Section 9 Independent Geologist’s Report INDEPENDENT GEOLOGIST’S REPORT Prepared by RUNGE LIMITED ABN 17 010 672 321 Value through Planning Level 12, 333 Ann Street, Brisbane Qld 4000 Project Team GPO Box 2774, Brisbane Qld 4001 MERRYL PETERSON Telephone +61 7 3100 7200 Facsimile +61 7 3100 7297 Email [email protected] FEBRUARY 2012 Website www.runge.com IMPORTANT INFORMATION ABOUT THIS DOCUMENT 1. Purpose of Report p This report has been produced by or on behalf of Runge Limited (Runge) for inclusion in the Prospectus to be issued by Allegiance Coal Limited (Allegiance Coal or the Company) in connection with an initial public offering (IPO) of securities in the Company and the proposed admission of the Company to the Official List of the Australian Securities Exchange (ASX) through quotation of its shares. Runge was commissioned by Allegiance Coal to prepare an independent technical review of 13 Coal Exploration Licences and one Mineral Development Licence located in Queensland, which are wholly owned by its operating wholly owned subsidiary Mineral and Coal Investments Pty Ltd (M&CI) and an indirectly wholly owned subsidiary of M&CI, Moreton Coal Pty Ltd. p Runge has conducted its review in accordance with the requirements of the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, prepared by the Joint Ore Reserve Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC) – Effective December 2004 (the JORC Code). p This report is provided to Allegiance Coal in connection with the proposed IPO and should not be used or relied upon for any other purpose. This report does not constitute an audit. THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED PROSPECTUS 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 57 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT 2. Use of Report The Company’s use and disclosure of this report is subject to the terms and conditions under which Runge prepared the report. 3. Notice to Third Parties Runge prepared this report for the Company for inclusion in its Prospectus and in connection with the proposed IPO. However, Runge notes that it has prepared this report having regard to the particular needs and interests of the Company, and in accordance with the Company’s instructions. It did not draft this report having regard to any other person’s particular needs or interests. Your needs and interests may be distinctly different to the Company’s needs and interests, and the report may not be sufficient, fit or appropriate for your purposes. 4. Inputs, subsequent changes and no duty to update p Runge has created this report using data and information provided by or on behalf of the Company (and the Company’s agents and contractors). The opinions stated herein are given in good faith. Runge has exercised all due care in reviewing the supplied information and believes that the information and data supplied to it are factual and correct and the interpretations are reasonable. Runge has independently analysed the data of Allegiance Coal and MC&I, but the accuracy of the conclusions of the review largely relies on the accuracy of the supplied data. Unless specifically stated otherwise, Runge has not independently verified that data and information. Runge accepts no liability for the accuracy or completeness of that data and information, even if that data and information has been incorporated into or relied upon in creating this report (or parts of it). p The conclusions and opinions contained in this report apply as at the date of the report. Events (including changes to any of the data and information that Runge used in preparing the report) may have occurred since that date which may impact on those conclusions and opinions and make them unreliable. Runge is under no duty to update the report upon the occurrence of any such event, though it reserves the right to do so. 5. Mining Unknown Factors The ability of any person to achieve forward-looking production and economic targets is dependent on numerous factors that are beyond Runge’s control and that Runge cannot anticipate. These factors include, but are not limited to, site-specific mining and geological conditions, management and personnel capabilities, availability of funding to properly operate and capitalize the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation and new industry developments. Any of these factors may substantially alter the performance of any mining operation. ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 58 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Table of Contents 1. Introduction 61 7. EPC1492 Townsville and EPC1617 Townsville Extended 96 1.1 Overview 61 1.2 Statement 63 7.1 Introduction 96 1.3 Method 63 7.2 Environment and Cultural Heritage 96 1.4 Proposed Exploration Expenditure 64 7.3 Geology 97 7.4 Exploration History 97 2. EPC1297 Back Creek 65 7.5 Exploration Program 2011 98 2.1 Introduction 65 7.6 Future Exploration 98 2.2 Environment and Cultural Heritage 65 7.7 Conclusion 98 2.3 Geology 65 8. EPC1874 Normanby 99 2.4 Exploration History and Geological Modelling 68 8.1 Introduction 99 2.5 Exploration Program 2011 70 8.2 Environment and Cultural Heritage 99 2.6 Future Exploration 75 8.3 Geology 99 2.7 Conclusion 75 8.4 Exploration History 100 8.5 Future Exploration 102 3. EPC1298 / EPC1917 Kilmain 76 8.6 Conclusion 102 3.1 Introduction 76 3.2 Environment and Cultural Heritage 76 9. EPC1875 Pinetree 103 3.3 Geology 77 9.1 Introduction 103 3.4 Exploration History 78 9.2 Environment and Cultural Heritage 103 3.5 Exploration Program 2011 78 9.3 Geology 103 3.6 Future Exploration 81 9.4 Exploration History 104 3.7 Conclusion 81 9.5 Future Exploration 106 9.6 Conclusion 106 4. EPC1631 Calen and EPC1820 Boldon 82 4.1 Introduction 82 10. EPC2278 Cedar Creek 107 4.2 Environment and Cultural Heritage 82 10.1 Introduction 107 4.3 Geology 83 10.2 Environment and Cultural Heritage 107 4.4 Exploration History 84 10.3 Geology 107 4.5 Future Exploration 87 10.4 Exploration History 107 4.6 Conclusion 87 10.5 Future Exploration 108 10.6 Conclusion 108 5. EPC1672 Lochaber 88 5.1 Introduction 88 11. EPC2309 Mobs Creek 109 5.2 Environment and Cultural Heritage 88 11.1 Introduction 109 5.3 Geology 89 11.2 Environment and Cultural Heritage 109 5.4 Exploration History 90 11.3 Geology 109 5.5 Exploration Program 2011 90 11.4 Exploration History 109 5.6 Future Exploration 91 11.5 Future Exploration 111 5.7 Conclusion 91 11.6 Conclusion 111 6. EPC1296 Connemarra 92 12. MDL138 Mintovale 112 6.1 Introduction 92 12.1 Introduction 112 6.2 Environment and Cultural Heritage 92 12.2 Environment and Cultural Heritage 112 6.3 Geology 93 12.3 Geology 113 6.4 Exploration History 94 12.4 Exploration History 113 6.5 Future Exploration 94 12.5 Resources 114 6.6 Conclusion 95 12.6 Future Exploration 115 12.7 Conclusions 116 THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED PROSPECTUS 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 59 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT 13. Other Tenement Applications 117 Figure 10.1 Location of EPC2278 Cedar Creek 107 Figure 10.2 EPC2278 Geology 108 14. Conclusions 117 Figure 11.1 Location of EPC2309 Mobs Creek 109 Appendices 118 Figure 11.2 Geology of the Mobs Creek Area 110 Figure 11.3 Mobs Creek Area – Previous A Department of Mines & Energy Tenements 1980-89 110 Company Reports 118 Figure 12.1 Location of MDL138 Mintovale 112 Figure 12.2 Mintovale – Cumulative Coal List of Figures Thickness and Strip Ratio 114 Figure 1.1 M&CI Exploration Areas 62 Figure 12.3 Mintovale – Previous Tenements 115 Figure 2.1 Location of EPC1297 Back Creek 65 Figure 2.2 Back Creek Seam Nomenclature 67 List of Tables Figure 2.3 Back Creek Area – Previous Table 1.1 M&Ci Project Details 61 Tenements 68 Table 1.2 Proposed Exploration Expenditure 64 Figure 2.4 Back Creek Condamine Seam Structure Floor 71 Table 2.1 Stratigraphy of the Back Creek Area 66 Figure 2.5 Back Creek Auburn Seam Total Table 2.2 Back Creek – Total Coal Thickness 68 Coal Thickness 72 Table 2.3 Back Creek Area – Quality Results 70 Figure 2.6 Back Creek Bulwer Seam Total Table 2.4 Preliminary Laboratory Results Coal Thickness 73 2011 Exploration Program 70 Figure 2.7 Back Creek Condamine Seam Table 2.5 EPC1297 Back Creek Exploration Total Coal Thickness 74 Program 75 Figure 3.1 Location of EPC1298 and Table 3.1 Stratigraphy of the Kilmain Area 77 EPC1917 Kilmain 76 Table 3.2 Togara South Drilling 79 Figure 3.2 Geology of the Kilmain Area 77 Table 3.3 Preliminary Laboratory Results Figure 3.3 Kilmain Area – Previous Tenements 78 Hole Kl001. 80 Figure 3.4 Kilmain 2011 Drilling Coal Seam Table 3.4 EPC1298 Kilmain and EPC1917 Kilmain Intersections 80 South Exploration Program 81 Figure 4.1 Location of EPC1631 Calen and Table 4.1 Stratigraphy of the Calen-Boldon Area 84 EPC1820 Boldon 82 Table 4.2 EPC1631 Calen and EPC1820 Boldon Figure 4.2 EPC1631 Sterile and Restricted Areas 83 Exploration Program 87 Figure 4.3 Geology of the Calen-Boldon Area 85 Table 5.1 Stratigraphy of the Lochaber Area 89 Figure 4.4 Calen-Boldon Area – Previous Table 5.2 EPC1672 Lochaber Exploration Tenements 86 Program 91 Figure 5.1 Location of EPC1672