to completion that AMFG 8. Equity Loan Facility Agreement (now Orpheus) is admitted to the official list of the ASX or receives conditional listing approval. By agreement executed on or about 19 November 2009 between OPL and AMFG (now Orpheus), it was agreed (d) Completion shall occur 7 days after commencement that, for the purposes detailed in the Framework of official quotation of AMFG (now Orpheus) on the Agreement: ASX. (a) funds would be advanced to AMFG (now Orpheus) By deed of variation dated 20 May 2011, the option was by OPL; extended to 31 December 2011. (b) the obligations of AMFG (now Orpheus) in relation to such advances would be secured by a fixed and 11. Various Access Agreements – floating charge; and Hodgson Vale Coal Project (c) funds advanced would be repayable as contemplated By various letters from Coalworks to the landowners listed in the Framework Agreement unless OPL or below, it was agreed that Coalworks would be permitted Coalworks elected to convert the same into equity access to the land within tenement EPC 1145 for samp - subject to AMFG (now Orpheus) shareholder ling and drilling and an amount of compensation for approval. disturbance was pre-agreed and paid by cheque.

Interest is accrued, and shall be capitalized, on the Landowners: Mr & Mrs Wilson, M Baines & R Fisher, Mr & advance at the RBA cash rate plus 5%. Mrs Barron, Mr & Mrs Strong, Mr & Mrs Frank, Mr & Mrs Williams, Mr Pammenter, Mr & Mrs Myers, Mr Junior, Haluana Pty Ltd 9. Supplemental Deed By deed dated 26 October 2010 between OPL, Coalworks and AMFG (now Orpheus), it was agreed that, subject to 12. Option and Joint Venture Deed* the Framework Agreement and Deed of Option, in consid- By deed dated 26 October 2010 between OPL and eration of OPL advancing over AUD $500,000 for the Plasminex Pty Ltd (Plasminex), it was agreed that: benefit of AMFG (now Orpheus) in relation to the Equity (a) Plasminex grants OPL an option to establish a joint Loan Facility Agreement, Coalworks is to receive from venture to explore, develop and exploit bentonite, AMFG (now Orpheus): clays or other minerals pursuant to tenements EL 7142 and ELA 3657 near Wingen, NSW.

124 MATERIAL CONTRACTS (b) The terms of the joint venture are as follows: 14. Letter Agreement – (i) Stage 1 (for a period of 2 years after expiry of the Access Ashford Lime Project option period): On completion of OPL expending By letter executed on or about 12 November 2007 up to $500,000 for surface exploration, drilling between Coalworks and Mr and Mrs Peters (Peters), and assays, OPL shall be entitled to 50% it was agreed that Coalworks would be permitted access beneficial ownership in the tenements and joint to the land within the Ashford Lime project tenement EL venture; 6511 for sampling and drilling for a fee of $750 per drill hole and compensation for any loss or damage caused by (ii) Stage 2: (for the life of the mine, mining lease, Coalworks. renewal or replacement): Following OPL’s entitlement to 50% , OPL may in its discretion expend further money to carry the project to a 15. Agreement Indonesian Coal Projects bankable feasibility stage and following adoption Strategic Alliance of an approved budget: By agreement dated 6 July 2010 between OPL and PT (a) If Plasminex agrees to contribute, then OPL Mega Coal, it was agreed that a strategic alliance be shall contribute 50% and Plasminex 50%; or entered into for the purpose of OPL identifying coal exploration and development opportunities in Indonesia. (b) If Plasminex doesn’t agree to contribute, The agreement has a number of phases outlined as then OPL shall be entitled to solely fund the follows: joint venture and upon doing so OPL shall be deemed to own 90% in the joint venture (a) In Phase 1: the parties work together to complete the and Plasminex a 10% of net profit interest following objectives by 30 September 2010: as defined in the agreement, being an (i) identification of synergies and efficiencies interest of no less than 2.5% of gross regarding OPL’s proposed management and revenue from the Wingen projects. development of the B26 coal project; (c) The option period is six months from (ii) preparation of a project list of suitable coal 26 October 2010.* projects with project assessment (at OPL’s (d) The consideration payable by OPL is expense); payment of the bond on ELA 3657 when (iii) consideration of further coal joint ventures; offered for grant. (iv) review of potential coal projects in Indonesia (e) Upon exercise of the option, OPL shall utilising coal to liquids technology. reimburse Plasminex $10,000 bond paid in relation to EL 7142. (b) In Phase 2: if OPL advises PT Mega Coal it wishes to enter into a joint venture in respect of an identified (f) If, after commencement of the joint venture, project, the parties will work together to enter into a Plasminex receives an offer to purchase all joint venture agreement with the following terms: or a part of their ownership in the tenements and joint venture, OPL shall have 30 days to (i) the parties shall own the new projects 50%-50% match such offer and thereafter Plasminex or 51%–49%; shall be free to accept such offer. (ii) OPL shall supply all exploration and development * The option has been extended to expenditure to earn its equity and such expen - 26 October 2011. diture will be credited against the purchase or repaid from profits; 13. Deed* (iii) Upon achievement of a JORC resource, OPL By deed dated 26 July 2010 between Plasminex and shall pay to PT Mega Coal an amount: Malcolm Kennedy (Kennedy), it was agreed that for a (a) negotiated between the parties; or period of 1 year or such other period as the parties agree, Kennedy will permit Plasminex to carry out exploration for (b) a payment based on $1.00 per tonne of clay or other mineral deposits on his land within tenements measured coal of which OPL shall pay 50 EL 7142 and ELA 3657 subject to certain conditions to be cents in cash in satisfaction of it’s purchase observed by Plasminex. of 50% equity, or at OPL’s election in cash and shares consisting of 30 cents cash and * Mr C. Hagan, Solicitor and Bestvale Resource Consultants 30 cents in shares; Pty Ltd who have both advised in relation (iv) OPL shall manage the joint venture with to this Prospectus have a beneficial interest in Plasminex logistical, community and technical support from Pty Ltd PT Mega Coal. (v) PT shall assist in the procurement of all regulatory, environmental and other approvals and consents necessary for the commencement of coal production.

PROSPECTUS 125 (c) The obligations to enter into the joint venture 18. Heads of Agreement agreements are, amongst other matters, contingent By heads of agreement dated 7 June 2010 between OPL, upon: PT Indomine , PT PKK , PT PAR and PT BBA it was agreed, subject to obtaining the necessary Indonesian (i) the procurement of finance by OPL for new coal governmental approvals, that OPL acquire 51% of the projects or by both parties; shareholding in each of PT PAR and PT BBA. (ii) the procurement by PT Mega Coal of all regulatory, environmental and other approvals Recital A states PT PAR is the lawful holder of Kuasa and consents in respect of the coal projects and Pertambangan Exploitasi for exploitation of coal in respect activities; and of 164.97 hectares issued by Bupati of Pasir Regency pursuant to decree no.545/21/Eksplorasi/EK/VI/2008 (iii) the listing on the ASX of Orpheus. dated 5 June 2008 (PAR Concession).

Recital B states PT BBA is the lawful holder of Kuasa 16. Deed of Variation of Strategic Alliance Pertambangan Exploitasi in respect of 1,951.57 hectares By deed dated 14 March 2011 between OPL and PT issued by Bupati of Pasir Regency pursuant to decree Mega Coal, the parties have agreed to vary the Strategic no.545/21/Eksplorasi/EK/X/2007 dated 10 October 2007 Alliance dated 6 July 2010 by varying sub-clause 3(a)(ii) by (BBA Concession). replacing it with the date which is two years from the effective date. In relation to PT BBA: (a) OPL pay a deposit of USD$250,000 secured by a 17. Deed of Strategic Alliance Extension pledge from PT Indomine (the majority shareholder in PT BBA) of 100% of its shares in PT BBA; By deed dated 18 May 2011 between OPL and PT Mega Coal, the parties have agreed to vary the Strategic Alliance (b) Upon the earlier of the listing of Orpheus on the ASX dated 6 July 2010 as follows: or 30 September 2010, OPL shall pay an amount of USD$500,000 to PT Indomine; (a) Extending the term to 31 December 2011; (c) OPL be responsible for funding all costs of PT BBA (b) Confirming that Blocks 5,8,9,10 and 11 at Kintap, through to the commencement of production; South Kalimantan, Indonesia, are within the Strategic (d) PT Indomine be responsible for all government and Alliance’s project list; community relations in relation to PT BBA and the (c) PT Mega Coal agreeing to do all things necessary BBA Concession; to grant joint venture rights to OPL consistent with (e) If OPL does not fund PT BBA through to the terms of the Strategic Alliance; commencement of production, or within 3 months of the date of the shareholders agreement between (d) Upon Orpheus being reinstated to ASX quotation, a OPL, PT Indomine and PT BBA, OPL notifies PT special purpose vehicle will be incorporated, being an Indomine that is not satisfied with technical due Australian proprietary company (Newco) which may diligence on the BBA Concession, PT BBA shall act as corporate trustee of a unit trust (Newco Trust); repay OPL the USD$500,000 and upon receipt, OPL shall transfer to PT Indomine all of OPL’s shareholding (e) PT Mega Coal and OPL will each hold 50% in in PT BBA; Newco, and 50% in the Newco Trust. OPL (or its nominee) will subscribe for 5 million redeemable (f) PT BBA to enter into a marketing agreement with PT preference shares in the capital of Newco at a cost Indomine pursuant to which PT BBA will pay PT of US$5 million for the shares or $5 million worth of Indomine USD$1.50 per tonne of coal sold by PT redeemable units in the capital of Newco Trust; BBA provided such agreement shall terminate from the date OPL has recovered in payment of (f) PT Mega Coal must offer to Newco and/or Newco shareholder loans an amount equal to the total Trust any coal projects on the same commercial amount of shareholder loans advanced to, and paid terms as the Strategic Alliance so that Newco and/or in share subscriptions by OPL in PT BBA. Newco Trust can conduct feasibility studies, mine development and mining operations in or by a joint In relation to PT PAR: venture with Newco and/or Newco Trust; (a) OPL pay a deposit of USD$250,000 secured by a (g) At any time, OPL (or its nominee) has the right to give pledge from PT PKK (the majority shareholder in PT 30 days of notice to request to redeem in full and for PAR) of 100% of its shares in PT PAR; full value 100% of the redeemable preference shares (b) Upon the earlier of the listing of Orpheus on the ASX or redeemable units (as applicable). or 30 September 2010, OPL shall pay an amount of USD$500,000 to PT PKK; (c) OPL be responsible for funding all costs of PT PAR through to the commencement of production;

126 MATERIAL CONTRACTS (d) PT PKK be responsible for all government and 22. Amendment Letter community relations in relation to PT PAR and the By letter effective 18 November 2010, the pledge of PAR Concession; shares agreement in relation to the shares in PT PAR is (e) If OPL does not fund PT PAR through to commenc - amended to extend to secure full and punctual payment of ement of production, or within 3 months of the date all indebtedness, obligations and liabilities of the pledgors, of the shareholders agreement between OPL, PT PT PAR and PT BBA in connection with the Heads of PKK and PT PAR, OPL notifies PT PKK that is not Agreement and the Joint Venture Agreement dated 18 satisfied with technical due diligence on the PAR November 2010 between OPL , PT PAR and PT BBA. Concession, PT PAR shall repay OPL the USD$500,000 and upon receipt, OPL shall transfer 23. Pledge of Shares Agreement in PT BBA to PT PKK all of OPL’s shareholding in PT PAR; By agreement dated 7 June 2010 between PT Indomine, (f) PT PAR to enter into a marketing agreement with PT PT Mega Coal and OPL it was agreed that PT Indomine PKK pursuant to which PT PAR will pay PT PKK and PT Mega Coal as owners of 100% of the shares in PT USD$1.50 per tonne of coal sold by PT PKK provided BBA, provide a pledge over the shares in favour of OPL to such agreement shall terminate from the date OPL secure full and punctual payment of all indebtedness, obli - has recovered in payment of shareholder loans an gations and liabilities of pledgors in connection with the amount equal to the total amount of shareholder Heads of Agreement. loans advanced to, and paid in share subscriptions by OPL in PT PAR. 24. Amendment Letter 19. First Supplement to Heads of Agreement By letter effective 18 November 2010, the pledge of shares agreement in relation to the shares in PT BBA is By supplementary agreement dated 18 November 2010, amended to extend to secure full and punctual payment of the Heads of Agreement dated 7 June 2010 is amended all indebtedness, obligations and liabilities of the pledgors, as follows: PT BBA and PT PAR in connection with the Heads of (a) payment of the USD$500,000 to each of PT Agreement and the Joint Venture Agreement dated 18 Indomine and PT PKK is to take place upon November 2010 between OPL , PT BBA and PT PAR. execution of the supplementary agreement; (b) termination of the Heads of Agreement will automat- 25. Sale and Purchase of Shares Agreement ically occur on 1 March 2011 unless extended by By agreement dated 18 November 2010 between PT PKK mutual agreement or upon OPL giving notice to PT and OPL, PT PKK agreed to sell and OPL agreed to Indomine that it doesn’t wish to proceed with the purchase 51% of the total issued and paid-up shares in investment in PT PAR and PT BBA; the capital of PT PAR on completion. (c) Upon termination PT Indomine, PT PKK, PT PAR and The purchase price for the shares was USD$750,000. PT BBA shall be jointly and severally obliged to repay OPL all amounts paid by OPL pursuant to the Heads The parties agreed that, upon completion, the amount of of Agreement ( a total ofUS$1,500,000). USD$750,000 already paid by OPL pursuant to the Heads of Agreement shall automatically be applied as payment of 20. Deed of Variation of Heads of Agreement the purchase price under this agreement. By deed dated 8 March 2011 between OPL, PT Indomine, Completion is conditional on the satisfaction or valid PT PKK, PT PAR and PT BBA the parties have agreed to waiver of specified conditions precedent including the vary the Heads of Agreement dated 7 June 2010 as issuance of MOHLR approval for the issuance of new supplemented by the First Supplement to the Heads of shares, letter from the Regent who issued the IUP Agreement dated 18 November 2010 to effect a change approving transfer of 51% of the shares, valid approval to clause 8.1 to 31 December 2011, unless extended by issued by BKPM in relation to conversion of the status of the mutual agreement of the parties. PT PAR to become a foreign investment company and approving the shareholders as PT PKK and OPL, and a 21. Pledge of Shares Agreement in PT PAR confirmation signed by PT PAR confirming no objections have been received from creditors in relation to the By agreement dated 7 June 2010 between PT PKK, Jose proposed change of control in PT PAR. Rizal Idham (JRI) and OPL it was agreed that PT PKK and JRI as owners of 100% of the shares in PT PAR, provide a The sale and purchase of the shares is subject to the usual pledge over the shares in favour of OPL to secure full and representations, warranties and indemnities of a share sale punctual payment of all indebtedness, obligations and transaction of this type. liabilities in connection with the Heads of Agreement.

PROSPECTUS 127 26. Deed of Variation of Sale and 30. Further Loan Purchase of Shares Agreement By letter dated 20 August 2010, Coalworks agreed to lend By deed dated 8 March 2011 between OPL and PT PKK, PT Mega Coal USD$150,000 on the basis that: the parties have agreed to vary the Sale and Purchase of (a) the loan is repayable on demand; Shares Agreement dated 18 November 2010 to effect a condition precedent deadline of 31 December 2011, or (b) the loan is interest free; and such later date as may be mutually agreed in writing by the (c) the loan can be assigned to OPL. parties. This loan was set off against the amount of 27. Sale and Purchase of Shares Agreement USD$1,500,000 due by OPL pursuant to the Heads of Agreement dated 7 June 2010. By agreement dated 18 November 2010 between PT Indomine, PT Mega Coal and OPL, PT Indomine and PT Mega Coal agreed to sell and OPL agreed to purchase 31. Shareholders Agreement in respect 51% of the total issued and paid-up shares in the capital of PT BBA of PT BBA on completion. By agreement dated 20 December 2010 between OPL The purchase price for the shares was USD$750,000. and PT Indomine it was agreed, subject to completion of the Sale and Purchase of Shares Agreement dated The parties agreed that, upon completion, the amount of 18 November 2010, that: USD$750,000 already paid by OPL pursuant to the Heads (a) The Board of Directors and the Board of of Agreement shall automatically be applied as payment of Commissioners of PT BBA shall consist of 2 OPL the purchase price under this agreement. members and one PT Indomine member; Completion is conditional on the satisfaction or valid (b) New shares and transfers of shares in PT BBA shall waiver of specified conditions precedent including the first be offered to the shareholders in proportion to the issuance of MOHLR approval for the issuance of new number of shares held by them at the time such offer shares, letter from the Regent who issued the IUP is made. Transfers of shares require prior approval of approving transfer of 51% of the shares, valid approval shareholders but shareholders shall be deemed to issued by BKPM in relation to conversion of the status of approve any pledging of shares owned by OPL to PT BBA to become a foreign investment company and financial institutions to secure any loans made by approving the shareholders as PT Indomine, PT Mega those financial institutions to PT BBA; Coal and OPL, and a confirmation signed by PT BBA confirming no objections have been received from (c) The Shareholders shall cause PT BBA, to the extent creditors in relation to the proposed change of control in permitted by law, to distribute by way of dividends all PT BBA. after-tax profits in each financial year;

The sale and purchase of the shares is subject to the usual (d) OPL will fund all PT BBA’s expenses (being the representations, warranties and indemnities of a share sale shortfall after the contributions made under any mine transaction of this type. contract signed by PT BBA and any surplus funds which will be applied to the existing B26 coal mine development) and operational expenses during the 28. Deed of Variation of Sale and Purchase of term of this agreement; Shares Agreement (e) PT Indomine agrees that any contribution by OPL in By deed dated 8 March 2011 between PT Indomine, excess of $US1,500,000 (being OPL’s acquisition PT Mega Coal and OPL, the parties have agreed to cost for the B26 project) which is applied to the vary the Sale and Purchase of Shares Agreement dated capital cost of the project shall be repaid to OPL out 18 November 2010 to effect a CP Deadline of of the projects cash flows as loan repayments. 31 December 2011, or such later date as may be mutually agreed in writing by the parties. 32. Deed of Variation of Shareholders Agreement 29. Loan By deed dated 8 March 2011 between OPL and By letter dated 9 August 2010, Coalworks agreed to lend PT Indomine, the parties have agreed to vary the PT Mega Coal USD$100,000 on the basis that: Shareholders Agreement in respect of PT BBA dated (a) the loan is repayable on demand; 20 December 2010 to effect a change to clause 1.3 such that if completion doesn’t occur prior to 31 December (b) the loan is interest free; and 2011 the agreement shall automatically terminate. (c) the loan can be assigned to OPL.

This loan was set off against the amount of USD$1,500,000 due by OPL pursuant to the Heads of Agreement dated 7 June 2010.

128 MATERIAL CONTRACTS 33. Shareholders Agreement in respect PAR profit share arrangements applicable to the first of PT PAR 250,000 tonnes in aggregate from PT PAR and any surplus funds or operating cashflow from the existing By agreement dated 20 December 2010 between OPL, operation which will be applied to the existing mine PT PKK and JRI it was agreed, subject to completion of development) and solely contribute to all coal mine the Sale and Purchase of Shares Agreement dated 18 development and operational expenses during the November 2010, that: currency of the joint venture; (a) The Board of Directors and the Board of (e) OPL’s obligation to contribute to the expenses of the Commissioners of PT PAR shall consist of 2 OPL joint venture only commences when OPL sends a members and one PT PKK member; notice of activation to PT BBA and PT PAR of the (b) New shares and transfers of shares in PT PAR shall profit sharing obligation following which OPL shall be first be offered to the shareholders in proportion to the entitled to 51% Profit Share (as defined and calcu - number of shares held by them at the time such offer lated in accordance with the schedule to the deed). is made. Transfers of shares require prior approval of (f) For the first 250,000 tonnes in aggregate from PT shareholders but shareholders shall be deemed to PAR, profits shall be shared 51% of the 50% profit approve any pledging of shares owned by OPL to share to OPL and the remaining 49% of the 50% financial institutions to secure any loans made by profit share to PT BBA and PT PAR; those financial institutions to PT PAR; (g) Apart from the first 250,000 tonnes, all net profits (c) The Shareholders shall cause PT PAR, to the extent of the joint venture shall be shared 51% to OPL and permitted by law, to distribute by way of dividends all 49% to PT BBA and PT PAR; after-tax profits in each financial year; (h) Following OPL acquiring 51% in each of PT BBA (d) OPL will fund all PT PAR’s expenses (being the and PT PAR, this deed shall terminate and OPL shortfall after the contributions made under any mine acknowledges it shall not receive any portion of the contract signed by PT PAR and any surplus funds 51% profit share twice. which will be applied to the existing B26 coal mine development) and operational expenses during the term of this agreement; 36. Royalty Agreement (e) PT PKK and JRI agrees that any contribution by OPL By agreement dated 18 November 2010 between PT PAR in excess of $US1,500,000 (being OPL’s acquisition and PT PKK, it was agreed that: cost for the B26 project) which is applied to the (a) the agreement shall commence on the date OPL capital cost of the project shall be repaid to OPL out acquires a 51% shareholding in PT PAR and PT PAR of the projects cash flows as loan repayments. loads its first cargo of coal at the relevant loading port; 34. Deed of Variation of Shareholders (b) PT PAR shall pay PT PKK USD$1.50 per tonne of Agreement coal; By deed dated 8 March 2011 between OPL, PT PKK and (c) the agreement will terminate on the date that all JRI, the parties have agreed to vary the Shareholders outstanding loans made by OPL to PT PAR have Agreement in respect of PT PAR dated 20 December been repaid in full to OPL. 2010 to effect a change to clause 1.3 such that if completion doesn’t occur prior to 31 December 2011 the agreement shall automatically terminate. 37. Royalty Agreement By agreement dated 18 November 2010 between PT BBA 35. Joint Venture Agreement and PT Indomine, it was agreed that: By deed dated 18 November 2010 between OPL, PT BBA (a) the agreement shall commence on the date OPL and PT PAR it was agreed that: acquires a 51% shareholding in PT BBA and PT BBA loads its first cargo of coal at the relevant loading port; (a) OPL, PT BBA and PT PAR constitute themselves as a joint venture commencing on the date of this deed to (b) PT BBA shall pay PT PKK USD$1.50 per tonne of operate the coal mine or mines at the B26 project in coal; East Kalimantan, Indonesia and to develop new business opportunities; (c) the agreement will terminate on the date that all outstanding loans made by OPL to PT BBA have (b) OPL shall be appointed the joint venture manager; been repaid in full to OPL. (c) the joint venture shall be governed by a management committee consisting of one OPL representative and one representative for both PT BBA and PT PAR; (d) OPL agrees to fund all expenses of the joint venture (being any amount required by the joint venture in excess of contributions made under the existing PT

PROSPECTUS 129 38. Coal Mining Agreement 42. Deed of Guarantee and Indemnity By agreement dated 23 August 2010 between PT PAR By deed dated 18 November 2010 between OPL and PT and PT Tunas Bumi Menggala (PT TBM), PT PAR and PT Indomine, it was agreed that: TBM agreed to establish a joint operation under which: (a) PT Indomine shall pay the debt (as defined) to OPL; (a) PT TBM shall perform the coal mining and coal selling (b) PT Indomine agrees to guarantee and indemnify OPL in the area the subject of Pasir Regency permit in relation to the performance of all the obligations no.545/05/Eksploitas/EK/VI/2008 dated 5 June 2008 other than those imposed on OPL in the Joint Venture until 250,000 metric tonnes excavated has been sold; Agreement dated 18 November 2010, Heads of (b) the parties shall each receive 50% of the net profit Agreement dated 7 June 2010 and any documents from the coal selling proceeds. executed pursuant to such Heads of Agreement.

39. Coal Sales Agreement 43. Deed of Settlement By agreement dated 17 December 2010 between PT PAR By deed dated 22 December 2010 between Sam Danieli, and PT Beringin Utama (PT BU), PT PAR agreed to sell Alcock Davis Danieli Pty Limited, Peter Robert Vince in his and PT BU agreed to buy PT PAR’s coal on the following capacity as joint and several administrator of AMFG (now terms: Orpheus) (then subject to deed of company arrangement), Kylie Maree Wright in her capacity as joint and several (a) coal is from Pasir Regency permit 545/14/Operaso administrator of AMFG (now Orpheus) (then subject to deed Produksi/EK/IV/2010; of company arrangement) and AMFG (now Orpheus) (then (b) coal price agreed is USD$115 x 25,000 metric tonnes subject to deed of company arrangement) it was agreed = $US2,875,000; that Federal Court proceedings in relation to proof of debt by the former auditors of AMFG (now Orpheus) be deter - (c) payment to be made by PT BU to PT PAR as follows: mined by consent orders dated 24 December 2010 that: (i) USD$200,000 by 21 December 2010 (a) allowed the auditors proof of debt in the amount of (ii) USD$300,000 on 5 January 2011 $44,873.30 and provides for payment of this sum by 22 December 2010; (iii) USD$1,200,000 on 17 January 2011 (b) paid the auditors costs of $10,000 by 22 December (iv) USD$1,200,000 between 18-25 January 2011 2010. (v) USD$287,500 upon receipt by PT BU of commercial invoice, certificate of origin acknow - 44. Engagement Letter Agreement – ledged by the mines department and cargo Financing – Assets certificate from the holder of the mining permit; By letter dated 29 July 2010 between Surge Capital Corp (d) delivery of coal scheduled to begin between 25-30 (SCC) and OPL and Orpheus, it was agreed that: January 2011. (a) OPL and Orpheus engage SCC as a finder to facilitate introductions to prospective funding groups 40. Licensing of Facilities Agreement or investors interested in financing up to USD$70 million; By agreement dated 21 March 2011 between PT Telen Paser Prima (PT TPP) and PT PAR, it was agreed that for (b) SCC services to be provided to OPL and Orpheus a period of 12 months PT TPP shall license its road, include assistance in the due diligence and hauling and loading facilities in Long Ikis, East Kalimantan negotiation process, collection of information from to PT PAR for its mining transportation and loading OPL and Orpheus and the investors, advising the operation for the fees specified in the agreement. investors about features of the financing, risk and related details; 41. Deed of Guarantee and Indemnity (c) The term of the agreement is 12 months from the By deed dated 18 November 2010 between OPL and PT date SCC receives an executed copy of the PKK, it was agreed that: agreement from OPL and Orpheus but either party may terminate on 10 days written notice; (a) PT PKK shall pay the debt (as defined) to OPL; (d) Consideration for the services to be provided by SCC (b) PT PKK agrees to guarantee and indemnify OPL in upon receipt of cleared proceeds by OPL and relation to the performance of all the obligations other Orpheus from a financing is as follows: than those imposed on OPL in the Joint Venture Agreement dated 18 November 2010, Heads of (i) up to USD$25 million: Agreement dated 7 June 2010 and any documents (a) OPL and Orpheus to pay cash of 5% of executed pursuant to such Heads of Agreement. gross financing whether such financing closes within the term of the SCC engagement or within 2 years from termination or expiry;

130 MATERIAL CONTRACTS (b) Orpheus to issue SCC share purchase (d) A consultancy fee of AUD$800 per day is payable for warrants entitling SCC to purchase consultancy services performed in addition to 3 days Orpheus’s common stock equal to (5% x per month. gross financing)/warrant exercise price Warrant to be exercisable for 5 years 47. Consultancy Agreement Warrant exercise price is equal to lowest exercise By agreement commencing on 30 November 2010 and price of any warrants issue to any investor in the ending on 31 March 2011 between Orpheus and Brakma financing, or if no warrants issued, to closing Pty Ltd ATF Andrew Family Trust (Brakma), it was agreed price of company’s shares on day prior to closing that: of financing. (a) Brakma will provide assistance in relation to (ii) Above USD$25 million: Orpheus’s re-listing, its financial processes and reports required by management; (a) OPL and Orpheus to pay cash of 3% of gross financing whether such financing (b) Brakma’s hourly rate will be $120 per hour plus GST, closes within the term of the SCC engage - and Brakma will not exceed 40 hours of work per ment or within 2 years from termination or month without the prior written consent of Orpheus. expiry; (b) Orpheus to issue SCC share purchase 48. Consultancy Agreement warrants entitling SCC to purchase Orpheus’s common stock equal to (3% x By deed dated 14 March 2011 between Orpheus, gross financing)/warrant exercise price Bestvale Resource Consultants Pty Limited (Bestvale), Christopher Hagan (C Hagan) and Bidya Hagan Warrant to be exercisable for 5 years (B Hagan), it was agreed that: Warrant exercise price is equal to lowest exercise (a) Bestvale will provide consultancy services to Orpheus price of any warrants issue to any investor in the for 24 months from the date of this deed; financing, or if no warrants issued, to closing price of company’s shares on day prior to closing (b) Bestvale will be paid AUD$70,000 per annum plus of financing. GST for its services; (c) Bestvale will provide C Hagan as senior advisor and 45. Non-Executive Role with Orpheus B Hagan as HR/Office Manager, on contract, to serve & Consultancy Orpheus, and Bestvale shall be responsible for payment of their fees. By letter agreement between Orpheus and Tableland Analytical Pty Ltd executed on 7 February 2011: 49. Consultancy Agreement (a) Anthony Meacham King is retained as a non- executive director and consultant; By deed dated 16 February 2011 between Orpheus, Dynamic Management Systems Pty Ltd (DMS) and David (b) Remuneration for acting as a non-executive director is Oastler (Oastler), it was agreed that: AUD$30,000 per annum plus GST for undertaking a minimum of 3 days per month including attending (a) DMS will provide consultancy services relating to a Director’s meetings; Chief Financial Officer and the operations of Orpheus to Orpheus for 24 months from 1 January 2011; (c) No director’s fees will be payable in respect of the period prior to the date of lodgement of Orpheus’s (b) DMS will be paid AUD$85,000 per annum plus GST prospectus with the ASX; for its services; (d) A consultancy fee of AUD$800 per day is payable for (c) DMS will provide Oastler as Chief Financial Officer, on consultancy services performed in addition to the role contract, to Orpheus for 24 months from the date of of non-executive director. this deed and DMS shall be responsible for payment of his fees. 46. Senior Consultant role with Orpheus By letter agreement between Orpheus and Tony Sin Pyng 50. Executive Services Agreement Teng dated 14 February 2011: By agreement dated 28 February 2011 between Orpheus and Wayne Mitchell (Mitchell) it was agreed that: (a) Tony Sin Pyng Teng is retained as a senior consultant; (a) Mitchell will be appointed Executive Chairman, Chief (b) Remuneration for acting as a senior consultant is Executive Officer and Managing Director of Orpheus AUD$30,000 per annum plus GST for undertaking a to perform the duties specified in the agreement; minimum of 3 days per month; (b) Mitchell will be paid a base salary of AUD$200,000 (c) No senior consultant’s fees will be payable in respect plus a directors’ fee of AUD$50,000 plus 9% of the period prior to the date of lodgment of superannuation; Orpheus’s prospectus with the ASX;

PROSPECTUS 131 (c) Mitchell is subject to a 3 month non-compete Orpheus shareholders or former AMFL shareholders in restriction in the areas of Indonesia and Thailand. relation to the diminution in value sustained in respect of shares it owned in AMFL and from otherwise dealing with AMFL. 51. Director of Exploration Services Agreement By agreement dated 28 February 2011 between Orpheus 56. Deed Governing AMFG Recovery Fund and Wesley Martin Harder (Harder) it was agreed that: By deed dated 4 April 2011: (a) Harder will be appointed Director of Exploration of (a) Orpheus has agreed to subscribe $100,000 for Orpheus to perform the duties specified in the 100,000 fully paid units representing 20% of all units agreement; on issue; (b) Harder will be paid a base salary of AUD$120,000 (b) Coalworks has agreed to subscribe 500,000 Orpheus plus a directors’ fee of AUD$30,000 plus 9% shares for 100,000 fully paid units representing 20% superannuation; of all units on issue; (c) Harder is subject to a 3 month non-compete (c) The Trustee has agreed to subscribe $300.00 for restriction in the areas of NSW, Queensland, Australia 300,000 fully paid units representing 60% of all units and Indonesia. on issue.

The deed governing the AMFG Recovery Fund regulates 52. Services Agreement the issue and redemption of the above units and the By agreement dated 20 October 2010 between OPL and management and administration of the AMFG Recovery Thomas Nietsch (Nietsch) it was agreed that: Fund. (a) Nietsch will be appointed Marketing Manager of If, following legal advice, AMFG Recovery Management Orpheus to perform the duties specified in the Pty Ltd as trustee for the AMFG Recovery Fund institutes agreement; legal proceedings that result in the recovery of loss and damage, Orpheus may, following payment of costs and (b) Nietsch will be paid a base salary of USD$8,000 per other liabilities, be entitled in accordance with the fund month; distribution policy, to redeem the amount originally (c) After OPL lists on the ASX, Nietsch will then be paid subscribed and any additional redemption proceeds. USD$10,000 per month. Note that such redemption proceeds represent the gross proceeds of such proceedings less costs and liabilities of such proceedings. 53. Share Sale Agreement By agreement dated 1 April 2011 between Orpheus and AMFG Recovery Management Pty Ltd, Orpheus agreed to 57. Commercial Lease sell, and AMFG Recovery Management Pty Ltd agreed to By commercial lease dated 27 January 2011 between purchase Orpheus’s shares in Australian Motor Finance MM Syndicates Pty Ltd (Landlord) and OPL (Tenant) it was Limited (AMFL) for $1.00. agreed that OPL would lease the premises situated at Lot 20, Level 5, 44 Miller Street North Sydney NSW for The sale and purchase of the shares is subject to the usual $6,439.13 inclusive of GST per month for the period representations, warranties and indemnities of a share sale 1 February 2011 to 31 March 2013 increased by CPI transaction of this type. each year. There is an option for an additional one year.

54. Chose in Action Sale Agreement Copies of all the above-described agreements will be By agreement dated 1 April 2011 between Orpheus and available for inspection at the registered office of the AMFG Recovery Management Pty Ltd, Orpheus agreed to Company for a period of six months after the date of this sell, and AMFG Recovery Management Pty Ltd agreed to prospectus. purchase Orpheus’s right to institute legal proceedings in relation to loss and damage arising out of and in relation to its acquisition of shares in and dealings with AMFL for $1.00.

55. Deed of Trust By deed of trust dated 1 April 2011 between CWK Nominees Pty Ltd as settlor, AMFG Recovery Manage - ment Fund Pty Ltd as trustee and specified unit holders, a trust known as the AMFG Recovery Fund is established for the purpose of instituting legal proceedings against one or more parties to recover loss and damage suffered by

132 MATERIAL CONTRACTS SECTION 13

Additional Information

Interests, Fees and Benefits (c) The directors may also participate in the offer. Other than as set out below or as is disclosed elsewhere (d) Each director will, as from the Listing Date, initially in this Prospectus, no: (a) director of the Company; or (b) receive directors’ fees, together with an allowance person named in this Prospectus as performing a function sufficient to meet statutory superannuation obligations in a professional, advisory or other capacity in connection in relation thereto, in addition to any consultancy fees, with the preparation and distribution of this Prospectus; or including under the consultancy agreements detailed (c) promoter of the Company; or (d) stockbroker or under - in section 12 of this Prospectus entitled Material writer to the offer of securities under this Prospectus; has Contracts. or had within 2 years before lodgement of this Prospectus with ASIC any interest in: (i) the formation or promotion of (e) Rules 88.1 of the Orpheus constitution provides that the Company; or (ii) any property acquired or proposed to the remuneration of the directors shall be $200,000 be acquired by the Company in connection with its per annum to be divided amongst them equally formation or promotion or in connection with the offer of unless they agree or it is resolved otherwise. securities under this Prospectus; or (iii) the offer of (f) For the purposes of the above rules, the Board has securities under this Prospectus; and no amounts have resolved that (1) no director’s and company secretary been paid or agreed to be paid and no amounts have fees will be payable in respect of any period prior to been given or agreed to be given to any of those persons the Listing Date and as from that date, until further as an inducement to become or to qualify as a director of resolution; and (2) directors and company secretary the Company or for services rendered in connection with shall be entitled to director’s fees of (i) $30,000 per the formation or promotion of the Company or the offer of annum (together with an allowance sufficient to meet securities under this Prospectus. statutory superannuation obligations in relation (a) Orpheus has entered into various agreements with thereto) for Wesley Harder, Anthony King and third parties which have an effect on Orpheus, further Nugroho Suksmanto (proposed director)/Michael details of which are set out in section 12 of this Rhodes (alternate director); and (ii) $50,000 per Prospectus entitled Material Contracts. annum (together with an allowance sufficient to meet statutory superannuation obligations in relation (b) The Directors and Company Secretary and their thereto) for Wayne Mitchell. Each director has respective nominees &/or associates) will be entitled evidenced his consent to his fees for his services to the following securities in Orpheus at the time of as director to Orpheus being as above provided. completion of the offer: In addition, Mr Mitchell and Mr Harder are entitled to fees of $100,000 and $60,000 respectively in respect Relevant interests Orpheus Securities of consultancy services provided to the Company in respect of work done prior to the date of this Director Shares Promoter Options Prospectus. Wayne Mitchell* 302,242 3,000,000 (g) Tony Teng acting as Senior Consultant shall be paid Wesley Harder*^ 302,242 1,500,000 $30,000 per annum Rodby Holdings Pty Ltd, an entity associated with Mr Teng is also entitled to Anthony King^^ 302,242 1,000,000 302,242 Shares, 1,500,000 Promoter Options and an entitlement to a further 500,000 Shares and 250,000 * These directors are also shareholders in Listed Options resulting from conversion of Coalworks which will receive 35,000,000 Shares Converting Notes. Mr Teng is also a director of and 17,500,000 Listed Options resulting from Coalworks. the acquisition of assets by the Company from (h) Bestvale Resource Consultants Pty Ltd will receive Coalworks as disclosed in section 12 of this fees of $70,000 per annum for services provided by Prospectus entitled Material Contracts. them as consultants to the company on terms set out ^ Options held by Corrina Consulting, an entity in section 12 of this Prospectus entitled Material related to Wesley Harder Contracts. In addition Bestvale Resource Consultants Pty Ltd owns 397,841 Shares and 2,750,000 ^^ Options held by Ark Super Fund, an entity related Promoter Options in the Company. Mr C.Hagan, to Anthony King solicitor is a director and principal of Bestvale Resource Consultants Pty Ltd. Bestvale Resource Consultants Pty Ltd is entitled to be paid a fee of

PROSPECTUS 133 $100,000 in respect of the services provided in 2009 $75,661.41 (exclusive of GST) for preparing the and 2010 in reconstructing the Company, coordi- Minarco-MineConsult report in section 7 of this nating the ASX listing, acquisitions, fund raising Prospectus relating to the Australian projects. and administering the transactions and corporate procedures throughout this period. Mr C Hagan (p) Stantons has been (or will be) paid a fee of approxi- and Bestvale Resource Consultants Pty Ltd have a mately $30,000 (exclusive of GST) for preparing the beneficial interest in Plasminex Pty Ltd (see section Stantons report in section 9 of this Prospectus. 12 – Material Contracts – 12 & 13). (q) Hetherington has been (or will be) paid a fee of up to (i) Mr C. Hagan is the sole proprietor of Hagan & Co. approximately $6,800 (exclusive of GST) for preparing On instructions from the Company he has prepared the Hetherington report in section 11 of this various agreements, provided compliance advice in Prospectus in respect of the Australian projects. relation to this Prospectus, participated in the due (r) Hadriputranto, Hadinoto & Partners has been (or will diligence process and provided other professional be) paid a fee of approximately USD$50,000 to services in relation to this Prospectus, the listing of prepare the Indonesian mining concession report for the Company and other services not related to the the B26 project in section 10 of this Prospectus. offer. Mr Hagan’s remuneration is through Bestvale Resource Consultants Pty Ltd as disclosed above. (s) BBY Limited is entitled to fees as detailed in section 12 of this Prospectus entitled Material Contracts. (j) Dynamic Management Systems Pty Ltd (DMS) a company associated with Mr David Oastler (the (t) The following directors and representatives of Centre company’s Chief Financial Officer) will receive fees for Capital own the following Shares: services provided to the company on terms set out in (i) Brendan Selby Scorer: 89,564 Shares; section 12 of this Prospectus entitled Material Contracts. DMS is also entitled to receive 500,000 (ii) Brenscor Pty Ltd, an entity associated with shares and 250,000 Listed Options from conversion Brendan Scorer: 7,143 Shares; of Converting Notes subscribed for in cash. (iii) Blooms Invest Trust, an entity associated with (k) Whittens Lawyers and Consultants , on instructions Robert Coyte: 39,286 Shares; from the Company has prepared various agreements (iv) Coyte Family Super, an entity associated with and provided compliance advice in relation to this Robert Coyte: 42,857 Shares; Prospectus, participated in the due diligence process and provided other professional services in relation to (v) Norman Investment Partners Pty Ltd, an entity this Prospectus and the listing of the Company and associated with Michael Norman: 39,286 other services not related to the offer. Whittens Shares. Lawyers and Consultants have been paid or are entitled to be paid up to AUD$150,000 for these (u) The following nominees will be entitled, for services services (excluding GST and disbursements). provided to Orpheus, to the following Promoter Options in Orpheus at the time of completion of the (l) As from the Listing Date, where a director provides offer: input to the affairs of the Company by way of extra effort or special exertion and which is beyond his Relevant interests ordinary duties as a director, then that director is Orpheus Securities entitled to be paid for the same in addition to ordinary Orpheus Shares Promoter directors’ fees except to the extent he is otherwise Nominees held Options remunerated for the same. As at the date of this Prospectus, none of the existing directors have Florims Pty Ltd, received any director’s fees (nor are any outstanding). an entity associated (m) Centre Capital will, subject to certain conditions, be with Andrew Firek, paid a fee of approximately $50,000 (exclusive of Director of Coalworks 302,242 1,000,000 GST) for acting as sponsoring broker and has been Octopi Pty Ltd, an granted 2,500,000 fully paid ordinary shares and entity associated with 1,250,000 Listed Options and for providing other David Smith, Head of professional services in relation to the offer, re-organi- Equity Capital Markets sation and the listing of the Company. at BBY Limited 467,841 1,000,000 (n) Corvidae Pty Ltd as trustee for the Ravensgate Unit Garf Pty Ltd, an entity Trust trading as Ravensgate has been (or will be) paid associated with Glenn a fee (including disbursements) of up to approximately Rosewall, CEO & $43,320 (exclusive of GST) for preparing the Managing Director Ravensgate report in section 6 of this Prospectus of BBY Limited 467,841 1,000,000 relating to the Indonesian projects. (o) Minarco-MineConsult has been (or will be) paid a fee (including disbursements) of up to approximately

134 ADDITIONAL INFORMATION Constitution Dividends – Subject to the rights of shares issued with Orpheus has lodged a constitution at ASIC on any special or preferential rights (at present there are 15th December 2010 (the Orpheus Constitution). none), any profits of Orpheus, which Orpheus from time to time may distribute by way of dividend, will be divisible This constitution is deemed to be incorporated by amongst the shareholders in proportion to the shares held reference into this Prospectus in accordance with section by them. 712 of the Corporations Act. A copy of this constitution can be obtained from the Company’s registered office, at Return of Capital on Winding up – Subject to the rights no cost, or from ASIC. of shareholders with shares with special rights in a winding up (at present there are none), on a winding up of Orpheus, A constitution has the effect of a contract between the all assets which may be legally distributed amongst the company and each member, between the company and shareholders in accordance with the Constitution. each director and company secretary, and between a member and each other member under which each of Transfer of Shares – Subject to some limited restrictions those persons agrees to observe and perform the contained in the Constitution, the ASX Listing Rules and provisions of the constitution as far as those provisions ASTC Settlement Rules, and the Corporations Act, shares apply to that person. A company’s constitution can only be in the Company are freely transferable. altered by a special resolution. Each Applicant for Shares Variation of Rights Attaching to Shares – Where shares under the offer agrees, by force of the application, to be of different classes are issued, the rights attaching to the bound by the Constitution. shares of a class can thereafter only be varied by a special The Constitution deals with matters such as the rights resolution passed at a general meeting of holders of the conferred and obligations imposed by shares, transfer of shares of that class, or with the written consent of holders shares, alterations of share capital, share buy-backs, of at least three quarters of the issued shares of that class. disposal of less than a marketable parcel, variation of class Notices – Each shareholder is entitled to receive notice of rights, meetings of share-holders, polls, appointment and and to attend and vote in person or by proxy, represen- removal of directors, remuneration of directors and the tative or attorney at general meetings of Orpheus and to Listing Rules. receive all notices, accounts and other documents required to be furnished to shareholders under the Rights Attaching to Shares Constitution or the Corporations Act. All Shares being offered pursuant to this Prospectus will be issued as fully paid ordinary shares in the capital of the Terms Applicable to the Options Company and will rank equally with existing fully paid ordinary shares on issue. Further details as to the rights and liabilities attaching to the Shares are set out in the Exercise Price means the exercise price of each Option Company’s Constitution. as specified in the options table in section 8 of this Prospectus entitled Financial Matters. Following is a broad (non-exhaustive) summary of the rights, privileges, and restrictions attaching to all shares in Expiry Date means the expiry date of each Option as Orpheus. specified in the options table in section 8 of this Prospectus entitled Financial Matters. Voting – Subject to any special rights or restrictions for the time being attached to any class or classes of shares (at Exercise Notice means the form prescribed by the present there are none), at a general meeting every share - Company from time to time for the purpose of exercising holder present in person or by proxy, representative or Options. attorney has: Option Holder means the person or persons registered as (a) on a show of hands, one vote; and the holder of one or more Options from time to time. (b) on a poll, one vote for each fully paid share held and in respect of a partly paid share, a fraction of a vote Share means one fully paid ordinary share in the capital of equivalent to the proportion which the amount paid the Company. up bears to the total issue price. (a) Each Option carries the right to subscribe for one Share. Calls – Where shares are issued as partly paid, directors may, subject to the terms of issue, make calls upon (b) Options may be exercised by delivering to the holders of those shares to pay the whole of or a portion of Company’s registered office or the Company’s share the balance of the issue price. If a shareholder fails to pay registry an Exercise Notice at any time prior to the a call or instalment of a call, then subject to the Exercise Date. Corporations Act, ASX Listing Rules, the Constitution, and (c) The Exercise Notice must state the number of the terms on which the shares were issued, the shares the Options to be exercised and be accompanied by subject of the call will be forfeited but the shareholder the relevant holding statement(s) and a cheque (in cannot be made to pay the call. Australian currency) made payable to the Company

PROSPECTUS 135 for an amount being the result of the Exercise Price inclusion of its report in section 6 of this Prospectus multiplied by the number of Options being exercised. (in the form and context in which it appears). (d) Following receipt of a properly executed Exercise (c) Minarco – MineConsult has consented to being Notice and application monies in respect of the named as an Independent Geologist to the Company exercise of any Options, the Company will issue the and to the inclusion of its report in section 7 of this resultant Shares and deliver notification of Prospectus (in the form and context in which it shareholdings. appears). (e) The Company will make application to have the (d) Stantons has consented to being named as the Shares (issued pursuant to an exercise of Options) Independent Accountant to the Company and to the listed for quotation by ASX within 7 days of the date inclusion of its report in section 9 of this Prospectus of issue. (in the form and context in which it appears). (f) Shares issued pursuant to an exercise of Options (e) Hetherington has consented to being named in this shall rank, from the date of issue, pari passu with Prospectus as an independent expert for its tenement existing Shares in all respects. report in respect of the Australian projects and to the inclusion of its report in section 11 of this Prospectus (g) Options carry no right to participate in pro rata issues (in the form and context in which it appears). of securities to shareholders unless the Options are exercised before the record date for determining (f) Hadriputranto, Hadinoto & Partners has consented entitlements to the relevant pro rata issue. to being named in this Prospectus as preparing the Indonesian mining concession report for the B26 (h) Each Option Holder will be notified by the Company project and to the inclusion of its report in section 10 of any proposed pro rata issue of securities to of this Prospectus (in the form and context in which it shareholders in accordance with the Listing Rules. appears). (i) In the event of a reorganisation (including recon- (g) Bentleys Melbourne Audit Pty Ltd has consented to struction, consolidation, subdivision, reduction, or being named as Auditor to the Company. Orpheus return) of the capital of the Company, the terms of the has received an indication from Bentleys Melbourne Options will be changed to the extent necessary to Audit Pty Ltd that it intends to resign as auditor of the comply with the requirements of the Listing Rules (in Company. force at the time of the reorganisation). (h) BBY Limited has consented to being named as Lead Manager to the offer (in the form and context in which Additional Terms Applicable to it appears). Promoter Options (i) Centre Capital has consented to being named as In addition to the Terms Applicable to the Options section Sponsoring Broker to the offer (in the form and immediately above, to qualify for the Promoter Options a context in which it appears). party holding such options must remain a consultant/ director until 30 September 2014. (j) Security Transfer Registrars consented to being named as providing share registry services (in the form and context in which it appears). Dividend Policy The directors intend to recommend that dividends be paid Other than as disclosed above or elsewhere in this out of profits if profitability and cash flow permit and will Prospectus, none of the abovementioned persons have endeavour, subject to the Company’s taxation liability, to been involved in the preparation, or authorised or caused ensure that such dividends are franked to the greatest the issue, of this Prospectus. To the maximum extent extent possible. permitted by law, each of the persons referred to above: (a) expressly disclaims and takes no responsibility for any Consents part of (or any matter included in or omitted from) this Prospectus; The following persons have given their written consent to be named in this Prospectus and for the inclusion of (b) makes no representation or warranty (either expressly statements made by those persons (as described below), or impliedly) with respect to the completeness or and have not withdrawn such consent before lodgement accuracy of information contained in this Prospectus; of this Prospectus with ASIC. (c) disclaims liability to any person in respect of any (a) Whittens Lawyers and Consultants has consented to statement included in or omitted from this being named in this Prospectus as solicitors to the Prospectus; Company and to the inclusion of section 12 of this Prospectus entitled Material Contracts in the form other than as disclosed above. and context in which that summary appears in this Prospectus. (b) Ravensgate has consented to being named as an Independent Geologist to the Company and to the

136 ADDITIONAL INFORMATION SECTION 14

Corporate Governance Policy

Corporate Governance Statement The Company has elected to depart from the adoption of The Company recognises the need to adhere to the the ASX Corporate Governance Guidelines in that it will corporate governance policy prescribed by the Australian not be forming a nomination committee or a remuneration Stock Exchange as outlined in Guidance Note 9A committee nor will it appoint independent directors for the Corporate Governance - Principles & Recommendations reason that these requirements are more appropriate for of the ASX rules consistent with best practice for a listed larger public companies and would unduly add to the cost public company. Accordingly the Company makes the structure of the Company. The Company will review its following corporate governance statements which are position on these requirements within two years of its consistent with these guidelines where appropriate. listing on the ASX. Departures from such policy are noted in this statement. Code of Conduct and Conflicts of Interest Board Charter The Company does not yet have a formal Code of Conduct setting out its core values. In general though, The Board of Directors of the Company is collectively the Company requires that each director and officer of the experienced in coal and mineral exploration, mine Company must comply with all laws and regulations. This development, finance and the management of listed public includes understanding the laws and regulations relevant companies, and the requirements of, and compliance to their work and complying with the legal requirements of with, the law and ASX and ASIC rules and policies. the jurisdiction in which the Company operates. As the Company will use contractors for its exploration Contractors and others employed by the Company should and mine development work, the Board generally will be not engage in activities or hold or trade assets that involve, responsible for over-seeing the work of those contractors or could appear to involve, a conflict between their and their performance against contract. Three of the personal interests and the interests of the Company. Directors, including the Company’s Chief Executive Officer, are qualified and experienced in mineral exploration and The practices of the Board are aimed at promoting ethical mine development and responsible decision making. The Board strives for good corporate governance and industry best practice. The Board has the responsibility of approving the Chief It specifically requires directors and employees to: Executive Officer. The Board approves and monitors corporate strategy and performance objectives. Under the p avoid situations which may give rise to a conflict of oversight of the Board’s Audit and Risk Committee, the interest; Board monitors systems of risk management, compliance p avoid situations where they may gain any benefit and financial reporting. The Board is responsible for which competes with Company’s business; approving and monitoring the progress of major capital expenditure, capital management and acquisitions and p read and confirm that they understand the divestitures of Company assets. Company’s policies; p comply with laws and regulations;

The Board is currently comprised of 2 executive directors p properly use Company’s assets for legitimate and 1 non executive director. The Board supports the business purposes; and appointment of directors who bring a wide range of p maintain confidentiality in both Company’s business business and professional skills and experience to the and the information of its clients and shareholders. Company. The Board is satisfied that the Board has an effective composition, size and commitment to adequately discharge its responsibilities and duties. The Board is committed to good corporate governance Directors are appointed in accordance with the consti- and aims for continuous improvement in these practices. tution of Orpheus and are appointed for a period of three It embraces high ethical standards and requires both years or until the third annual general meeting following his personal and corporate responsibility. Directors, officers or her appointment (whichever is longer). and employees are required to safeguard the integrity of the Company and to act in the best interests of its The Board has established an Audit and Risk Committee. stakeholders.

PROSPECTUS 137 Each director is required to disclose any interest which Board Continuous Disclosure Policy might create a potential conflict of interest with his or her ASX defines continuous disclosure in its Listing Rules as duties as a director or which might affect their “the timely advising of information to keep the market independence. informed of events and developments as they occur”. The Listing Rules and the Corporations Act require that There must be no conflict, or perception of a conflict, a listed company disclose to the market matters which a between the interests of any Company director, officer or reasonable person would expect to have a material effect employee and the responsibility of that person to the on the price or value of the company’s securities. stakeholders. All directors, officers and employees may A reasonable person is taken to expect information to never improperly use their position for personal or private have a material effect on the price or value of securities gain to themselves, a family member, or other associated if it would, or would be likely to, influence persons who person. commonly invest in securities in deciding whether or not Where a potential conflict exists, this should be disclosed to subscribe for, buy or sell the securities. to the Chairman prior to any dealings taking place. The Company’s Continuous Disclosure Policy is designed to meet market best practice, ensuring that all interested Audit and Risk Committee parties have an equal opportunity to obtain information which is issued by the Company.

The Audit & Risk Committee plays a key role in assisting The procedures which have been developed to comply the Board of Directors with its responsibilities relating to with these rules include immediate reporting of any matter accounting, internal control systems, reporting practices which could potentially have a material effect, via and risk management, and ensuring the independence of established reporting lines to the Company Secretary. the company auditor. The charter for this committee The Company Secretary is responsible for monitoring incorporates policies and procedures to ensure an information which could be price sensitive, liaising with the effective focus from an independent perspective. CEO and the Chairman to make an initial assessment, and escalating to the Board for disclosure of such information The Audit & Risk Committee oversees and appraises where practicable. The CEO monitors daily activity to the quality of the audits conducted by the auditors and ascertain what matters should be considered for emphasises areas where the Committee believes special disclosure and as soon as a matter is appropriate for attention is required. The external auditors for the disclosure the CEO must immediately notify the Company Australian Projects are Bentleys whose appointment will Secretary. It is noted that the Company must not delay be reviewed periodically in line with industry best practice. giving this information to the ASX. Therefore, if the Board The Board believes in the ongoing assessment of our audit is not immediately available, the Company Secretary will arrangements and will comply with any regulatory require - lodge such information after consultation with the CEO or ments to rotate the Company’s external audit partner. the Chairman.

The Audit & Risk Committee also reviews the effectiveness Price-sensitive information will be disclosed, in the first of administrative, operating and accounting controls. instance, to the ASX and disclosures to the market will then be placed on the Company’s website. Material information must not be selectively disclosed (i.e. to The composition of the Audit & Risk Committee is analysts, the media or shareholders) prior to being determined in accordance with the principle that only non- announced to the ASX, and all media releases must be executive directors may be members of the Committee. referred to the Company Secretary for clearance prior to There must be at least 2 members on the Committee. any release.

Trading Policy The Committee’s terms of reference are published on the The Company’s trading policy ensures that unpublished company’s web site www.orpheusenergy.com.au price sensitive information about the Company is not used in an unlawful manner. The main provisions of this policy Risk Management System Statement are: The Board takes a proactive approach to the Company’s p compliance with the specific requirements of the risk management and internal compliance and control Corporations Act 2001; systems. p prohibition of short term trading by directors, officers, employees and contractors in the Company’s The Board believes that it is crucial for all Board members securities; to be a part of this process, and as such the Board has not established a separate risk management committee. p prior notification by directors, officers, employees and contractors of their intention to deal in the Company’s The Board is responsible for ensuring that risks, and also securities. opportunities are identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the Board.

138 CORPORATE GOVERNANCE POLICY Shareholder Communications Board Remuneration and Nominations Policy The Board has adopted a communication strategy to Increases in remuneration of directors are determined by promote effective communication with shareholders and shareholders and the Board determines individual encourage effective participation at general meetings. directors’ remuneration.

In accordance with our regulatory obligations, certain The Company has not formed a Nominations Committee periodic reporting will also be made to shareholders, because of the Company’s size which is small enough for including the Annual Report. Our aim is for informed the whole Board to efficiently address the issue of board shareholder participation. competencies.

The Company maintains a web site and endeavours to publish on the web site all relevant announcements made to the market. In accordance with ASX Principle 6.2, the external auditors are requested to attend the annual general meeting and are available to answer shareholder questions about the conduct of the audit and preparation of the auditor’s report.

PROSPECTUS 139 SECTION 15

Glossary and Interpretation

adb Air dried basis.

AUD$, A$ Dollars of the currency of Australia, and all amounts in this Prospectus are in Australian dollars unless otherwise stated.

AMFG Australian Motor Finance Group Limited (ACN 121 257 412).

Applicant A person who submits an Application Form under this Prospectus.

Application An application for Shares under this Prospectus.

Application Forms The Rights Issue Application Form, the Priority Application Form and the Public Offer Application Form.

Ashford Limestone Project Refers and relates to the Ashford Limestone Project (Exploration Licence 6511 NSW). or “Ashford”

ASIC Australian Securities and Investments Commission.

ASTC ASX Settlement Pty Limited (ABN 49 008 504 532).

ASTC Settlement Rules The Settlement Rules of ASTC.

ASX ASX Limited (ABN 98 008 624 691).

B26 Blocks 2 and 6 south-west of Balikpapan in East Kalimantan, Indonesia.

BBY or BBY Limited BBY Ltd (ACN 006 707 777).

BKPM Indonesia Investment Coordinating Board.

Board The board of Directors of the Company as constituted from time to time.

Broker Options Means the ‘Broker’ options specified in the options table in the Financial Matters section of this Prospectus.

Capex Capital Expenditure.

Centre Capital Centre Capital Securities Pty Ltd (ABN 45 123 011 389).

CHESS The Clearing House Electronic Sub-register System.

Closing Date The closing date for the Priority Offer, the Rights Issue and the Public Offer specified in the indicative timetable in this Prospectus.

Coalworks Coalworks Limited (ACN 114 702 831).

Company Orpheus Energy Limited (ACN 121 257 412) previously known as Australian Motor Finance Group Limited.

Constitution The Constitution of the Company as amended or replaced from time to time.

Converting Notes The converting notes issued by Orpheus Energy Group Pty Ltd, the terms of issue were that one note converts to one share and one option will attach to every two shares.

Corporations Act Corporations Act 2001 (Cth) as amended from time to time.

Directors The directors of the Company as at the date of this Prospectus.

DOCA Deed of Company Arrangement.

Eligible Orpheus Shareholders of the Company as at the Rights Issue Record Date resident in Australia Shareholder and New Zealand.

140 CORPORATE GOVERNANCE POLICY Exposure Period 7 day period from the lodgement of the Prospectus.

Full Subscription The raising of $15,000,000 by the issue of 60,000,000 Shares at $0.25 each pursuant to this Prospectus.

Hetherington Hetherington Exploration & Mining Title Services Pty Limited.

Hodgson Vale Coal Project Refers and relates to the Hodgson Value Coal Project (Exploration Permit EP 1145 QLD). or “Hodgson Vale”

IUP Izin Usaha Pertambangan (Indonesian Mining Business License).

JORC The Joint Ore Reserves Committee.

JORC Code or the Code The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

JV Joint Venture.

KP Kuasa Pertambangan (Indonesian Mining Authorisation).

Listed Options means the ‘Listed’ options specified in the options table in the Financial Matters section of this Prospectus.

Listing Date Recommencement of quotation of the Shares on ASX.

Listing Rules or The official listing rules of ASX and any other rules of ASX which are applicable while the ASX Listing Rules Company is admitted to the Official List, each as amended or replaced from time to time, except to the extent of any express written waiver by ASX.

Minimum Subscription The raising of $12,500,000 by the issue of 50,000,000 Shares at $0.25 each pursuant to this Prospectus.

MoHLR Ministry of Laws and Human Rights of the Republic of Indonesia.

Mt Million tonnes.

Offer Period The period from the Opening Date to the Closing Date.

Official List The official list of the ASX.

Official Quotation Has the same meaning as in the ASX Listing Rules.

Opening Date The opening date for the Rights Issue, the Priority Offer and the Public Offer specified in the indicative timetable in this Prospectus.

Operation Production IUP Indonesian Operation Production Mining Business Permit (Izin Usaha Pertambangan Operasi Produksi).

Opex Operational Expenditure.

Orpheus or OEL Orpheus Energy Limited (ACN 121 257 412) formerly known as Australian Motor Finance Group Limited.

Options The Broker Options, the Listed Options, the Pre-Existing Options and the Promoter Options, as applicable.

OPL Orpheus Energy Group Pty Ltd (ACN 138 389 590).

Overseas Applicants Applicants who are not resident in or residents of Australia or New Zealand.

Pre-Existing Options Means the ‘Pre-Existing’ options specified in the options table in the Financial Matters section of this Prospectus.

Priority Application Form Means the application form accompanying this Prospectus and entitled “Priority Application Form – Coalworks Limited”.

Priority Offer Means the offer to Coalworks shareholders detailed in section 4 of this Prospectus.

Promoter Options Means the ‘Promoter’ options specified in the options table in the Financial Matters section of this Prospectus.

PROSPECTUS 141 Prospectus This prospectus lodged on the date specified in the Important Notices section of this Prospectus.

PT BBA PT Berkah Bhumi Abadi a limited liability company established under the laws of the Republic of Indonesia and having its domicile at Gedung Menara Anugrah, Lt. 27, Kantor Taman E.3.3, Kawasan Mega Kiningan Lot 8.6-8.7, East Kunungan, Setiabudi, South Jakarta.

PT Indomine PT Mega Coal Indomine, a limited liability company established under the laws of the Republic of Indonesia and having its domicile at Gedung Menara Anugrah, Lt. 27, Kantor Taman E.3.3, Kawasan Mega Kiningan Lot 8.6-8.7, East Kunungan, Setiabudi, South Jakarta.

PT Mega Coal PT Mega Coal International a limited liability company established under the laws of the Republic of Indonesia and having its domicile at Gedung Menara Anugrah, Lt. 27, Kantor Taman E.3.3, Kawasan Mega Kiningan Lot 8.6-8.7, East Kunungan, Setiabudi, South Jakarta.

PT PKK PT Persada Kharisma Kenanga a limited liability company established under the laws of the Republic of Indonesia and having its domicile at Gedung Menara Anugrah, Lt. 27, Kantor Taman E.3.3, Kawasan Mega Kiningan Lot 8.6-8.7, East Kunungan, Setiabudi, South Jakarta.

PT PAR PT Pola Andhika Realtor a limited liability company established under the laws of the Republic of Indonesia and having its domicile at Gedung Menara Anugrah, Lt. 27, Kantor Taman E.3.3, Kawasan Mega Kiningan Lot 8.6-8.7, East Kunungan, Setiabudi, South Jakarta.

Public Offer The offer pursuant to this Prospectus to members of the public.

Public Offer Application The application form accompanying this Prospectus and entitled “Application Form Public Form Offer”.

Record Date Means the date specified in the indicative timetable in this Prospectus and is 7pm WST on that date.

Rights Issue The 1 for 1 non-renounceable entitlement offer pursuant to this Prospectus to Eligible Orpheus Shareholders, including a 1 for 2 option entitlement as described in section 4 of this Prospectus.

Rights Issue Application The application form accompanying this Prospectus and entitled “Entitlement and Form Acceptance Application Form”.

Securities Shares and/or Options, as applicable.

Shares Fully paid ordinary shares in the issued capital of the Company.

Shareholder The holder of a Share in Orpheus.

US$, USD$ Dollars of the currency of the United States of America.

Wingen Bentonite Project Refers and relates to the Wingen Bentonite Project (Exploration Licence 7142 or or “Wingen” ELA 3657).

WST Western Australia Standard Time.

Please refer to the Ravensgate and Minarco-MineConsult reports in this Prospectus for additional definitions with respect to geological terms and abbreviations contained in this Prospectus.

In this Prospectus unless the context otherwise unambiguously requires the same, general statements followed by an example or a list of examples are not limited to or by that example or list.

142 GLOSSARY AND INTERPRETATION SECTION 16

Statement of Directors

The Directors report that due inquiry from them, they have The Directors further report that after making all enquiries not become aware: which in their opinion were reasonable, they believe: (a) of any circumstances which in their opinion materially (a) that every statement in this Prospectus not purporting has affected or will affect the proposed assets of the to be made on the authority of an expert or of a Company; public official, document or statement is true and not misleading or deceptive; (b) of any contingent liabilities of the Company; (b) that every statement in this Prospectus purporting to (c) of any material items, transactions or events subse - be a statement made by an expert or contained in quent to the preparation of the pro-forma statement what purports to be a copy of or extract from a report of assets and liabilities set out in the Prospectus or evaluation of an expert fairly represents the which require adjustments to that statement or to the statement or is a correct and fair copy of or extract Independent Accountant’s Report or which could from the report and that the person making the cause figures disclosed in this Prospectus to be statement was competent to give it, has consented to misleading or deceptive; and the issue of this Prospectus and has not withdrawn (d) of any material items, transactions or events which, that consent before lodgement of this Prospectus at although they do not relate to figures included in this ASIC; and Prospectus, could cause reliance on the figures in this (c) that every statement in this Prospectus purporting to Prospectus to be misleading or deceptive. be a statement in this Prospectus purporting to be made by an official person or contained in what purports to be a copy of or extract from a public official document is a correct and fair representation of the statement or a correct and fair copy of or extract from the document.

Date: 24 May 2011

This Prospectus has been signed by or on behalf of the directors of the Company in accordance with section 351 and section 720 of the Corporations Act.

Wayne Mitchell Chairman and Director

PROSPECTUS 143 Notes

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144 NOTES Notes

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PROSPECTUS 145 Notes

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146 NOTES ENTITLEMENT AND ACCEPTANCE APPLICATION FORM THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.

REGISTERED OFFICE: ORPHEUS ENERGY LIMITED SHARE REGISTRY: LEVEL 4 Security Transfer Registrars Pty Ltd 44 MILLER STREET ABN: 67 121 257 412 All Correspondence to: NORTH SYDNEY NSW 2060 PO BOX 535, AUSTRALIA APPLECROSS WA 6953 AUSTRALIA 770 Canning Highway, APPLECROSS WA 6153 AUSTRALIA T: +61 8 9315 2333 F: +61 8 9315 2233 E: [email protected] W: www.securitytransfer.com.au

Code: OEG

Holder Number: Eligible Holding as at 7.00pm WST on 2 June 2011: Entitlement to Securities 1:1: Amount payable on acceptance @ $0.25 per Security: NON-RENOUNCEABLE SHARE OFFER CLOSING AT 5.00PM WST ON 21 JUNE 2011 ISSUE PRICE OF 25 CENTS PER SHARE WITH 1 FREE ATTACHING OPTION (EXPIRING 31 DECEMBER 2011 @ $0.20) FOR EVERY 2 SHARES ISSUED.

(1) I/We the above named being registered at 7.00pm WST on the 2 June 2011 as holder(s) of Shares in the Company hereby accept as follows:

NUMBER OF NEW SHARES AMOUNT ENCLOSED ACCEPTED/APPLIED FOR @ $0.25 PER SHARE

Entitlement or Part Thereof , , $ , , .

(2) I/We have enclosed/made payment for amount shown above (following the payment instructions as detailed overleaf). (3) I/We hereby authorise you to place my/our name(s) on the register of members in respect of the number of New Securities allotted to me/us. (4) I/We agree to be bound by the Constitution of the Company. (5) I/We understand that if any information on this form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be accepted. Any decision of the Directors as to whether to accept this form, and how to construe, amend or complete it shall be final. (6) I/We authorise the Company to send me/us a substituted form if this form ceases to be current. (7) I/We declare that I/we have received a full and unaltered version of the Prospectus either in an electronic or paper format. (8) My/Our contact details in case of enquiries are: NAME TELEPHONE NUMBER ( ) EMAIL ADDRESS

@

BPAY PAYMENT OR THE RETURN OF THIS DOCUMENT WITH THE REQUIRED REMITTANCE WILL CONSTITUTE YOUR ACCEPTANCE OF THE OFFER. REGISTRY DATE STAMP PAYMENT INFORMATION - Please also refer to payment instructions overleaf.

Biller Code: 159483 CHEQUE/MONEY ORDER

Ref: All cheques (expressed in Australian currency) are to be made payable to ORPHEUS ENERGY BPAY® this payment via internet or phone banking. LIMITED and crossed "Not Negotiable". Your BPAY® reference number is unique to this offer and is not to be used for any other offer. E & O.E.

5555555522233333300066644433 4 8674330641 LODGEMENT INSTRUCTIONS

PAYMENT INSTRUCTIONS

CHEQUE/MONEY ORDER Biller Code: 159483 All cheques should be drawn on an Australian bank and expressed in Australian currency and crossed "Not Negotiable".

BPAY® this payment via internet or phone banking. Sufficient cleared funds should be held in your account as your Your reference number is quoted on the front of this form. acceptance may be rejected if your cheque is dishonoured.

Multiple acceptances must be paid separately. Cheques or bank drafts drawn on overseas banks in Australian or any foreign currency will NOT be accepted. Any such Applicants should be aware of their financial institution's cut-off cheques will be returned and the acceptance deemed to be time (the time payment must be made to be processed invalid. overnight) and ensure payment is processed by their financial institution on or before the day prior to the closing date of the Do not forward cash as receipts will not be issued. offer. BPAY applications will only be regarded as accepted if payment is received by the registry from your financial institution When completed, this form together with the appropriate on or prior to the closing date. It is the Applicant's responsibility payment should be forwarded to the share registry: to ensure funds are submitted correctly by the closing date and time. Security Transfer Registrars Pty Ltd PO Box 535, APPLECROSS WA 6953. You do not need to return this form if you have made payment via BPAY. Applications must be received by Security Transfer Registrars Pty Ltd no later than 5.00pm WST on the closing Your BPAY reference number will process your payment to date. your entitlement electronically and you will be deemed to have applied for such Securities for which you have paid.

EXPLANATION OF ENTITLEMENT 1. The front of this form sets out the number of Securities and the price payable on acceptance of each Security.

2. Your entitlement may be accepted either in full or in part. There is no minimum acceptance.

ENQUIRIES All enquiries should be directed to the Company's share registry:

Security Transfer Registrars Pty Ltd

PO Box 535, Applecross WA 6953 AUSTRALIA

770 Canning Highway, Applecross WA 6153 AUSTRALIA

Telephone +61 8 9315 2333

Facsimile +61 8 9315 2233

Email [email protected]

PRIVACY STATEMENT Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form. PRIORITY APPLICATION FORM - COALWORKS LIMITED THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.

SHARE REGISTRY: Security Transfer Registrars Pty Ltd BROKER STAMP All Correspondence to: ORPHEUS ENERGY LIMITED PO BOX 535, APPLECROSS WA 6953 ABN: 67 121 257 412 770 Canning Highway, APPLECROSS WA 6153 T: +61 8 9315 2333 F: +61 8 9315 2233 Broker Code E: [email protected] W: www.securitytransfer.com.au Advisor Code PLEASE READ CAREFULLY ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM Before completing this Application Form you should read the accompanying Prospectus and the instructions overleaf. Please print using BLOCK LETTERS. TOTAL SUBSCRIPTION AMOUNT NUMBER OF SHARES I/We apply for: @ $0.25 PER SHARE (please mark "X" to indicate one choice only) OFFER A - maximum amount $15,000.00 60,000 OFFER B $10,000.00 40,000 OFFER C $7,500.00 30,000 OFFER D $5,000.00 20,000 OFFER E $2,000.00 8,000

Full Name of Applicant / Company Title (e.g.: Dr, Mrs) Given Name(s) or Company Name

Joint Applicant #2 Title (e.g.: Dr, Mrs) Given Name(s) or Company Name

Joint Applicant #3 Title (e.g.: Dr, Mrs) Given Name(s) or Company Name

Account Designation (e.g.: THE SMITH SUPER FUND A/C) < >

Postal Address Unit Street Number Street Name or PO BOX /

Suburb/Town/City State Postcode

Country Name (if not Australia)

CHESS HIN(where applicable) If an incorrect CHESS HIN has been provided (e.g.: incorrect number, registration details do not X match those registered) any securities issued will be held on the Issuer Sponsored subregister. Tax File Number / Australian Business Number Tax File Number of Security Holder #2 (Joint Holdings Only)

I confirm I am a holder of Coalworks Limited, and my SRN/HIN is:

Declaration and Statements: REGISTRY DATE STAMP (1) I/We declare that all details and statements made by me/us are complete and accurate. (2) I/We agree to be bound by the Terms & Conditions set out in the Prospectus and by the Constitution of the Company. (3) I/We authorise the Company to complete and execute any documentation necessary to effect the issue of Securities to me/us. (4) I/We have received personally a copy of the Prospectus accompanied by or attached to this Application form, or a copy of the Application Form or a direct derivative of the Application Form before applying for the Securities. (5) I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in the Company and that no notice of acceptance of the application will be provided. E & O.E.

7799999922255577788899900066 5 TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 24 MAY 2011 AND ANY RELEVANT SUPPLEMENTARY PROSPECTUS. This Application Form relates to the Offer of Fully Paid Shares in ORPHEUS ENERGY LIMITED pursuant to the Prospectus dated 24 May 2011.

Contact Name Contact Number ( )

Email Address

@

Please complete all parts of the Application Form using BLOCK LETTERS. Use correct forms of registrable name (see below). Applications using the wrong form of name may be rejected. Current CHESS participants should complete their name and address in the same format as they are presently registered in the CHESS system. Insert the number of Shares you wish to apply for. The application must be for a minimum of 8,000 Shares up to a maximum of 60,000 Shares. The applicant(s) agree(s) upon and subject to the terms of the Prospectus to take any number of Shares equal to or less than the number of Shares indicated on the Application Form that may be allotted to the applicants pursuant to the Prospectus and declare(s) that all details of statements made are complete and accurate. There are a total 20,000,000 Shares to be offered to all shareholders of Coalworks. If applications for Priority Offer shares exceed $5 million, they will be scaled back accordingly. No notice of acceptance of the application will be provided by the Company prior to the allotment of Shares. Applicants agree to be bound upon acceptance by the Company of the application. Please provide us with a telephone contact number (including the person responsible in the case of an application by a company) so that we can contact you promptly if there is a query in your Application Form. If your Application Form is not completed correctly, it may still be treated as valid. There is no requirement to sign the Application Form. The Company's decision as to whether to treat your application as valid, and how to construe, amend or complete it shall be final. PAYMENT All cheques should be made payable to ORPHEUS ENERGY LIMITED and drawn on an Australian bank and expressed in Australian currency and crossed "Not Negotiable". Cheques or bank drafts drawn on overseas banks in Australian or any foreign currency will NOT be accepted. Any such cheques will be returned and the acceptance deemed to be invalid. Sufficient cleared funds should be held in your account as your acceptance may be rejected if your cheque is dishonoured. Do not forward cash as receipts will not be issued. LODGING OF APPLICATIONS Completed Application Forms and cheques must be: Posted to: OR Delivered to: ORPHEUS ENERGY LIMITED ORPHEUS ENERGY LIMITED C/- Security Transfer Registrars Pty Ltd C/- Security Transfer Registrars Pty Ltd PO Box 535 770 Canning Highway APPLECROSS WA 6953 APPLECROSS WA 6153 Applications must be received by no later than 5.00pm (WST) on the Closing Date 21 June 2011 which may be changed immediately after the Opening Date at any time and at the discretion of the Company. CHESS HIN/BROKER SPONSORED APPLICANTS The Company intends to become an Issuer Sponsored participant in the ASX CHESS System. This enables a holder to receive a statement of holding rather than a certificate. If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold shares allotted to you under this Application on the CHESS subregister, enter your CHESS HIN. Otherwise, leave this box blank and your Shares will automatically be Issuer Sponsored on allotment. TAX FILE NUMBERS The collection of tax file number ("TFN") information is authorised and the tax laws and the Privacy Act strictly regulate its use and disclosure. Please note that it is not against the law not to provide your TFN or claim an exemption, however, if you do not provide your TFN or claim an exemption, you should be aware that tax will be taken out of any unfranked dividend distribution at the maximum tax rate. If you are completing the application with one or more joint applicants, and you do not wish to disclose your TFN or claim an exemption, a separate form may be obtained from the Australian Taxation Office to be used by you to provide this information to the Company. Certain persons are exempt from providing a TFN. For further information, please contact your taxation adviser or any Taxation Office. CORRECT FORM OF REGISTRABLE TITLE Note that only legal entities are allowed to hold securities. Applications must be in the name(s) of a natural person(s), companies or other legal entities acceptable to ORPHEUS ENERGY LIMITED. At least one full given name and the surname are required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the example of the correct forms of registrable names below: TYPE OF INVESTOR CORRECT INCORRECT Individual Mr John Alfred Smith J A Smith Use given names in full, not initials. Company ABC Pty Ltd ABC P/L or ABC Co Use the company's full title, not abbreviations. Joint Holdings Mr Peter Robert Williams & Peter Robert & Use full and complete names. Ms Louise Susan Williams Louise S Williams Trusts Mrs Susan Jane Smith Sue Smith Family Trust Use trustee(s) personal name(s), Do not use the name of the trust. Deceased Estates Ms Jane Mary Smith & Estate of Late John Smith Use the executor(s) personal name(s). Mr Frank William Smith or John Smith Deceased Minor (a person under the age of 18) Mr John Alfred Smith Master Peter Smith Use the name of a responsible adult with an appropriate designation. Partnerships Mr John Robert Smith & John Smith and Son Use the partners' personal names. Do not use the name of the partnership. Mr Michael John Smith Superannuation Funds Jane Smith Pty Ltd Jane Smith Pty Ltd Superannuation Fund Use the name of the trustee(s) of the super fund.

PRIVACY STATEMENT Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form. 3399900099955577788899900000 APPLICATION FORM - PUBLIC OFFER THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.

SHARE REGISTRY: Security Transfer Registrars Pty Ltd BROKER STAMP All Correspondence to: ORPHEUS ENERGY LIMITED PO BOX 535, APPLECROSS WA 6953 ABN: 67 121 257 412 770 Canning Highway, APPLECROSS WA 6153 T: +61 8 9315 2333 F: +61 8 9315 2233 E: [email protected] Broker Code W: www.securitytransfer.com.au Advisor Code PLEASE READ CAREFULLY ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM Before completing this Application Form you should read the accompanying Prospectus and the instructions overleaf. Please print using BLOCK LETTERS. I/We apply for: I/We lodge full application of monies of:

, , Shares at AUD $0.25 per share A$ , , . or such lesser number of Shares which may be allocated to me/us by their Directors.

Full Name of Applicant / Company Title (e.g.: Dr, Mrs) Given Name(s) or Company Name

Joint Applicant #2 Title (e.g.: Dr, Mrs) Given Name(s) or Company Name

Joint Applicant #3 Title (e.g.: Dr, Mrs) Given Name(s) or Company Name

Account Designation (e.g.: THE SMITH SUPER FUND A/C) < >

Postal Address Unit Street Number Street Name or PO BOX /

Suburb/Town/City State Postcode

Country Name (if not Australia)

CHESS HIN(where applicable) If an incorrect CHESS HIN has been provided (e.g.: incorrect number, registration details do not X match those registered) any securities issued will be held on the Issuer Sponsored subregister.

Contact Name Contact Number ( )

Email Address

@

Tax File Number / Australian Business Number Tax File Number of Security Holder #2 (Joint Holdings Only)

Declaration and Statements: REGISTRY DATE STAMP (1) I/We declare that all details and statements made by me/us are complete and accurate. (2) I/We agree to be bound by the Terms & Conditions set out in the Prospectus and by the Constitution of the Company. (3) I/We authorise the Company to complete and execute any documentation necessary to effect the issue of Securities to me/us. (4) I/We have received personally a copy of the Prospectus accompanied by or attached to this Application form, or a copy of the Application Form or a direct derivative of the Application Form before applying for the Securities. (5) I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in the Company and that no notice of acceptance of the application will be provided. E & O.E.

7755544477744488833366611155 5 TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 24 MAY 2011 AND ANY RELEVANT SUPPLEMENTARY PROSPECTUS. This Application Form relates to the Offer of Fully Paid Shares in ORPHEUS ENERGY LIMITED pursuant to the Prospectus dated 24 May 2011.

APPLICATION FORMS Please complete all parts of the Application Form using BLOCK LETTERS. Use correct forms of registrable name (see below). Applications using the wrong form of name may be rejected. Current CHESS participants should complete their name and address in the same format as they are presently registered in the CHESS system. Insert the number of Shares you wish to apply for. The application must be for a minimum of 8,000 Shares and thereafter in multiples of 500 Shares. The applicant(s) agree(s) upon and subject to the terms of the Prospectus to take any number of Shares equal to or less than the number of Shares indicated on the Application Form that may be allotted to the applicants pursuant to the Prospectus and declare(s) that all details of statements made are complete and accurate. No notice of acceptance of the application will be provided by the Company prior to the allotment of Shares. Applicants agree to be bound upon acceptance by the Company of the application. Please provide us with a telephone contact number (including the person responsible in the case of an application by a company) so that we can contact you promptly if there is a query in your Application Form. If your Application Form is not completed correctly, it may still be treated as valid. There is no requirement to sign the Application Form. The Company's decision as to whether to treat your application as valid, and how to construe, amend or complete it shall be final.

PAYMENT All cheques should be made payable to ORPHEUS ENERGY LIMITED and drawn on an Australian bank and expressed in Australian currency and crossed "Not Negotiable". Cheques or bank drafts drawn on overseas banks in Australian or any foreign currency will NOT be accepted. Any such cheques will be returned and the acceptance deemed to be invalid.

Sufficient cleared funds should be held in your account as your acceptance may be rejected if your cheque is dishonoured. Do not forward cash as receipts will not be issued.

LODGING OF APPLICATIONS Completed Application Forms and cheques must be: Posted to: OR Delivered to: ORPHEUS ENERGY LIMITED ORPHEUS ENERGY LIMITED C/- Security Transfer Registrars Pty Ltd C/- Security Transfer Registrars Pty Ltd PO Box 535 770 Canning Highway APPLECROSS WA 6953 APPLECROSS WA 6153 Applications must be received by no later than 5.00pm (WST) on the Closing Date 27 June 2011 which may be changed immediately after the Opening Date at any time and at the discretion of the Company.

CHESS HIN/BROKER SPONSORED APPLICANTS The Company intends to become an Issuer Sponsored participant in the ASX CHESS System. This enables a holder to receive a statement of holding rather than a certificate. If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold shares allotted to you under this Application on the CHESS subregister, enter your CHESS HIN. Otherwise, leave this box blank and your Shares will automatically be Issuer Sponsored on allotment.

TAX FILE NUMBERS The collection of tax file number ("TFN") information is authorised and the tax laws and the Privacy Act strictly regulate its use and disclosure. Please note that it is not against the law not to provide your TFN or claim an exemption, however, if you do not provide your TFN or claim an exemption, you should be aware that tax will be taken out of any unfranked dividend distribution at the maximum tax rate. If you are completing the application with one or more joint applicants, and you do not wish to disclose your TFN or claim an exemption, a separate form may be obtained from the Australian Taxation Office to be used by you to provide this information to the Company. Certain persons are exempt from providing a TFN. For further information, please contact your taxation adviser or any Taxation Office.

CORRECT FORM OF REGISTRABLE TITLE Note that only legal entities are allowed to hold securities. Applications must be in the name(s) of a natural person(s), companies or other legal entities acceptable to ORPHEUS ENERGY LIMITED. At least one full given name and the surname are required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the example of the correct forms of registrable names below:

TYPE OF INVESTOR CORRECT INCORRECT Individual Mr John Alfred Smith J A Smith Use given names in full, not initials.

Company ABC Pty Ltd ABC P/L or ABC Co Use the company's full title, not abbreviations.

Joint Holdings Mr Peter Robert Williams & Peter Robert & Use full and complete names. Ms Louise Susan Williams Louise S Williams

Trusts Mrs Susan Jane Smith Sue Smith Family Trust Use trustee(s) personal name(s), Do not use the name of the trust.

Deceased Estates Ms Jane Mary Smith & Estate of Late John Smith Use the executor(s) personal name(s). Mr Frank William Smith or John Smith Deceased

Minor (a person under the age of 18) Mr John Alfred Smith Master Peter Smith Use the name of a responsible adult with an appropriate designation.

Partnerships Mr John Robert Smith & John Smith and Son Use the partners' personal names. Do not use the name of the partnership. Mr Michael John Smith Superannuation Funds Use the name of the trustee(s) of the super fund. Jane Smith Pty Ltd Jane Smith Pty Ltd Superannuation Fund

PRIVACY STATEMENT Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form. 4477799922244488833366611144 This page left blank intentionally

PROSPECTUS 153 Level 5, 44 Miller St North Sydney NSW 2060