Independent Geologist's Report

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

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 Lochaber 88 Table 6.1 Stratigraphy of the Connemarra Area 93 Figure 5.2 Geology of the Lochaber Area 89 Table 6.2 EPC1296 Connemarra Exploration Figure 5.3 Lochaber Area – Previous Tenements 90 Program 95 Figure 6.1 Location of EPC1296 Connemarra 92 Table 7.1 EPC1492 Townsville and EPC1617 Townsville Extended Exploration Figure 6.2 Geology of the Connemarra Area 94 Program 98 Figure 6.3 Connemarra Area – Previous Table 8.1 Stratigraphy of the Normanby Area 100 Tenements 95 Table 8.2 EPC1874 Normanby Exploration Figure 7.1 Location of EPC1492 Townsville and Program 102 EPC1617 Townsville Extended 96 Table 9.1 Stratigraphy of the Pinetree Area 104 Figure 7.2 Geology of the Townsville Area 97 Table 9.2 EPC1875 Pinetree Exploration Figure 7.3 Townsville Area – Previous Program 106 Tenements 98 Table 10.1 EPC2278 Cedar Creek Exploration Figure 8.1 Location of EPC1874 Normanby 99 Program 108 Figure 8.2 Geology of the Normanby Area 101 Table 11.1 EPC2309 Mobs Creek Exploration Figure 8.3 Normanby Area – Previous Program 111 Tenements 102 Table 12.1 Stratigraphy of Mintovale Deposit 113 Figure 9.1 Location of EPC1875 Pinetree 103 Table 12.2 Mintovale Quality Results 113 Figure 9.2 Geology of the Pinetree Area 104 Table 12.3 MDL138 Mintovale Exploration Figure 9.3 Pinetree Area – Previous Tenements 105 Program 116

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 60 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 1 INTRODUCTION

1.1 Overview Runge Limited (Runge) has been engaged by Allegiance Coal Limited (Allegiance Coal or the Company) to undertake an independent technical review of 13 Coal Exploration Licences and one Mineral Development Licence wholly owned by its operating subsidiary Mineral and Coal Investments Pty Ltd (M&CI) and an indirectly wholly owned subsidiary of M&CI, Moreton Coal Pty Ltd. The prospects are all located in Queensland and are shown on Figure 1.1 below, and in Table 1.1. M&CI has also submitted 12 Coal Exploration Licence Applications, which are listed in Section 13. M&CI has recently applied to amalgamate the two Kilmain tenements EPC1298 and EPC1917, under EPCA2826.

TABLE 1.1 M&CI Project Details

NUMBER SURFACE GRANT/ PROJECT TENEMENT OF SUB AREA APPLICATION COAL NAME BASIN NUMBER BLOCKS km2 DATE TYPE DEPOSIT

Back Creek Surat EPC1297 20 68 22-Mar-10 Thermal Open cut

Kilmain Bowen EPC1298 16 50 Renewal Coking/ Underground pending thermal

EPC1917 2 6 22-Mar-10

Calen Calen EPC1631 52 161 5-Nov-09 PCI Open cut/ Underground

EPC1820 17 53 19-Feb-10 PCI Open cut/ Underground

Lochaber Mulgildie EPC1672 38 117.8 18-Dec-09 Thermal Open cut

Connemarra Bowen EPC1296 40 138 Renewal Thermal Open cut pending

Townsville Northern EPC1492 154 494 21-May-10 Coking/ Open cut/ Bowen thermal Underground

EPC1617 65 202 6-Aug-09 Coking/ Open cut/ thermal Underground

Normanby Hodgkinson EPC1874 86 267 19-Apr-11 Low vol Open cut PCI

Pinetree Laura EPC1875 217 670 19-Apr-11 Low vol Open cut PCI/ thermal

Cedar Creek Surat EPC2278 12 36 31-May-11 Thermal Open cut

Mobs Creek Moreton EPC2309 28 96 27-June-11 Thermal Open cut

Mintovale Moreton MDL138 244 ha 22-Mar-10 Thermal Open cut

TOTAL 747 2361

The purpose of this report is to provide an independent geologist’s report for inclusion in a prospectus, as Allegiance Coal is proposing to list on the ASX.

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. 61 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT

FIGURE 1.1 M&CI Exploration Areas

144° 0.00000' E 146° 0.00000' E 148° 0.00000' E 150° 0.00000' E 152° 0.00000' E 154° 0.00000' E

LEGEND

Township Coal Export Port Water Pipeline Electrified Track Cooktown Non-electrified Track 1875 Coal Haul Track Future Coal Haul Track Proposed Dam 16° 0.00000' S 16° 0.00000' S 1874 COAL MEASURES Bowen Basin Calen Coal Measures Callide Basin Cairns CORAL SEA Galilee Basin Ipswich Basin Laura Basin Maryborough Basin Clarence-Moreton Basin Mulgildie Basin Styx Basin 18° 0.00000' S 18° 0.00000' S Surat Basin Tarong Basin

Townsville

1492

Abbot Point Coal 1617 NEWLANDS Terminal 200 000dwt SYSTEM Bowen 20° 0.00000' S 20° 0.00000' S

1820

Mackay Dalrymple Bay Coal GOONYELLA TO 1631 Terminal 230 000dwt ABBOT POINT Hay Point Coal EXPANSION Terminal 230 000dwt PROJECT

PROPOSED CONNORS Moranbah GOONYELLARIVER DAM 22° 0.00000' S 22° 0.00000' S SYSTEM

Dysart

Clermont BLACKWATER SYSTEM Rockhampton Blackwater Proposed Wiggins Island Emerald Coal Terminal RG Tanna Coal MOURA Terminal 220 000dwt SYSTEM Barney Point Coal PROPOSEDTerminal 150 000dwt GladstoneMOURA LINK(max.cargo 90 000t) 1296 ALDOGA RAIL Baralaba PROJECT 24° 0.00000' S 24° 0.00000' S 1298 1917 Moura Biloela

QUEENSLAND Theodore Monto Bundaberg PROPOSED SURAT BASIN PROPOSED RAILWAY NATHAN DAM Maryborough Taroom 1672

2278 Wandoan 26° 0.00000' S 26° 0.00000' S 1297 Kingaroy Miles Chinchilla WESTERN 2309 SYSTEM BRISBANE Toowoomba Fishermans Island Coal Milmerran Terminal 90 000dwt 28° 0.00000' S 28° 0.00000' S Warwick 138

0 125 375 NEW

KILOMETRES N SOUTH WALES 30° 0.00000' S 30° 0.00000' S

144° 0.00000' E 146° 0.00000' E 148° 0.00000' E 150° 0.00000' E 152° 0.00000' E 154° 0.00000' E

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 62 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 1.2 Statement This report has been prepared by Ms Merryl Peterson, a full-time employee of Runge Limited. She has over 35 years experience as a geologist, and 25 years experience in geological modeling and resource estimation for coal deposits. Ms Peterson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves, and the 2005 edition of the VALMIN Code. Ms Peterson is signing off as the Competent Person for this report. She consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Merryl Peterson B.Sc.Geol.Hons M.Sc.Env.Sc. MAusIMM

Ms Merryl Peterson and Runge Limited are entirely independent of M&CI and Allegiance Coal, and have not worked for either M&CI or Allegiance Coal, nor their owners and directors, for a period of greater than 2 years. Ms Peterson confirms that she has complied with the requirements of ASIC Regulatory Guide 112 “Independence of Experts” and the VALMIN Code. Runge’s fee for this project has been charged on a “Time and Materials” basis, and Ms Peterson has been charged at her normal hourly rate. Neither Runge nor Merryl Peterson have received any other benefit in connection with this report.

1.3 Method A number of sources were accessed to compile this report. Tenement status was confirmed from the Queensland Department of Employment, Economic Development and Innovation website using the IRTM (Interactive Resource and Tenure Map) functionality. A brief summary of previous exploration and the geological setting for the tenements was obtained from M&CI. Copies of Company Reports on each area were obtained from the Queensland Department of Employment, Economic Development and Innovation QDEX (Queensland Digital Exploration Reports) website1. The list of available reports was compiled by M&CI but checked by Runge to ensure no relevant data has been overlooked. This was done by using the IRTM website to locate tenements held in previous years over the areas covered by the current M&CI tenements. A review of these reports allowed verification of data obtained from M&CI. Appendix A lists the reports reviewed. The IRTM functionality was also used to confirm the status of restricted or unavailable land over the tenements. However Runge is not qualified to comment as to the status of tenements with respect to the Native Title Act, and thus have made no attempt to verify statements by M&CI as to the status of Native Title Protection Conditions. All figures within this report have been compiled from information obtained from the IRTM websites or from company reports obtained from QDEX. Some discussions have been held on technical and tenure aspects of the tenements with M&CI directors and personnel. Details and proposed expenditure for the planned exploration programs have been obtained from M&CI. No discussions on Runge’s opinions or conclusions have been entered into with M&CI directors or personnel.

1 Please note that the authors of these reports have not consented to the use of the historical geological report references in this Prospectus.

1.4 Proposed Exploration Expenditure M&CI has drawn up a budgeted exploration expenditure for each of the tenements (Table 1.2). The exploration steps for each project vary and are discussed in the section for each tenement. The proposed expenditure is a maximum that would apply should exploration be successful in all areas. At present it is impossible to state what the total expenditure would be. Exploration will be funded by the current shareholders of Allegiance Coal or by an IPO.

TABLE 1.2 Proposed Exploration Expenditure

YEARS OF GRANT - $’000

TENEMENT YEAR 1 YEAR 2

EPC1297 Back Creek 835 207

EPC1298 Kilmain 1,359 176

EPC1917 Kilmain South 11 30

MDL138 Mintovale 45 9

EPC1631 Calen 131 162

EPC1820 Boldon 43 54

EPC1672 Lochaber 100 161

EPC1296 Connemara 176 160

EPC1492 Townsville 94 74

EPC1617 Townsville Extended 170 164

EPC1874 Normanby 98 86

EPC1875 Pinetree 323 211

EPC2278 Cedar Creek 59 75

EPC2309 Mobs Creek 199 359

TOTAL 3,647 1,927

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 64 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 2 EPC1297 – Back Creek

2.1 Introduction EPC1297 Back Creek covers an area of 68 sq km and consists of 20 sub-blocks. The tenement was granted on 22 March 2010 to M&CI and the lease expires on 21 March 2012. EPC1297 is also under application for a petroleum license EPPA747 by Arrow Energy Ltd. EPC1297 lies 45 km south-east of Wandoan, and 50 km north-east of Miles (Figure 2.1). The area consists of gently undulating land draining to the south-east. It is heavily timbered with only small areas cleared for grazing. Two-thirds of EPC1297 is covered by the Barakula State Forest, whilst the extreme northern portion of EPC1297 lies within the Quandong State Forest. This area of the Surat Basin has become more economically attractive with the announcement of the extension of the railway from Wandoan to Gladstone – the “missing link”.

Figure 2.1 Location of EPC1297 Back Creek

149° 52.50000' E 150° 0.00000' E 150° 7.50000' E 150° 15.00000' E 150° 22.50000' E 150° 30.00000' E 150° 37.50000' E 150° 45.00000' E

EPCA 2409

25° 56.25000' S N 25° 56.25000' S

Spring Creek

MDLA 449 Roche Creek 26° 3.75000' S 26° 3.75000' S

EPC 838 MLA 50230 Wandoan

MDLA 433 Grant Creek EPC 1112 LOCATION OF EPC 1297 ML 55001 26° 11.25000' S 26° 11.25000' 26° 11.25000' S 26° 11.25000' EPC 787 EPCA 2442

MLA 50247 Guluguba MDL 224 MDLA 451 EPC 1987

LEGEND EPCA 2094 EPCA 2092 26° 18.75000' S EPC 1987 Mining Investments One Pty Ltd 26° 18.75000' S EPC 1464 Matilda Coal Pty Ltd Hellhole Creek EPC 813 EPCA 2092 EPC1015 Stockyard Creek EPC 1041 SE Qld Coal Pty Ltd EPC 1464 MDLA 451 MDLA 433 EPC 1112 Comet Coal & Coke Pty Ltd Barakula MLA 55001 EPC 1015 Waratah Coal Pty Ltd Gurulmundi EPCA 2094 Clear Global Energy Operations Pty Ltd 26° 26.25000' S 26° 26.25000' S EPCA 2442 Civil & Mining Resources Pty Ltd EPCA 2409 EPC 838 MLA 50230 Xstrata Coal Qld Pty Ltd EPC 1041 MDLA 449 MDL 224 EPC 813 MLA 50247 Surat Coal Pty Ltd

0 18 26° 33.75000' S 26° 33.75000' S KILOMETRES

149° 52.50000' E 150° 0.00000' E 150° 7.50000' E 150° 15.00000' E 150° 22.50000' E 150° 30.00000' E 150° 37.50000' E 150° 45.00000' E

2.2 Environment and Cultural Heritage More than 50% of EPC1297 is covered by State Forest, thus the whole area is subject to Native Title Protection Conditions.

2.3 Geology EPC1297 lies in the northern Surat Basin. The coal bearing sediments in this area occur within the Jurassic Walloon Coal Measures, part of the Injune Creek Group. The Walloon Coal Measures have been sub-divided into 3 units, the lowermost of which, the Taroom Coal Measures, occurs within EPC1297. The stratigraphy of this part of the Surat Basin is shown in Table 2.1. Recent interest in the area has led to the renaming and wider recognition of the seams in the Taroom Coal Measures. The main seam in this area used to be called the Pelham Seam. There are now three major seam groups correlated within the area – Auburn, Bulwer and Condamine Seams (Figure 2.2).

Table 2.1 Stratigraphy of the Back Creek Area

STRATIGRAPHIC UNIT THICKNESS AGE GROUP MEMBER (m) LITHOLOGY

TERTIARY 0–45 Sandstone, Mudstone

LOWER Mooga 30 Sandstone CRETACEOUS Sandstone

JURASSIC Kumbarilla Sandstone, Siltstone, TO LOWER 600 Beds Mudstone CRETACEOUS

Orallo Sandstone, Siltstone, 100–250 Formation Mudstone

Gubberamunda 0–50 Sandstone Sandstone

Westbourne 50 Siltstone, Mudstone Formation

Springbok Sandstone, Mudstone, 80 Sandstone Coal

Mainly siltstone and mudstone with interbedded Juandah Coal coal seams (Kentucky and 150 Measures Wandoan Seam Intervals). MIDDLE Fine grained sandstones TO UPPER also occur. JURASSIC INJUNE Sandstone is dominant. Tangalooma CREEK 150 Siltstone, mudstone and thin Sandstone GROUP Walloon Coal coal seams are also present. Measures Interbedded sandstone, siltstone, and mudstone. Taroom Coal 100 A number of coal seams Measures (Pelham Seam Interval) are developed.

Dominantly sandstone with 100 some siltstone and mudstone. Minor thin coal lenses.

Eurombah 25 Sandstone Formation

LOWER Hutton TO MIDDLE 200 Sandstone Sandstone JURASSIC

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 66 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 2.2 Back Creek Seam Nomenclature

SOURCE: TAMPLIN RESOURCES PTY LTD (REFERENCE 1)

The Back Creek area contains at least 25 coal plies that are grouped into 11 main coal intervals – A1 to A2 (Auburn), B1 to B3 (Bulwer) and C1 to C6 (Condamine). The plies are generally not laterally extensive and tend to split and coalesce. The coal plies are interbanded with fine to medium grained grey argillaceous sandstone. Total coal thickness of each seam group varies quite widely (Table 2.2).

Table 2.2 Back Creek – Total Coal Thickness

SEAM NO. HOLES MEAN MINIMUM MAXIMUM

Auburn 61 0.7 0.0 5.4

Bulwer 61 1.8 0.0 7.0

Condamine 61 2.3 0.0 9.1

The seams crop in the east of EPC1297 and dip gently south-westward at 1 to 3 degrees. A north-east/south-west trending fault with a downthrow of approximately 20 m to the north occurs in the south of EPC1297.

2.4 Exploration History and Geological Modelling The area was held by The Shell Company of Australia Limited (Shell) in the 1970s and 1980s as part of the extensive EPC312C (Figure 2.3a, b and c). The area now covered by EPC1297 was relinquished in 1984. 18 open geophysically logged holes were drilled by Shell within or adjacent to EPC1297. Only one cored hole, BK47A, was drilled within EPC1297.

Figure 2.3a Back Creek Area – Previous Tenements 1970-1979

EPC223

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 68 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 2.3b Back Creek Area – Previous Tenements 1980-1989

EPC312

Figure 2.3c Back Creek Area – Previous Tenements 1990-1999

EPC577

EPC312C is described in numerous Shell reports, as listed in Appendix A. Department of Employment, Economic Development and Innovation Report 9500 contains plans showing structure contours, total coal thickness and strip ratio of the Pelham Seam2.

2 Please note that the authors of this report have not consented to the use of the historical geological report references in this Prospectus.

During the 1990s the area was briefly held as EPC577; however, no holes were drilled within the current EPC1297. The Bottle Tree deposit (EPC813) occurs 7 km to the north-west of EPC1297 along strike, and was also part of EPC312C. 60 open holes and 2 cored holes have been drilled in the Bottle Tree deposit within EPC813, indicating an inferred resource of 32 Mt at an average strip ratio of 8.1. The Range deposit (EPC2030) lies along strike to the north-west of Back Creek. In September 2010 M&CI commissioned Tamplin Resources Pty Ltd (Tamplin) to prepare a geological model and conceptual open cut propensity assessment. Data was sourced from the QDEX system, and from data supplied with adjacent tenement holders under a data sharing agreement. The data obtained was of varying quality, but as most holes had been geophysically logged, seam intervals were able to be re-picked by Tamplin. However drillhole collars varied by up to 10 m from topography contours, leading to uncertainty in the accuracy of hole locations. Runge obtained the drillhole data from Tamplin and constructed a geological model in Minescape. This work shows that the deposit has the potential to contain 60 to 80 Mt of coal at an average strip ratio of less than 10:1. Plots of Condamine Seam structure floor, and Auburn, Bulwer and Condamine thickness contours are shown in Figure 2.4 to Figure 2.7. Table 2.3 summarises quality results for Shell hole BK47A, which lies just to the west of EPC1297, and an average of 5 boreholes from EPC2030.

Table 2.3 Back Creek Area – Quality Results

SPEC. SAMPLE THICKNESS MOIST ASH VM TS RD ENERGY DATA NO. (m) (%ad) (%ad) (%ad) (%ad) (MJ/kg)

Hole BK47A 1-7 3.12 8.99 22.32 35.96 0.37 1.50 22.12

8-15 1.33 7.88 29.52 35.56 0.77 1.56 20.01

16-25 2.85 7.72 22.38 37.25 0.40 1.50 22.72

Average EPC2030 8.7 20.8 37.0 0.43 1.42 23.06

2.5 Exploration Program 2011 During 2011, 16 open geophysically logged holes have been drilled in the northern third of the EPC. At two of these sites, a cored hole has also been drilled to obtain coal samples for quality and washability testing. Allegiance Coal have commissioned Tamplin to correlate the coal seam intersections and update the geological model prepared in 2010 from historical data. This work is currently ongoing. Runge have viewed the geological logs from the drilling program, and confirm that coal has been intersected in these holes as expected from the preliminary geological model. Runge has not performed any seam correlation or updated the geological model. Preliminary laboratory results are listed in Table 2.4.

Table 2.4 Preliminary laboratory results 2011 Exploration Program

FIXED TOTAL HOLE SEAM LENGTH RELATIVE MOISTURE ASH VOLATILE CARBON SULPHUR CV NUMBER NAME (m) DENSITY (%) (%) (%) (%) (%) (MJ/kg)

BC17 Seam A 0.53 1.34 5.1 11.5 40.9 42.5 0.61 27.99

BC17 Seam B 0.64 1.41 6.0 14.1 39.3 40.6 0.51 26.15

BC17 Seam C 1.24 1.32 5.7 8.2 42.1 44.1 0.48 28.97

BC19 Seam A 1.38 1.76 6.1 49.3 27.4 17.2 0.57 10.50

BC19 Seam B 0.36 1.37 4.6 17.9 41.9 35.7 0.51 26.11

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 70 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Table 2.4 Preliminary laboratory results 2011 Exploration Program continued FIXED TOTAL HOLE SEAM LENGTH RELATIVE MOISTURE ASH VOLATILE CARBON SULPHUR CV NUMBER NAME (m) DENSITY (%) (%) (%) (%) (%) (MJ/kg)

BC19 Seam C 0.70 1.33 6.0 10.8 41.0 42.3 0.56 27.70

BC19 Seam D 0.40 1.37 5.7 14.9 38.8 40.6 0.50 26.12

BC19 Seam E 0.79 1.32 5.7 8.0 41.6 44.8 0.51 28.81

BC19 Seam F 0.81 1.67 4.6 45.5 26.8 23.1 0.29 13.89

BC19 Seam G 0.94 1.42 5.2 20.6 37.5 36.8 0.35 24.15

BC19 Seam H 1.46 1.39 5.1 17.3 39.1 38.5 0.41 25.80

BC19 Seam I 0.55 1.70 4.7 46.7 25.8 22.9 0.26 14.94

Figure 2.4 Back Creek Condamine Seam Structure Floor

225000E 230000E 235000E 240000E

270 270

60 60

BK190 58610 LEGEND

300

310 310 7095000N 7095000N 290 Lease Boundary

200 180 Seam Structure Floor

BK43 BK165 BK43 Drillhole DM7

DM3

0 1000 2000 3000 4000 5000

METRES

290 280 270 7090000N 7090000N

270

SUO181

DM4

280 280

310

BK51 290

300 7085000N 7085000N

230 190 240 160 210 220 200 260 270 180 250

170

BK194

280 150

BK168 BK103 7080000N 7080000N

225000E 230000E 235000E 240000E

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. 71 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT

Figure 2.5 Back Creek Auburn Seam Total Coal Thickness

225000E 230000E 235000E 240000E

BK190 58610 LEGEND

7095000N Lease Boundary 7095000N

Seam Total Coal Thickness 5

1 BK43 A Crop Lines BK165 DM7 BK43 Drillhole

DM3

0 1000 2000 3000 4000 5000

METRES 7090000N 7090000N

SUO181

DM4

3 3

4 4

BK51 7085000N 7085000N

BK194

4 4

3 3

BK168 BK103

7080000N 1 7080000N

225000E 230000E 235000E 240000E

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 72 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 2.6 Back Creek Bulwer Seam Total Coal Thickness

225000E 230000E 235000E 240000E

2 BK190 58610 LEGEND

7095000N Lease Boundary 7095000N 1 Seam Total Coal Thickness 5

BK43 B Crop Lines BK165 DM7 BK43 Drillhole

DM3

3 0 1000 2000 3000 4000 5000

2 METRES 7090000N 7090000N

SUO181

DM4

2 1

2 2

1 BK51

2 2 7085000N 7085000N

2 2

1 1

2 2

BK194

2 2 1

BK168 BK103 7080000N 7080000N

225000E 230000E 235000E 240000E

Figure 2.7 Back Creek Condamine Seam Total Coal Thickness

225000E 230000E 235000E 240000E

BK190 586104 LEGEND 7095000N 7095000N Lease Boundary

3 Seam Total Coal Thickness

1 1 BK43 C Crop Lines BK165 DM7

BK43 Drillhole

3 3 2 DM3

0 1000 2000 3000 4000 5000

2 METRES

4 4

8 8

7090000N 7090000N 5 5

6 6

SUO181

DM4

13 9 9

10 10

8 7

BK51

12 12

10 10

7085000N 7085000N

7 7

10 BK194

14 11

8 8 BK103 BK168 7080000N 7080000N

225000E 230000E 235000E 240000E

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 74 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 2.6 Future Exploration A work Program costing $1,041,749 over 2 years has been planned (Table 2.5).

Table 2.5 EPC1297 Back Creek Exploration Program

YEAR 1 YEAR 2

p Conduct drilling to define indicated/inferred Depending on results of Year 1 exploration: resources p Conduct additional to define indicated resources p Say 32 holes including 5 cored holes with full p Say 5 cored holes with full range of analyses. range of analyses p Geological resource modelling and report p Geological resource modelling and report

$835,082 $206,667

2.7 Conclusion EPC1297 has the potential to contain an exploration target of 60 to 80 Mt minable by open cut methods with an average strip ratio less than 10:1. The quantity and quality of the deposit is conceptual in nature, there has been insufficient exploration to define a Coal Resource and it is uncertain that further exploration will result in the determination of a Coal Resource. The coal is expected to be suitable to be used either as a domestic or as an export thermal coal. The area was relinquished by Shell as it considered that the size of the deposit was too small to be economic. However, since that time economic, technical and infrastructure conditions have changed. Mining methods have improved, and thin seam and selective mining of coal seams in the Surat Basin is the norm. With the advent of the railway connection between Wandoan and Gladstone, access to the export market will improve.

3 EPC1298 / EPC1917 – Kilmain

3.1 Introduction EPC1298 Kilmain covers an area of 50 sq km and consists of 16 sub-blocks. The tenement was granted on 7 April 2009 to M&CI and the lease expired on 6 April 2011. M&CI has applied for renewal of the lease for another two years, and has no reason to believe that the extension will not be granted. EPC1917 Kilmain South covers an area of 6 sq km and consists of 2 sub-blocks. EPC1917 was granted on 22 March 2010 to M&CI and the lease expires on 21 March 2015. The renewal application EPCA2836 covers both EPC1298 and EPC1917. EPC1298 and EPC1917 lie 75 km south-east of Emerald (Figure 3.1).

Figure 3.1 Location of EPC1298 and EPC1917 Kilmain

147.87500000° E 148.12500000° E 148.37500000° E 148.62500000° E 148.87500000° E

N 23.62500000° S 23.62500000° S

EPC 1231 EPC 891 Springsure Creek LOCATION OF EPC 1298 EPC 1858 MLA 70149 23.87500000° S 23.87500000° S

MDL317 Turkey Creek MLA 70461

EPC 1858 MDL 155 EPC 1858 MDL 155 MDL 155

MDL 340 MDL189

GREGORY HIGHWAY Oaky Creek Springsure EPC 891 Comet River LEGEND EPC 1221 24.12500000° S MDL 340 Togara South Coal Mines 24.12500000° S EPC 891 Australia Limited EPC 1131 EPC 1221 Springsure Creek Coal Pty Ltd MLA 70461 DAWSON HIGHWAY EPC 1467 EPC 1858 Queensland Coking Coal Pty Ltd EPC 1231 EPC 1467 LOCATION OF EPC 1917 EPC 1467 Matilda Coal Pty Ltd MDL 317 Enex Togara Pty Ltd MLA 70149 MDL 155 South Blackwater Coal Pty Ltd MDL 189 EPC 1131 EPC 1467

0 25 Canopus Creek Meteor Creek

KILOMETRES 24.37500000° S 24.37500000° S

147.87500000° E 148.12500000° E 148.37500000° E 148.62500000° E 148.87500000° E

The area is surrounded by other tenements and is adjacent to the western boundary of Togara South MDL340. Underground resources of thermal coal at Togara South are reported as 317 million tonnes Measured and 639 million tonnes Indicated. Approximately 9.5 sq km of EPC1298 are covered by MDL340. Thermal coal resources at the Arcturus deposit in EPC1221/891 are reported as 102 million tonnes Indicated and 104 million tonnes Inferred.

3.2 Environment and Cultural Heritage The tenement is intersected by the Comet River and a network of tributary creeks. There are no state forests within the tenement. The land within the tenement is freehold. M&CI believes that it is unlikely that the tenement will fall under the Native Title Protection Conditions.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 76 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 3.3 Geology The area is underlain by the Permian Rangal Coal Measures, which are overlain by the Triassic Rewan Formation. Overlying this are Tertiary sediments and Quaternary alluvium (Table 3.1 and Figure 3.2). The strike of the coal measures is aligned with the Togara North and Rolleston mine areas. The Arcturus deposit to the west lies on the western limb of an anticline, whose eastern limb extends into the Kilmain area. Within EPC1298 the coal measures dip to the east. In the south-west of EPC1298 one hole intersected 7 m of coal at 35 m depth, and the crop lines of the seams are thought to occur immediately to the south-west of the EPC. A north-south fault occurs in the middle of the tenement and another north-west to south-east trending fault occurs in the extreme south-west, forming a downfaulted block of unknown displacement. To the east of this fault block, the coal seams occur at depth of 300–400 m.

Table 3.1 Stratigraphy of the Kilmain Area

AGE GEOLOGICAL UNIT SEAMS

Quaternary Alluvial Silts and Sands

Undifferentiated Sediments Tertiary Unconformity

Triassic Rewan Formation

Aries Seam + Splits

Castor Seam Permian Rangal Coal Measures Pollux Seam

Orion Seam

Figure 3.2 Geology of the Kilmain Area

E '00000.03 °841 '00000.03 E °841 '00005.73 E 148° 45.00000' E 148° 52.50000' E

DE54 24° 0.00000' S S '00000.0 °42 '00000.0 S

LEGEND EPC1298 - Kilmain Allegiance Coal Tenement Current Exploration Permits Coal Creeks

FAULT ARCTURUS 5 Roads FAULT Railway

DE167 1298 FAULT MDL340 - Togara South KL003 (Coal Mines Australia Ltd.- BHP Tenement) N

KL002 24° 7.50000' S S '00005.7 °42 '00005.7 S KL001

EPC NS168 891 EPC 1221 1298

QUEENSLAND 1917

EPC1917 - Kilmain South GEOLOGY LEGEND Brisbane Rewan Fm. (Sandstone) Burngrove Fm. (Mudstone, Coal) 0 15 Rangal Coal Measures Black Alley Shale KILOMETRES

E '00000.03 °841 '00000.03 E °841 '00005.73 E 148° 45.00000' E 148° 52.50000' E

3.4 Exploration History EPC523 to the west of Kilmain was held by Pacific Coal Pty Ltd from 1991 to 1993 (Figure 3.3). Their relinquishment report lists data from holes NS168 in the current area of Kilmain, and several holes to the north-west (Table 3.2)3. These holes were drilled in the downfaulted block. When Togara South’s EPC551 was converted to MDL340, a small area in the north-west was relinquished. There are several holes in this relinquished area that intersected the Pollux Seam at depths of 200–300m and thickness of up to 3 m.

Figure 3.3 Kilmain Area - Previous Tenements

EPC551

EPC523

3 Please note that the authors of these reports have not consented to the use of the historical geological report references in this Prospectus.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 78 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Table 3.2 Togara South Drilling

TOP OF BASE OF QUALITY HOLE SEAM SEAM SEAM THICKNESS /ASH LOCATION

NS168 Uncorr 470.13 472.02 1.89 12.5% Within EPC1298 Rangal Coal 503.32 504.58 1.26 10.9%

DE167 Aries Seam 317.54 319.01 1.47 Coal Dmb 5km W of EPC1298 Split 325.80 327.40 1.60 Coal D

336.76 338.18 1.42 Coal Dmb

DE54 Pollux Seam 362.82 366.56 3.74 Coal D 15km NNW of EPC1298

Arcturus 5 Pollux Seam 275.00 280.00 5.00 80% Coal 6m NNW of EPC1298

TS157 Pollux Seam 208.13 208.64 0.51 19.0% Area relinquished by Togara Coal (7km NE 208.64 209.84 1.20 9.7% of EPC1298)

209.84 210.17 0.33 45.3%

210.17 211.11 0.94 11.9%

Total Seam 2.98 15.90%

TS163B Pollux Seam 204.65 207.39 2.74 11.00% Area relinquished by Togara Coal

TS279 Pollux Seam 214.82 217.03 2.21 18.60% Area relinquished by Togara Coal

TS280 Pollux Seam 209.53 210.00 0.47 22.0% Area relinquished by Togara Coal 210.00 211.95 1.95 10.2%

211.95 212.58 0.63 9.0%

Total Seam 3.05 11.80%

TS290 Pollux Seam 220.09 220.70 0.61 17.8% Area relinquished by Togara Coal 220.70 222.16 1.46 10.6%

222.16 223.37 1.21 12.5%

Total Seam 3.28 12.60%

3.5 Exploration Program 2011 During 2011 MCI have drilled three holes in the north-east of the tenement (Figure 3.2), to confirm the coal seam intersections reported by Togara South, and to obtain coal samples for quality testing. These holes intersected the Aries, Castor-Pollux and Orion Seams at depths of around 420 m (Figure 3.4). The Castor-Pollux Seam is 2.5–3 m thick in these holes, and consists of dull and bright banded coal. The Aries Seam plies are of variable thickness. Samples are currently being tested on a raw and washed basis. Preliminary raw coal results for hole KL001 are listed in Table 3.3.

Figure 3.4 Kilmain 2011 Drilling Coal Seam Intersections

Table 3.3 Preliminary laboratory results hole KL001.

VOLATILE FIXED TOTAL THICKNESS RELATIVE MOISTURE ASH MATTER CARBON SULPHUR HOLE SEAM NAME m DENSITY % % % % %

KL001 ARIES2 1.03 1.41 5.80 10.75 32.04 51.41 0.28

CASTOR- KL001 3.03 1.47 6.03 16.92 26.87 50.18 0.36 POLLUX

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 80 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 3.6 Future Exploration A work Program costing $1,535,516 over EPC1298 and another Program costing $41,600 over EPC1917 have been planned over a period of 2 years (Table 3.4).

Table 3.4 EPC1298 Kilmain and EPC1917 Kilmain South Exploration Program

YEAR 1 YEAR 2

p Conduct drilling to define indicated/inferred Depending on results of Year 1 exploration: resources p Conduct studies including coal washability and p Say 9 holes including all seams cored holes with coal transport full range of analyses p Geological resource modelling and report p Geological resource modelling and report

EPC1298 $1,359,072 EPC1298 $176,444

EPC1917 $11,701 EPC1917 $29,898

3.7 Conclusion Drilling during 2011 has identified the Aries and Castor-Pollux Seams at depths of 200–450m in the north-east of the tenement. In this area, the Aries Seam is affected by splitting and the exploration target is to identify areas where the splits coalesce. The Castor-Pollux Seam attains 3 m in thickness. Both seams are low in ash, with values in the range of 10–16%. There is potential to define a washed coking, PCI or low ash thermal product, or alternatively a thermal or PCI coal with no requirement for washing. The single hole in the south-west of EPC1298 could represent the Aries Seam, occurring on the eastern limb of the anticline on which the Arcturus deposit is located. There is therefore potential to identify an open cut thermal coal deposit in this part of EPC1298. In an announcement to the Australian Stock Exchange on 12 October 2011, Allegiance Coal stated that the Kilmain project (EPC1298 and EPC1917) holds an exploration target of 100 to 200 million tonnes, based on the 2011 drilling results, and refers to the proximity of the project to the Togara South and Arcturus deposits. Runge believes that this is not unreasonable, but cautions that an exploration target by definition is conceptual in nature, that there has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will result in the determination of a Mineral Resource.

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. 81 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT

4 EPC1631 Calen and EPC1820 Boldon

4.1 Introduction EPC1631 Calen and EPC1820 Boldon are contiguous. They extend from the Pioneer River about 25 km west of Mackay in a north-west direction for 55 km (Figure 4.1). The tenements lie just to the west of the Bruce Highway and railway line. EPC1631 covers 161 sq km and consists of 52 sub-blocks. EPC1820 covers 53 sq km and consists of 17 sub-blocks. They adjoin the southern boundary of EPC905 held by Vale Coal Exploration Pty Ltd. EPC1631 was granted to M&CI on 5 November 2009 and expires on 4 November 2014, whilst EPC1820 was granted to M&CI on 19 February 2010 and expires on 18 February 2015.

Figure 4.1 Location of EPC1631 Calen and EPC1820 Boldon

148° 00' 0.0000" E 148° 15' 0.0000" E 148° 30' 00.0000" E 148° 45' 0.0000" E 148° 45' 0.0000" E 149° 15' 0.0000" E 149° 30' 0.0000" E

EPC 905 BRUCE HIGHWAY 20° 45' 0.0000" S N 20° 45' 0.0000" S

Massey Creek

Urannah Creek EPC 905 Mount Ousa LOCATION OF EPC 1820

Bowen River EPC 905 EPCA 2134

21° 00' 0.0000" S EPCA 2138 21° 00' 0.0000" S EPCA 2142 LOCATION OF EPC 1631 EPCA 2154 Macky EPCA 2492 Pioneer River Cattle Creek

EPC 2134

21° 15' 0.0000" S EPCA 2492 CORAL SEA 21° 15' 0.0000" S Glenden EPC 1911

Sarina

Hail Creek

PEAK DOWNS HIGHWAY EPCA 2492 LEGEND SUTTOR ROAD Vale Coal Exploration Pty Ltd EPC 1906 21° 30' 0.0000" S EPC 905 21° 30' 0.0000" S EPC 1911 DEVELOPMENTAL Bowen Basin Coal Qld Aust Pty Ltd EPC 1906 Koumala EPC 2134 Eastern Coal Pty Ltd Nebo Creek Matilda Coal Pty Ltd EPC 2138 BRUCE HIGHWAY EPC 2142 Eastern Coal Pty Ltd EPC 2154 Mineral and Coal Investments Pty Ltd Nebo Civil and Mining Resources Pty Ltd EPC 2492 Ibilbi

0 30

KILOMETRES 21° 45' 0.0000" S 21° 45' 0.0000" S

148° 00' 0.0000" E 148° 15' 0.0000" E 148° 30' 00.0000" E 148° 45' 0.0000" E 148° 45' 0.0000" E 149° 15' 0.0000" E 149° 30' 0.0000" E

The Mackay-Eungella Road passes through the Boldon area in the south, whilst the Bruce Highway north from Mackay lies adjacent to the eastern margin of the Calen tenement. The Pioneer River Valley and the coastal strip are densely populated with numerous small towns and intensive sugar cane cropping. Both tenements are well serviced by secondary roads. EPC1631 is characterised by high and steep relief with prominent hills, leading down to alluvial plains along major drainage. Volcanic and intrusive igneous rocks form the high relief areas, whilst the Permian sediments are confined to lower relief.

4.2 Environment and Cultural Heritage Five areas of national park lie within and adjacent to EPC1631 and are excluded from exploration activities. The national parks cover mostly the areas of higher relief, but do not extend into the flatter areas which are underlain by Permian sediments. There are smaller areas of State Forest within EPC1631 which are also excluded from exploration activity without seeking prior governmental approval (Figure 4.2).

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 82 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 4.2 EPC1631 Sterile and Restricted Areas

PINDI PINDI

Cape Hillsborough CALEN SEAFORTH BALL BAY

MOUNT PELION Andrews Point

MOUNT OSSA Sand Bay

MOUNT ADDER Green Island BUTHURRA MOUNT JUKES EPC 905

MOUNT BLACKWOOD

KUTTABUL HABANA

MOUNT MARTIN Slade Point EPC 1631 SLADE POINT ALMINUNGO

FARLEIGH

EPC 1820 NORTH MACKAY

PINNACLE MARIAN MACKAY FINCH HATTON DENHOLME NABILLA Flat Top GARGETT MIRANI WALKERSTON

NORTH ETON BAKERS CREEK

Dudgeon

ETON

HOMEBUSH Balberra OAKENDEN

EPC 1911 ALLIGATOR CREEK

Dawlish

Sterile Land

EPC 1906 Mount Convenient Restricted Areas

The northernmost part of EPC1631 lies within the proposed St Helen’s Creek dam site and as such is also a restricted area for exploration activities. A small area (less than 1 sq km) of EPC1820 is an Environmental Park excluded from EPC1820. The remainder of the area is mainly freehold land. A small area of EPC1631 is subject to a Native Title claim.

4.3 Geology EPC1631 and EPC1820 lie within the Calen Basin. The basin is bounded by and underlain by the Carboniferous-Lower Permian Urannah Igneous Complex to the west and the Devonian-Carboniferous Campwyn Block to the east. The Lower Permian Calen Coal Measures are stratigraphically equivalent to the Collinsville Coal Measures. The Calen Coal Measures are 350–400 m thick and consist of sandstone, thin conglomerate bands, carbonaceous mudstone and coal. The coal bearing sediments occur 30–60 m below a hard quartozse sandstone marker. The Calen Coal Measures overlie either the Lizzie Creek Volcanics or the Carmilla Beds. The area is structurally complex, with significant folding, faulting and igneous activity. Table 4.1 shows the stratigraphy of the area and Figure 4.3 is a geological plan of the area.

Table 4.1 Stratigraphy of the Calen-Boldon Area

AGE FORMATION DESCRIPTION

Recent Un-named Superficial cover of Quaternary soils and alluvium

Tertiary Various, undifferentiated Volcanics (mainly basalt) and intrusives

Lower Cretaceous – Various, mostly Granite stocks, including Mount Catherine and Mount Lower Permian undifferentiated Beatrice in the north, and Mount Blackwood in the south

Up to 400m of quartz sandstones, siltstone, claystone and minor coal. “Upper” and “Lower” measures recog- Lower Permian Calen Coal Measures nised, separated by a prominent quartz sandstone marker horizon and some layered volcanics/intrusives

Lizzie Creek Carmilla Lower Permian Basalt to andesite lava; Tuffaceous and volcanic Volcanics Beds clastic sediments

Carboniferous – Granites, diorites, granodiorites and extensive acid Urannah Igneous Complex Lower Permian intermediate and basic dykes

3000–8000 m of andesitic and rhyolitic flows and Devonian – Campwyn Beds pyroclastics, mudstone, siltstone, lithic arenites, Carboniferous limestones and conglomerate

Figure 4.3 Geology of the Calen-Boldon Area

Tertiary Volcanics

Granite (Mesozoic/Permian)

Calen Coal Measures

F Calen Carmilla Beds F F Lizzie Creek Volcanics F F F Pre-Permian F

EPC 1631 F

F EPC 1820 Mackay

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 84 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. The major coal seams occur toward the top of the lower section of the Calen Coal Measures. The upper and lower sections of the Coal Measures are separated by a thick massive to cross-bedded sandstone unit which forms prominent ridges and forms a marker horizon. Igneous intrusions are common within the coal measures, and also intrude the coal seams. In the north, west of Calen, the Calen Coal Measures are steeply folded and faulted in a north-plunging syncline, with dips ranging from 45 degrees to near-vertical. Southwards, fold structures become more open and regional dips moderate. Northeast-southwest trending faults are common.

4.4 Exploration History Coal was first reported in the area in 1903. The Calen Colliery commenced in 1927, and operated until 1939. The coal seam was 2.6 m thick, and dipped at 50 degrees. The coal quality was (thought to be on air dried basis):

Inherent moisture 1.2%

Ash 17–21%

Volatile matter 16–17.5%

The Fleetwood Colliery operated from 1932-1939 and supplied the railway with coal. In the 1960s The Broken Hill Proprietary Company Pty Ltd (BHP) held AP4C over the Calen Coal Measures, concen- trating exploration in the south where the structure is less severe (Figure 4.4a and b). Exploration consisted of field mapping and digging of shallow shafts; no drilling was undertaken. No significant coal seams were identified and the area was relinquished. During the 1970s the area was held by Petrocarb Exploration NL as AP97C. Again no significant coal seams were identified and the area was relinquished. Since 2006 Swanbank Resources Pty Ltd has held EPC905 which adjoins EPC1631 to the east. A drilling Program has been conducted, but since the area is still a current tenement, results are confidential.

Figure 4.4a Calen-Boldon Area - Previous Tenements – 1960-1969

EPC4

Figure 4.4b CalenBoldon Area - Previous Tenements – 1970-1979

EPC97

EPC85

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 86 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 4.5 Future Exploration A work program costing $292,297 over EPC1631 and another Program costing $97,163 over EPC1820 have been planned over a period of 2 years (Table 4.2).

Table 4.2 EPC1631 Calen South and EPC1820 Boldon Exploration Program

YEAR 1 YEAR 2

p Detailed geological review of all historical previous Depending on the result of Year 1 exploration: exploration and mining p Conduct follow up drilling in main areas of interest p Preparation of detailed maps p Say up to 20 shallow holes with 5 twinned for p Regional geological and access survey coring of significant seams p Sampling and analysis of any seam outcrop p Full seam analyses p Drilling of selected sites p Resource modelling and report p Eight to ten shallow open holes to determine thickness and lateral continuity of seams

EPC1631 $130,648 EPC1631 $161,648

EPC1820 $43,248 EPC1820 $53,915

4.6 Conclusion Previous exploration and mining in this region has mainly been at shallow depth, and it is possible that there are coal seams of economic significance at depth. Mining at the Calen and Fleetwood collieries was discontinued due to the steep dip, however this should not discourage modern mining methods. The quality of the previously mined coal and the proximity to existing infrastructure means that exploration may lead to the discovery of potential small to medium coal deposits. The coal product is likely to be a low volatile high rank PCI coal4.

4 This potential grade is conceptual in nature. There has been insufficient exploration to define a JORC compliant resource, and it is uncertain whether further exploration will result in the determination of a JORC compliant resource.

5 EPC1672 – Lochaber

5.1 Introduction EPC1672 Lochaber lies just to the east of Eidsvold about 290 km north-west of Brisbane (Figure 5.1). The Burnett River and Burnett Highway are immediately adjacent to the tenement, and there are numerous secondary roads within the area. EPC1672 was granted on 18 December 2009 and expires on 17 December 2014, for an area of 117.8 sq km covering 38 sub-blocks.

Figure 5.1 Location of EPC1672 Lochaber

150° 22' 30.0000" E 150° 37' 30.0000" E 150° 52' 30.0000" E 151° 07' 30.0000" E 151° 22' 30.0000" E 151° 37' 30.0000" E 151° 52' 30.0000" E 152° 07' 30.0000" E

Monto

BURNETT HIGHWAY

Lake Monduran N

BRUCE HIGHWAY 24° 52' 30.0000" S 24° 52' 30.0000" S

Wuruma Reservoir LOCATION OF EPC 1672 25° 07' 30.0000" S EPC 1175 25° 07' 30.0000" S

Eidsvoid EPCA 2406

EPCA 2406 25° 22' 30.0000" S Grosvenor 25° 22' 30.0000" S

Biggenden

EPCA2304 Mundubbera

Gayndah ISIS HIGHWAY

MUNDUBBERA BURNETT HIGHWAY EPCA 2265 25° 37' 30.0000" S 25° 37' 30.0000" S

LEGEND

-BURONG EPC 1175 BURT Terence John EPCA 2265 Wavenet International Limited EPCA 2304 Subiaco Capital Pty Ltd

EPCA 2406 Civil & mining Resources Pty Ltd EPCA2304

ROAD ROAD

0 40 25° 52' 30.0000" S 25° 52' 30.0000" S KILOMETRES

150° 22' 30.0000" E 150° 37' 30.0000" E 150° 52' 30.0000" E 151° 07' 30.0000" E 151° 22' 30.0000" E 151° 37' 30.0000" E 151° 52' 30.0000" E 152° 07' 30.0000" E

5.2 Environment and Cultural Heritage There are no sterile or restricted areas within the EPC1672 area. There are small isolated environmentally sensitive areas, however these should not be an impediment to future exploration. Land use is dominantly freehold grazing land and there are no registered Native Title claims within EPC1672.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 88 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 5.3 Geology The Lochaber tenement is located within the southern extension of the Mulgildie Basin, and is an outlier of Jurassic to Triassic aged sediments surrounded by the Carboniferous basement (Table 5.1). The basin is bounded to the west by the Auburn Granite Complex and to the east by a thrust fault against the Yarraman Block (Figure 5.2). The Monto coal deposit, which lies within the Jurassic Mulgildie Coal Measures, occurs some 30 km to the north. The Jurassic Mulgildie Coal Measures are correlated with the Walloon Coal Measures of the Surat Basin. The Coal Measures are up to 150 m thick, and include up to 5 thin coal seams which are banded, display splitting and laterally grade into carbonaceous shale.

Table 5.1 Stratigraphy of the Lochaber Area

AGE FORMATION THICKNESS DESCRIPTION

Mulgildie Coal Measures 150 Sandstone, siltstone, shale, coal Middle Jurassic Hutton Sandstone 150–275 Sandstone

Evergreen Formation 72–260 Sandstone, siltstone, shale, minor coal Lower Jurassic Precipice Sandstone 60–150 Sandstone

Figure 5.2 Geology of the Lochaber Area

EPC 1759 G

D Mainly I

Mainly E CARBONIFEROUS

JURASSIC

(Minior Triassic) FA

U Eidsvold LT

Mainly Cronulla HS

PERMIAN B

U THE RED MOUNTAIN R F N AU LT T E

F Grosvenor

EPC 1672 I M G

U H L

W G

A A I L Y DIE LT R AU F E

Mundowran Malmoe F A

UL UBB Mainly

T D

DEVONIAN

Mainly

JURASSIC

O Bil Bil

(Minior Triassic) Nantglyn

Mainly

CARBONIFEROUS

Riverleigh F

Mainly U

PERMIAN T Mundubbera Philpott Creek HS

Corsers Bridge 0 7km

5.4 Exploration History Coal was discovered near Monto in 1922 and the Selene Mine operated from 1949 until 1966. From 1969–1971 Thiess Pty Ltd held the area as AP70C, but did not locate any significant coal deposits. Queensland Metals Corporation Limited (QMC) held the area as EPC539 during 1994, and drilled four open holes (Figure 5.3). Minor thin coal bands and carbonaceous mudstone were intersected. The QMC report states that water bores drilled during the 1930s on Lochaber station intersected coal, and that an abandoned coal prospect exists near the southern boundary of Lochaber station5.

Figure 5.3 Lochaber Area - Previous Tenements

EPC539

5.5 Exploration Program 2011 Two holes (LCH004 and LCH014) were drilled in the north-west of the lease area during 2011 (Figure 5.2). Both holes were drilled to the basalt basement without intersecting coal. It is thought that thrust faulting may have affected the thickness and the disposition of the Jurassic sediments in this area.

5 Please note that the authors of this report have not consented to the use of the historical geological report references in this Prospectus.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 90 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 5.6 Future Exploration A work Program costing $261,397 over EPC1672 has been planned over a period of 2 years (Table 5.2).

Table 5.2 EPC1672 Lochaber Exploration Program

YEAR 1 YEAR 2

p Review of previous exploration Depending on the result of Year 1 exploration: p Preparation of geological maps p Conduct follow up drilling in main areas of interest p Regional geological and access survey p Say up to 3 open holes with 2 twinned cored holes p Drilling of selected sites p Full seam analyses p Four to five open holes to establish whether p Resource modelling and report significant seams are developed in the sequence p Review data and report

$100,448 $160,948

5.7 Conclusion Although coal has been mined from the Monto deposit in the main Mulgildie Basin, no significant coal occurrences have been identified to date by exploration in this southern extension of the basin. However exploration has been limited, and it is possible that economic intersections of coal may occur.

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. 91 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT

6 EPC1296 – Connemarra

6.1 Introduction EPC1296 Connemarra covers an area of 138 sq km and consists of 40 sub-blocks. The tenement was granted on 7 April 2009 to M&CI and the lease expired on 6 April 2011. M&CI has applied for renewal of the lease for another 2 years and has no reason to believe that the extension will not be granted. EPC1296 lies 65 km south-west of Emerald, and 20 km south-west of the Minerva open cut coal mine (Figure 6.1).

Figure 6.1 Location of EPC1296 Connemarra

147° 00' 0.0000" E 147° 07' 30.0000" E 147° 15' 0.0000" E 147° 22' 30.0000" E 147° 30' 0.0000" E 147° 37' 30.0000" E 147° 45' 0.0000" E 147° 52' 30.0000" E 148° 00' 0.0000" E 148° 07' 30.0000" E

Emerald

Bogantungan

Lake Maraboon 23° 45' 0.0000" S 23° 37' 30.0000" S Minerva Rail Loop 23° 45' 0.0000" S 23° 37' 30.0000" S

EPC 553 ML 70145 LOCATION OF EPC 1296 ML 70376 MINERVA 23° 52' 30.0000" S 23° 52' 30.0000" S

EPC 1116

EPC 1393

Springsure

EPC 1520 24° 07' 30.0000" S 24° 00' 0.0000" S 24° 07' 30.0000" S 24° 00' 0.0000" S

LEGEND

EPC 1116 EPC 1393 Athena Coal Pty Ltd EPC 553 EPC 1520 Cliffs Australia Coal Pty Ltd

0 25 EPC 1520

KILOMETRES 24° 22' 30.0000" S 24° 15' 0.0000" S 24° 22' 30.0000" S 24° 15' 0.0000" S 147° 00' 0.0000" E 147° 07' 30.0000" E 147° 15' 0.0000" E 147° 22' 30.0000" E 147° 30' 0.0000" E 147° 37' 30.0000" E 147° 45' 0.0000" E 147° 52' 30.0000" E 148° 00' 0.0000" E 148° 07' 30.0000" E

6.2 Environment and Cultural Heritage The tenement consists of gently undulating ground and river flats, with steeper relief towards the south of the tenement. Access is via several dirt tracks. Agricultural activity is limited to grazing. Environmentally sensitive areas are restricted to the extreme north of the tenement. There are no State Forests in the area. Land status has not been researched, but is believed by M&CI to be mainly freehold land. M&CI has informed Runge that the northern two-thirds of the area is not subject to any cultural heritage claim, but the southern third is subject to a claim by the Bidjara people.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 92 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 6.3 Geology EPC1296 lies at the boundary between the Bowen and Drummond Basins. In the Drummond Basin the late Carboniferous to Lower Permian Joe-Joe Group is uncomformably overlain by the Permian Colinlea Sandstone (Table 6.1). The lower part of the Colinlea Sandstone and the Jochmus Formation, part of the Joe-Joe Group, are both coal bearing. The western margin of EPC1296 is affected by faulting, bringing Carboniferous sequences in contact with Middle Permian sediments (Figure 6.2). The structure of the remainder of the tenement is not well known.

Table 6.1 Stratigraphy of the Connemarra Area

GEOLOGICAL UNIT AGE CONNEMARRA AREA SPRINGSURE AREA Drummond Basis Bowen Basin

BASALT BASALT Tertiary Fluvial and Lacustrine Fluvial and Lacustrine Sediments Sediments

Unconformity Unconformity

Peawaddy Formation

Catherine Formation

Ingelara Formation COLINLEA SANDSTONE PERMIAN Freitag Formation

ALDEBARAN FORMATION

Colinlea Sandstone

Unconformity Cattle Creek Formation

Jochmus Fm. REIDS DOME BEDS JOE PERMIAN JOE FM. Jericho Fm. Unconformity

UNDIFF. CARBONIFEROUS UNDIFF. BASEMENT

Coal Bearing Coal Bearing Potential

Figure 6.2 Geology of the Connemarra Area

SUMMER HILL

JUANITA

Craigmore HS EPC553

EPC1591 EPC1116 ML70145 Minerva C6

C5 Colinlea Ss

C2 MT ALEXANDER C3 Joe Joe Group

C1 EPC1393 C4 EPC1674 EPC1296

Conemarra HS

Milthorpe HS

Pre Permian Formations Colinlea Ss Springsure

EPC1520

0 11km

6.4 Exploration History The project area has not been held since at least the 1950s. EPC587 Box Creek, which lies immediately to the north and west of EPC1296, was held by CRA Exploration Pty Ltd (CRA) in 1995–1996 (Figure 6.3). CRA’s target was the identifi- cation of a “Blair Athol type deposit” (ie. a small Permian sub-basin containing an economic coal deposit within older sequences), and to identify economically mineable coal in the Reids Dome Beds6. Nine exploratory percussion holes were drilled and geophysically logged, of which six (C1-C6) are close to EPC1296. Thin coal seams in carbonaceous sequences were intersected at the base of the Colinlea Sandstone. Water bore 36106 lies within EPC1296. CRA reports indicate it intersected coal. Relinquished areas of EPC553, currently held by New Hope Exploration Ltd, are covered by various Department of Employment, Economic Development and Innovation reports. Potential coal seams within the Reid Dome Beds were the target of these areas. No coal seams were encountered in exploration drilling.

6.5 Future Exploration M&CI considers that EPC1296 has two exploration targets, the Jochmus Formation and the base of the overlying Colinlea Sandstone. A work Program costing $337,665 over 2 years has been planned (Table 6.2). The drilling planned for 2011 has been postponed due to wet weather conditions.

6 Please note that the authors of this report have not consented to the use of the historical geological report references in this Prospectus.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 94 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 6.3 Connemarra Area - Previous Tenements

EPC587

EPC553

Table 6.2 EPC1296 Connemarra Exploration Program

YEAR 1 YEAR 2

p Regional geological and access survey Depending on results of Year 1 exploration: p Regional OH drilling program 3–5 holes with p Conduct follow-up drilling in selected areas with geophysical logging targeting basal Colinlea aim of defining Inferred resources. Sandstone and Jochmus formation p Say 8 part cored geophysically logged holes and p Geological modelling and report full range of analyses p Geological modelling and report

$177,582 $160,082

6.6 Conclusion EPC1296 is a speculative exploration area, with targets of the Jochmus Formation and the basal part of the Colinlea Sandstone. Coal bearing strata have been intersected in adjacent areas, and a water bore within EPC1296 has intersected coal, however no systematic exploration has previously been undertaken within EPC1296.

7 EPC1492 – Townsville and EPC1617 – Townsville Extended

7.1 Introduction EPC1492 Townsville consists of two separate areas adjacent to the city of Townsville (Figure 7.1). Townsville West covers 160 sq km and 49 sub-blocks, while Townsville East covers 334 sq km and 105 sub-blocks. The total area is 494 sq km consisting of 154 sub-blocks. The tenement was granted on 21 May 2010 and expires 20 May 2012. EPC1617 Townsville Extended lies 25 km south of Townsville, covering 202 sq km and consisting of 65 sub-blocks. It was granted on 6 August 2009 to M&CI, and expires on 5 August 2014.

Figure 7.1 Location of EPC1492 Townsville and EPC1617 Townsville Extended

7.2 Environment and Cultural Heritage The area is mainly freehold land apart from some built-up zones. A National Park lies immediately to the east of Townsville East. There are no State Forests within EPC1492 and EPC1617. There is a small Nature Refuge (approximately 6 sq km) within EPC1617.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 96 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 7.3 Geology The tenements lie in the northern extension of the Bowen Basin. Acid and intermediate magmatic and volcanic rocks intrude Lower Permian sediments of the Bowen River Beds. The sediments consists of conglomerate, sandstone, siltstone and shale, with carbonaceous remains and plant fragments. The complex nature of the volcanic and sedimentary horizons indicates intermittent volcanism with sedimentary deposition in the intervening periods. Regionally the Lower Permian units are intruded by granite stocks (Figure 7.2).

Figure 7.2 Geology of the Townsville Area

7.4 Exploration History Thin coal seams, interbedded with shale and sandstone, were identified in 1883 in a railway cutting just south of Townsville, however later exploration failed to find this exposure. In the early 1980s a literature search was conducted, and 6 holes drilled, by G. Abignano (Qld) Pty Limited in AP336C, which covered almost the same area as EPC1492 (Figure 7.3). Permian sediments were intersected in all holes, and some holes recorded intersections of carbonaceous sediments, however no significant coal seams were intersected.7 Carbonaceous material has been observed in the Roseneath Quarry within EPC1492, however prior to M&CI’s involvement, there had been no systematic exploration to determine the extent of the carbonaceous sediments and whether there are viable coal seams in the area.

7 Please note that the authors of this report have not consented to the use of this reference to its historical geological report.

Figure 7.3 Townsville Area - Previous Tenements

7.5 Exploration Program 2011 M&CI undertook a field mapping Program and drilled 4 geohyscally logged open holes in the early part of 2011 within the Roseneath Quarry. Two of the holes intersected carbonaceous shale and coaly shale bands, however no coal bands of economic potential were found in any of the holes, nor did the field mapping identify any coal.

7.6 Future Exploration M&CI plan to undertake further field mapping in nearby quarries to determine whether there is any potential for economic coal deposits in the vicinity of the Roseneath Quarry. A work Program costing $168,622 over EPC1492 and another Program costing $334,017 over EPC1617 have been planned over a period of 2 years (Table 7.1).

Table 7.1 EPC1492 Townsville and EPC1617 Townsville Extended Exploration Program

YEAR 1 YEAR 2

p Detailed geological review of all previous Depending on results of Year 1 exploration: geological data p Conduct follow up drilling in main areas of interest p Regional geological and access survey p Say up to 3 open holes with 2 twinned cored p Sampling and analysis any seam outcrops holes p Review of data p Full seam analyses p Drilling of selected sites p Resource modelling and report p Between 5–8 selected open holes p Data review and report

EPC1492 $94,478 EPC1492 $74,144

EPC1617 $170,258 EPC1617 $163,758

7.7 Conclusion Previous exploration in the area has been limited. The area occurs at the extreme north of the Bowen Basin and the disposition of Lower Permian sediments is less than in the main body of the Basin. However, potential exists for small areas of thicker sediment accumulation and possibly coal deposition to have occurred.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 98 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 8 EPC1874 – Normanby

8.1 Introduction EPC1874 Normanby lies 40 km south-west of Cooktown (Figure 8.1). EPC1874 was granted on 19 April 2011 and expires 18 April 2016, for an area of 267 sq km covering 86 sub-blocks.

Figure 8.1 Location of EPC1874 Normanby

144° 22' 30.0000" E 144° 30' 0.0000" E 144° 37' 30.0000" E 144° 45' 0.0000" E 144° 52' 30.0000" E 145° 00' 0.0000" E 145° 07' 30.0000" E 145° 15' 0.0000" E 145° 22' 30.0000" E

Normanby River

N 15° 15' 0.0000" S

Hope Vale 15° 15' 0.0000" S

Laura River River Laura Laura 15° 22' 30.0000" S MULLIGAN HIGHWAY 15° 22' 30.0000" S Endeavor River

Cooktown

Peninsula Development Road Oaky Creek EPCA 2562 15° 30' 0.0000" S 15° 30' 0.0000" S

Deighton River EPCA 2559 Laura EPC 1059

LOCATION OF EPC 1874 West Normanby River 15° 37' 30.0000" S 15° 37' 30.0000" S Pine Tree Creek EPCA 2745 Roseville

Peninsula Development Road Annan River 15° 45' 0.0000" S 15° 45' 0.0000" S

LEGEND MULLIGAN HIGHWAY EPC 1059 Waratah Coal Pty Ltd EPCA 2562 Coal Face Resource Pty Ltd EPCA 2559 EPCA2745 Jems Exploration Pty ltd

0 20 15° 52' 30.0000" S 15° 52' 30.0000" S Wujal Wujal KILOMETRES

144° 22' 30.0000" E 144° 30' 0.0000" E 144° 37' 30.0000" E 144° 45' 0.0000" E 144° 52' 30.0000" E 145° 00' 0.0000" E 145° 07' 30.0000" E 145° 15' 0.0000" E 145° 22' 30.0000" E

8.2 Environment and Cultural Heritage There are no State Forests or other constrained areas within EPC1874. There are no registered Native Title Claims.

8.3 Geology EPC1874 Normanby lies within the Paleozoic Hodgkinson Basin. The oldest rocks outcropping in the area are the early Devonian to late Carboniferous Hodgkinson Formation, consisting of a folded sequence of greywacke, sandstone, quartzite, chert, slate and phyllite. The middle to late Permian Normanby Formation occurs in faulted outliers. The strata are strongly folded and faulted, and dip steeply. The formation has been divided into 4 units, with coal seams occurring in Unit 3. It is thought there are 3 to 5 coal seams, ranging in thickness from 0.1 to 0.75 m (Table 8.1 and Figure 8.2). The coal is of anthracitic rank with a Romax ranging from 1.86% to 3.30%, and a high ash content. The Jurassic Dalrymple Sandstone unconformably overlies the Normanby Formation, but does not occur in the vicinity of EPC1874.

Table 8.1 Stratigraphy of the Normanby Area

AGE FORMATION THICKNESS DESCRIPTION

DALRYMPLE JURASSIC SANDSTONE

Sandstone, medium, quartz/lithic, flaggy becoming laminated, minor siltstone Pn4 230 m+ Sandstone, medium, quartz/lithic, cross bedded, worm burrows

Coal, dull to stony; Siltstone, carbonaceous

Sandstone, medium, quartz/lithic, Pn3 150 m well sorted MIDDLE TO LATE PERMIAN Rhyolite and rhyolitic ignimbrite

Andesite, vesicular, tuff, fine andesitic, crystal, coarse lithic; sandstone

NORMANBY FORMATION NORMANBY Pn2 170 m Breccia, sedimentary; chert, light green

Sandstone, medium, quartz/lithic; siltstone Pn1 250 m+ containing volcanic debris towards base; minor conglomerate and claystone

EARLY DEVONIAN HODGKINSON TO MIDDLE FORMATION CARBONIFEROUS

8.4 Exploration History Coal was discovered in the area during the 1870s, and a shaft was sunk with the aim of providing coal for the railways. No further work was undertaken. CRA Exploration Pty Limited (CRA) held EPC169C in the 1970s (Figure 8.3). Exploration consisted of geological mapping of the area, and no holes were drilled. CRA discovered coal in 21 outcrops, however they state that due to the deformation of the sediments, correlation of the seams was impossible. CRA sampled the coal in outcrops, and analysed for vitrinite reflectance, with Romax ranging from 1.86% to 3.30%. Nine samples were tested for proximate analysis, although five of these samples were oxidized. Ash ranged from 14.6% to 78%, specific energy from 8.62 MJ/kg to 18.70 MJ/kg, and total sulphur from 0.18% to 0.44%. The geological plan shown in Figure 8.2 is extracted from a CRA report.8 Although mapping did not extend as far south as EPC1874 it shows that EPC1874 is along the strike of the Normanby Formation.

8 Please note that the author of this report has not consented to the use of this reference to its historical geological report.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 100 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 8.2 Geology of the Normanby Area

LEGEND

Geological Boundary, established, position approximate Fault - established, position approximate Fault - position inferred Trend line - aerial photograph interpretation Anticline, fold axis position approximate Anticline, fold axis position inferred Syncline, fold axis position inferred Direction of dip of cross beds Strike and dip Strike and dip - bedding overturned Strata vertical Aerial photograph centres and run number Vehicle tracks Road Homestead Creek

Alluvium, grey silty clay and sand

Eluvium, colluvium, mottled clayey sand

Olivine basalt

unconformity Quartz sandstone, conglomerate, sandy siltstone

Sandstone, siltstone Sandstone, siltstone, conglomerate, rhyolite, coal Andesite, rhyolite, tuff, chert, breccia, sandstone Sandstone, siltstone conglomerate, claystone Andesite, tuff, breccia, sandstone, siltstone

Quartzite

Siltstone

Chert

Quartzite, chert, siltstone, greywacke, slate, undifferentiated

Conglomerate

Limestone

QUATERNARY

CAINOZOIC TERTIARY McLEAN BASALT

JURASSIC DALRYMPLE SANDSTONE MEZOZOIC

Northern Part of EPC1874 PERMIAN NORMANBY FORMATION PALAEOZOIC

EARLY DEVONIAN to HODGKINSON FORMATION MIDDLE CARBONIFEROUS

Figure 8.3 Normanby Area - Previous Tenements

EPC169

8.5 Future Exploration A work Program costing $184,107 over EPC1874 has been planned over a period of 2 years (Table 8.2).

Table 8.2 EPC1874 Normanby Exploration Program

YEAR 1 YEAR 2

p Review of previous exploration Depending on the result of Year 1 exploration: p Preparation of geological maps p Conduct follow up drilling in main areas of interest p Regional geological and access survey p Say up to 5 open holes with 2 twinned cored holes p Drilling of selected sites p Full seam analyses p Drill several open holes to basement to establish p Resource modelling and report whether significant seams are developed in the sequence p Review data and report

$98,258 $85,758

8.6 Conclusion Very little exploration has been conducted within EPC1874, however geological mapping north of the area shows that EPC1874 is along strike of the Normanby Formation, and thus coal of high rank might be discovered9. It is likely that any coal seams encountered will be structurally disturbed.

9 This potential grade is conceptual in nature. There has been insufficient exploration to define a JORC compliant resource, and it is uncertain whether further exploration will result in the determination of a JORC compliant resource.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 102 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 9 EPC1875 – Pinetree

9.1 Introduction EPC1875 Pinetree lies 100 km west of Cooktown (Figure 9.1). EPC1875 was granted on 19 April 2011 and expires 18 April 2016, for an area of 670 sq km covering 217 sub-blocks.

Figure 9.1 Location of EPC1875 Pinetree

143° 15' 0.0000" E 143° 30' 0.0000" E 143° 45' 0.0000" E 144° 00' 0.0000" E 144° 15' 0.0000" E 144° 30' 0.0000" E 144° 45' 0.0000" E

Peninsula Development Road 15° 00' 0.0000" S 15° 00' 0.0000" S Old Laura

Laura River

Waterbag Creek EPCA 2568 LOCATION OF EPC 1875

Dixie 15° 15' 0.0000" S 15° 15' 0.0000" S

EPCA 2569

Laura 15° 30' 0.0000" S 15° 30' 0.0000" S EPCA 2570

EPCA 1058

EPCA 2560

Pine Tree Creek 15° 45' 0.0000" S 15° 45' 0.0000" S LEGEND Palmer River EPCA 2572 EPCA 2747 EPC 1058 Waratah Coal Pty Ltd EPCA 2560 EPCA 2570 EPCA2569 Coal Face Resources Pty Ltd EPCA 2572 EPCA 2568 EPCA 2747 Jems Exploration Pty Ltd

0 40 16° 00' 0.0000" S 16° 00' 0.0000" S MULLIGAN HIGHWAY

KILOMETRES

143° 15' 0.0000" E 143° 30' 0.0000" E 143° 45' 0.0000" E 144° 00' 0.0000" E 144° 15' 0.0000" E 144° 30' 0.0000" E 144° 45' 0.0000" E

9.2 Environment and Cultural Heritage There are no State Forests or other constrained areas within EPC1875. There are no registered Native Title Claims.

9.3 Geology EPC1875 Pinetree lies within the Laura Basin. The earliest rocks exposed within the area are early Carboniferous to Devonian Hodgkinson Formation, consisting of greywacke, siltstone, slate and chert. Unconformably overlying this formation are the Permian Little River Coal Measures, consisting of coal, sandstone, siltstone and shale, which occurs in isolated outliers, often fault-bounded. The Jurassic Dalrymple Sandstone unconformably overlies the Permian, and consists of sandstone, conglomerate and shale (Table 9.1 and Figure 9.2).

Table 9.1 Stratigraphy of the Pinetree Area

MAX THICKNESS AGE ROCK UNIT (m) LITHOLOGY

Gravel, sand, clay; ferruginous semi- Quaternary Alluvium 20 consolidated conglomerate (Tertiary?)

Ferruginous basal conglomerate, Battle Camp Cretaceous 150 glauconitic sandstone, shaly sandstone, Formation leached shale

Dalrymple Quartz sandstone, pebble and cobble Jurassic 400 Sandstone conglomerate, shale

Little River Coal Permian ? Coal, sandstone, siltstone, shale Measures

Early Carboniferous – Hodgkinson Micaceous greywacke, quartz greywacke, ? Devonian Formation siltstone, slate, chert

Late Silurian – Chillagoe Basic and intermediate volcanics, chert, 1500 Devonian Formation quartzite, limestone

Dargalong Proterozoic ? Schist, gneiss, quartzite Metamorphics

Figure 9.2 Geology of the Pinetree Area

144° 07' 30.0000" E 144° 15' 0.0000" E 144° 22' 30.0000" E 144° 30' 0.0000" E 15° 15' 0.0000" S 15° 15' 0.0000" S 15° 22' 30.0000" S 15° 22' 30.0000" S

EPC 1875 15° 30' 0.0000" S 15° 30' 0.0000" S

GEOLOGY

Quaternary Alluvium Quaternary Colluvium Early Cretaceous Wallumbilla Formation

0 15

KILOMETRES 15° 37' 30.0000" S 15° 37' 30.0000" S

144° 07' 30.0000" E 144° 15' 0.0000" E 144° 22' 30.0000" E 144° 30' 0.0000" E

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 104 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 9.4 Exploration History EPC167, to the west of EPC1875, was held by CRA Exploration Pty Ltd (CRA) in the 1970s (Figure 9.3). The Little River Coal Measures occur in a faulted outlier within this EPC. The Coal Measures are strongly deformed and dip steeply in this area. Numerous outcrops of coal were located, however thickness and correlation of seams was difficult to estimate due to the structure. One outcrop exposed 16 m of steeply dipping deformed coal. Vitrinite reflectance indicated that the coal is semi-anthracite. No drilling was conducted.10 EPC196, to the east of EPC1875, was held by Utah Development Company (Utah) in the 1970s (Figure 9.3). Utah were exploring for Jurassic coal within the Dalrymple Formation. 24 holes were drilled, and thin coal seams (mainly less than 0.1 m thick) were encountered, however no coal seams of economic significance were located. Samples were analysed and a relatively high vitrinite reflectance (0.78% to 1.15%) was recorded. Raw ash ranged from 27.6% to 69.5%, whilst ash at F1.60 ranged from 11.5% to 19.6%.11

Figure 9.3 Pinetree Area - Previous Tenements

EPC 196

EPC 167

10 Please note that the authors of this report have not consented to the use of this reference to its historical geological report. 11 Please note that the authors of this report have not consented to the use of this reference to its historical geological report.

9.5 Future Exploration A work Program costing $533,837 over EPC1875 has been planned over a period of 2 years (Table 9.2).

Table 9.2 EPC1875 Pinetree Exploration Program

YEAR 1 YEAR 2

p Review of previous exploration Depending on the result of Year 1 exploration: p Preparation of geological maps p Conduct follow up drilling in main areas of interest p Regional geological and access survey p Say up to 15 holes with 5 twinned for coring of p Drilling of selected sites significant seams p Four to five open holes to basement to establish p Full seam analyses whether significant seams are developed in the p Resource modelling and report sequence p Review data and report

$323,168 $210,668

9.6 Conclusion Very little exploration has previously been conducted within the area covered by EPC1875. There is potential for Permian outliers containing coal bearing sediments to be discovered within the area. Any coal seams discovered are likely to be of high rank, and suitable for a thermal or PCI coal12. It appears that there is little likelihood of finding Jurassic coal of economic significance in the area.

12 This potential grade is conceptual in nature. There has been insufficient exploration to define a JORC compliant resource, and it is uncertain whether further exploration will result in the determination of a JORC compliant resource.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 106 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 10 EPCA2278 – Cedar Creek

10.1 Introduction EPC2278 covers an area of 36 sq km and consists of 12 sub-blocks. It was granted on 31 May 2011 and expires 30 May 2016. EPC2278 lies 30 km north-west of Injune (Figure 10.1) and 100 km north of the regional centre of Roma, which lies on the closest railway.

Figure 10.1 Location of EPCA2278 Cedar Creek

147° 30' 0.0000" E 147° 45' 0.0000" E 148° 00' 0.0000" E 148° 15' 0.0000" E 148° 30' 0.0000" E 148° 45' 0.0000" E

N 25° 15' 0.0000" S 25° 15' 0.0000" S

Forfar-Injune Road Sardine Creek

Womblebank

CARNARVON HIGHWAY

EPC 1435 Maranoa River 25° 30' 0.0000" S 25° 30' 0.0000" S EPC 1440 LOCATION OF EPC 2278 Baffle Creek

Hutton Creek EPC 1018 25° 45' 0.0000" S 25° 45' 0.0000" S

EPC 1191 Injune

EPC 1190 LEGEND

EPC 1440 Brothers Mining Pty Ltd EPC 1191 Argos Qld Pty Ltd EPC 1190 26° 00' 0.0000" S 26° 00' 0.0000" S EPC 1018 Injune Coal Pty Limited EPC 1435 Urea Corp of Australia Pty Ltd Kemp Creek

0 25

Mitchell-Forestvale Road Road Mitchell-Forestvale Mitchell-Forestvale

KILOMETRES

147° 30' 0.0000" E 147° 45' 0.0000" E 148° 00' 0.0000" E 148° 15' 0.0000" E 148° 30' 0.0000" E 148° 45' 0.0000" E

10.2 Environment and Cultural Heritage No environmentally sensitive or native title areas occur within the application area.

10.3 Geology EPC2278 Cedar Creek lies within the Surat Basin, and contains strata of both the Juandah Coal Measures and Taroom Coal Measures, with the former being the main target (refer to Table 2.1 for the stratigraphy of the Surat Basin). Coal occurrences within both these Measures are commonly referred to as “coal packages”. The coal package typically contains several coal seams, consisting of numerous thin coal plies with seam splitting and variability in thickness common and occurring over local areas. The coal package can however be recognised over large distances. The environment of deposition was such that areas of thick peat deposition formed pod shaped deposits between fluvial channels, and channel migration and relocation restricted peat swamp development over large areas, resulting in thick deposits being formed in areas of restricted lateral extent. Figure 10.2 shows the surface geology of the area.

10.4 Exploration History The area was held as EPC259 Merivale from 1979 to 1984. Two exploration targets were identified within the EPC1018 area, which were considered to contain 35 Mt of open cut thermal coal. Approximately 17 holes were drilled within the area now covered by EPC2278, the majority of which were percussion holes. Cumulative coal intersections greater than 2 m were identified in six widely spaced holes across the northern part of a major synclinal closure in the Cedar Creek area.

Figure 10.2 EPCA2278 Geology

MV050 MV047 MV071 MV185 Birkhead Formation (Formation for coal bearing target sequence)

MV184 MV139

MV140 MV127 MV138

Cedar Creek EPC MV109 MV032 MV030 MV133MV133CH MV046 MV137 MV01 MV128 MV008

MV135 Fault Merivale MV193 MV142 Springbok Sandstone MV126 MV146 MV036CH MV143 Member

MV174 MV17 MV044 MV134 MV131 MV192 MV145

MV042 MV151 MV152

MV144 Merivale Syncline MV147

MV216 MV215

MV129 MV125 MV011 0 2 MV126 MV187 MV153 Kilometres N MV1 MV122 MV154 MV120

Westbourne FormaFormationtion MV119CH MV124

EPC1018 was granted to SE Qld Coal Pty Ltd (SEQC), a subsidiary of Metallica Minerals Ltd, in February 2006 for 5 years. In late 2007 Cockatoo Coal Limited purchased SEQC. In February 2008 Cockatoo Coal Limited relinquished 12 sub-blocks from EPC2018, that have been taken up by M&CI. No work was done on these sub-blocks by Cockatoo Coal Limited.

10.5 Future Exploration A work Program costing $133,963 over EPC2278 has been planned over a period of 2 years (Table 10.1). Infill drilling over the previously identified target areas is planned to determine if a coal resource is present.

Table 10.1 EPCA2278 Cedar Creek Exploration Program

YEAR 1 YEAR 2

p Literature research and assessment of historical p Conduct follow up drilling in main target areas exploration results p 10 geophysically logged holes with 1 km grid p Desktop study and field mapping spacing p Preliminary 2–3 open holes in target sites defined p Resource modelling, resource estimation and by previous drilling report p Review data and report

$58,884 $75,080

10.6 Conclusion Although previous drilling has not located any coal occurrences of economic significance, the nature of Surat Basin deposits suggests that a coal deposit could potentially be discovered within EPC2278. The planned exploration Program aims to determine whether such a deposit can be located within the area.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 108 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 11 EPCA2309 – Mobs Creek

11.1 Introduction EPC2309 Mobs Creek covers an area of 96 sq km and consists of 28 sub-blocks. It was granted on 27 June 2011 and expires 26 June 2016. EPC2309 is located 160 km west of Brisbane and 30 km east of Dalby (Figure 11.1).

Figure 11.1 Location of EPCA2309 Mobs Creek

150° 45' 0.0000" E 151° 00' 0.0000" E 151° 15' 0.0000" E 151° 30' 0.0000" E 151° 45' 0.0000" E 152° 00' 0.0000" E

N 26° 45' 0.0000" S 26° 45' 0.0000" S Yarraman EPCA 2439

Cooranga Creek

Cooyar Creek EPC 918

27° 0' 0.0000" S EPCA 2429 27° 0' 0.0000" S EPC 1136 EPC 1691 EPC 2110 EPC 2108 Mocattas Corner

Dalby Irvingdale

EPC 870 LEGEND Oakey Creek EPC 1136 EPC 919 EPC 2110 Clean Global Energy Operations Pty Ltd Bowenville MLA 50170

27° 15' 0.0000" S EPC 2108 Jindal Steel & Power Limited 27° 15' 0.0000" S MLA 50232 EPC 918 MDL 244 EPC 919 New Hope Exploration Pty Ltd EPC 1691 Matilda Coal Pty Ltd LOCATION OF EPC 2309 EPC 1136 EPC 1136 EPC 1136 SE Qld Coal Pty Ltd EPC 870 Australian Environmental Coals Pty Ltd EPCA 2439 Civil & Mining Resources Pty Ltd Oakey EPCA 2429 ML 50170 MLA 50232 New Acland Coal Pty Ltd MDL 244

0 30 27° 30' 0.0000" S 27° 30' 0.0000" S

KILOMETRES

150° 45' 0.0000" E 151° 00' 0.0000" E 151° 15' 0.0000" E 151° 30' 0.0000" E 151° 45' 0.0000" E 152° 00' 0.0000" E

11.2 Environment and Cultural Heritage M&CI believes there are no Native Title issues over the EPC2309 area. There are no sterile or restricted areas within EPC2309.

11.3 Geology EPC2309 is situated 50 km east of the north-trending Kumbarilla Ridge which defines the boundary between the Moreton and Surat Basin. The regional strata consists of the Lower to Middle Jurassic Marburg Sandstone and Middle to Upper Jurassic Walloon Coal Measures (Figure 11.2). The primary target for exploration is the Walloon Coal Measures, which sub-crop to the immediate south and potentially within area EPC2309 along a NW–SE strike length, dipping to the south west at 1 to 3 degrees. The Walloon Coal Measures conformably overlay the Marburg sandstone, which sub-crops to the immediate north of EPC2309.

11.4 Exploration History Exploration for the Walloon Coal Measures within the Darling Downs region has taken place since the 1960s. Dampier Mining Co. Ltd (now known as BHP Billiton Minerals Pty Ltd) conducted exploration drilling within ATP 375C in the 1980s (Figure 11.3).13 Their results confirmed the presence of the Walloon Coal Measures. A number of boreholes located

13 Please note that the authors of this report have not consented to the use of this reference to its historical geological report.

Figure 11.2 Geology of the Mobs Creek area

151° 0.00000' E 151° 7.50000' E 151°15.00000' E 151° 22.50000' E 151° 30.00000' E 151° 37.50000' E 151° 45.00000' E 151° 52.50000' E 152° 0.00000' E 152° 7.50000' E 152°15.00000' E Yarraman N 26° 52.50000' S 26° 52.50000' S Cooranga Creek

Cooyar Creek EPC 918 27° 0.00000' S LOCATION OF EPCA 2309 27° 0.00000' S EPC 1136 EPC 1691 EPC 2110 EPC 2108 Mocattas\ Corner

BJ64 BJ59 27° 7.50000' S LEGEND 27° 7.50000' S Myall Creek

Quaternary Alluvium Dalby Irvingdale Late Cainozoic

Tertiary Volcanics Doctors Creek EPC 870 EPC 919 Bundamba Group 27° 15.00000' S OakeyCreek 27° 15.00000' S Boreholes Bowenville Acland EPC 2110 Clean Global Energy Operations Pty Ltd

EPC 2108 Jindal Steel & Power Limited

EPC 918 New Hope Exploration Pty Ltd 27° 22.50000' S EPC 919 27° 22.50000' S

Oakey EPC 1691 Matilda Coal Pty Ltd EPC 1136 SE Qld Coal Pty Ltd

EPC 870 Australian Environmental Coals Pty Ltd 27° 30.00000' S 27° 30.00000' S

0 20 40

KILOMETRES

151° 0.00000' E 151° 7.50000' E 151°15.00000' E 151° 22.50000' E 151° 30.00000' E 151° 37.50000' E 151° 45.00000' E 151° 52.50000' E 152° 0.00000' E 152° 7.50000' E 152°15.00000' E

to the immediate south of EPC2309 intersected coal seams up to approximately one metre thick, which were commonly interbedded with carbonaceous mudstone. Two boreholes in particular, BJ64 and BJ59, intersected 2 m and 3.5 m of coal respectively, at relatively shallow depths. These coal intersections have been interpreted as the lower most seams of the Taroom Coal Measures of the Walloon Sub-group.

Figure 11.3 Mobs Creek Area – Previous Tenements 1980-89

151° 0.00000' E 151° 7.50000' E 151° 15.00000' E 151° 22.50000' E 151° 30.00000' E 151° 37.50000' E 151° 45.00000' E 151° 52.50000' E 151° 60.00000' E 152° 7.50000' E

N 376

26° 52.50000' S Cooranga Creek 26° 52.50000' S

LOCATION OF ATP 375C Cooyar Creek 430

27° 0.00000' S 321 27° 0.00000' S

Mocattas\ Corner 340

27° 7.50000' S Myall Creek 27° 7.50000' S

Dalby Irvingdale

329 Doctors Creek

27° 15.00000' S Acland 27° 15.00000' S OakeyCreek 469 Bowenville 462

313 27° 22.50000' S 27° 22.50000' S 0 10 20

Oakey KILOMETRES

151° 0.00000' E 151° 7.50000' E 151° 15.00000' E 151° 22.50000' E 151° 30.00000' E 151° 37.50000' E 151° 45.00000' E 151° 52.50000' E 151° 60.00000' E 152° 7.50000' E

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 110 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 11.5 Future Exploration The first stage in exploration will entail a detailed geological assessment by an extensive literature search, which will be used in conjunction with satellite imagery, digital topographic maps and cadastral data. An exploration Program and costing will subsequently follow the geological assessment.

Table 11.1 EPC2309 Mobs Creek Exploration Program

YEAR 1 YEAR 2

p Review of literature Depending on the result of Year 1 exploration: p Preliminary geological model p 7 traverses each with 3 chip holes p Geological model update p Estimate potential tonnages

$199,108 $358,608

11.6 Conclusion The prospectivity of EPC2309 is considered to be moderate to high14. As there is insufficient exploration in the area to accurately define the Walloon cropline, there is a reasonable chance that EPC2309 will contain near surface coal.

14 This potential quantity is conceptual in nature. There has been insufficient exploration to define a JORC compliant resource, andit is uncertain whether further exploration will result in the determination of a JORC compliant resource.

12 MDL138 – Mintovale

12.1 Introduction MDL138 Mintovale covers an area of 244 hectares. The tenement holder Moreton Coal Pty Ltd was granted an extension of MDL138 on 22 March 2010, with the lease expiring on 30 November 2013. In December 2010 M&CI wholly owned subsidiary Echidna Coal Pty Ltd completed its purchase of Moreton Coal Pty Ltd. MDL138 lies 87 km south-west of Brisbane, and 62 km south-south-west of Ipswich (Figure 12.1). It lies adjacent to the formed gravel Carney Creek Road approximately 7 km south of the junction with the sealed Boonah-Rathdowney Road, and approximately 30 km west of the main Brisbane-Sydney railway line.

Figure 12.1 Location of MDL138 Mintovale

152.25000000° E 152.37500000° E 152.50000000° E 152.62500000° E 152.75000000° E 152.87500000° E 153.00000000° E 153.12500000° E 153.25000000° E 153.37500000° E 153.50000000° E

N 27.62500000° S 27.62500000° S Waterford

Logan River

Peak Crossing EPC 1273 27.75000000° S 27.75000000° S

Sandy Creek Jimboomba

Albert River 27.87500000° S CUNNINGHAM HIGHWAY 27.87500000° S

Pimpama River Fassifern Coulson Canungra Creek

EPC 1662 EPCA 2082 HIGHWAY EPC 1643 Bonnah Allan Creek HIGHWAY

EPC 1643 Logan River 28.00000000° S 28.00000000° S Tregony LOCATION OF MDL 138 MOUNT LINDESAY

EPC 1656 Tamrookum

Seven Mile Creek 28.12500000° S 28.12500000° S Reynolds LEGEND

EPC 2120 Christmas Creek EPC 1656 Bumett Creek EPC 2120 EPC 1643 Golden Cross Operations Pty Ltd EPCA 2082 EPC 1662 Altera Resources Ltd EPC 2120 Carabella Resources Limited EPC 1273 Queensland Thermal Coal Pty Ltd Logan River 28.25000000° S 28.25000000° S

Running Creek 0 25

KILOMETRES

152.25000000° E 152.37500000° E 152.50000000° E 152.62500000° E 152.75000000° E 152.87500000° E 153.00000000° E 153.12500000° E 153.25000000° E 153.37500000° E 153.50000000° E

MDL138 is overlapped by competing EPCAs 1662 and 1656, which were lodged in December 2008. EPP791 also completely overlaps MDL138.

12.2 Environment and Cultural Heritage An Environmentally Sensitive Area lies to the north-west of MDL138, and a very small portion of MDL138 lies within the 500 m exclusion zone. The Moogerah Dam catchment area is located 10 km to the north-west of MDL138, whilst the Teviot Brook Dam Site to the south-west, and the Maroon Dam catchment area to the south are at least 5 km from MDL138. These catchment areas do not overlie MDL138. Much of MDL138 lies within the area designated as Strategic Cropping Land.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 112 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 12.3 Geology MDL138 lies within the Clarence-Moreton basin which is depositionally contiguous with the Surat Basin, and separated from it by the Kumbarilla Ridge. The middle to late Jurassic Walloon Coal Measures contain extensive coal deposits within the region, and underlie MDL138 (Table 12.1). MDL138 is superficially covered by Quaternary alluvial sediments and Tertiary volcanics outcrop just to the east of MDL138. The Walloon Coal Measures consist of sandstone, siltstone, shale, carbonaceous mudstone and coal.

Table 12.1 Stratigraphy of Mintovale Deposit

AGE GEOLOGICAL UNIT

Quaternary Alluvial Silts and Sands

Tertiary VOLCANICS

Unconformity

Jurassic Middle Kumbarilla Beds

Jurassic Middle WALLOON COAL MEASURES

Marburg Sub-Group Jurassic Early BUNDAMBA GROUP Ripley Road Sandstone

The Mintovale deposit is oval shaped, trending north-north- Table 12.2 Mintovale Quality Results east. In the north the seams dip west at 5 degrees, whilst in the south they are flat lying. A possible fault bisects the lease and Raw ash % 23.4 seam correlation across the fault is difficult. In the northern part Relative density 1.37 of the lease the sediments have been intruded by dolerite, and some coal has been coked. Float 1.60 There is one main coal seam with up to 20 plies occurring over Yield % 85.4 an interval of 30 m, with total coal thickness ranging from less than 1 m to 7.5 m (Figure 12.2). Depth of cover generally ranges Moisture % 4.7 from 30 m to 50 m, and vertical strip ratio (using a default RD of 1.50) ranges from 4:1 to 8:1 over the most prospective area. Ash % 17.3

Quality results from an 8 inch (200 mm) core are summarised Volatile matter % 36.6 in Table 12.2. Sulphur % 0.49

Specific energy MJ/kg 26.55

Chlorine % 0.01

Nitrogen % 1.04

HGI 33

Ash fusion temperatures deg C

Initial deformation >1600

Spherical >1600

Hemispherical >1600

Flow >1600

Figure 12.2 Mintovale – Cumulative Coal Thickness and Strip Ratio

462000E 462500E 463000E 463500E 464000E 464400E

10 7

1A 9 3.50 7.20 6889000N 6889000N

74 4 8 2.95 MV01 7.90 2.75 4 MV05 2.95 7 10.00 73 9.60 72 3.60 3.60 4.10 4.90 66 MV02 67 4 6.90 6.85 2 3.80 3.20 6.85 3.20 MV03_4 42 5 3.30 6 MV14 MV06 5.07 8.90 4.60 4.25 7.40 7 7.80 4.00 4 5 7 69 8 6 70 6 6.70 6888500N 4 6888500N 4.00 5.05 8 7 4.00 MV08

4.85 9 75 5.30 16 4.80 MVC13 MV07 9 3.90 6.00 5.20 5.00 2 6.80 9 5.20 5.40 4 8 MV09 10 2.50 7 2 13.50 MV11 76 MV12 MV10 9 0.15 10 3.70 3.85 239.30 1.70 7.60 6.20 9 13.90 8 7 8

6 7 50 47 6888000N 6888000N

2.88 6 8.60

4 5 77 3.40 15 20 5.80 6

2 LEGEND 17 6.50 MV15 4.80 2.47 11.60 Lease Boundary

Resource Boundary 6887500N 6887500N Drillhole MDL138 MV11 Hole Name 0.15 Thickness 239.30 Strip ratio 2 Thickness

6 Strip Ratio

0 100 200 300 400 500 6887000N METRES 6887000N

462000E 462500E 463000E 463500E 464000E 464400E

12.4 Exploration History The area was explored by Offshore Oil NL in conjunction with Pacific Copper Pty Ltd as part of EPC354 during the early 1980s, and 13 open holes were drilled. In 1985 Northpac Resources NL took over EPC354 and took out EPC452 and drilled 16 holes, including an 8 inch bulk sample hole. Figure 12.3 shows the location of earlier tenements. Mogul Mining NL acquired EPC452 in 1989 through its subsidiary Moreton Coal Pty Limited. EPC452 was reduced to the most prospective 5 sub-blocks, and in 1993 became MDL138. Cockatoo Coal Pty Ltd acquired Moreton Coal Pty Ltd in June 2005, and in October 2010 sold the subsidiary to M&CI.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 114 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Figure 12.3 Mintovale – Previous Tenements

Radford Kagaru N

Munbilla Milbong

Warill Creek MT JOYCE

Purga Creek Blantyre

Kalbari Gleneagle

Fassifern Coulson

Templin Bromelton

Aratula Fassifern Valley Allan Creek Warill Creek Beaudesert Tarome Bonnah Boys Town MT EDWARDS EPC 503 Charlwood LOGAN RIVER

Bunjurgen Josephville Sandy Creek MT ALFORD

Bunburra

Cannon Creek EPC 452 Laravale Moogerah Coulson Creek

LOCATION OF MDL138 MT MOON

Knapps Tamrookum Seven Mile Creek KNAPPS PEAK Croftby EPC 354

Christmas Creek

Reynolds Oaky Creek Tamrookum Creek

MT TOOWOONAN Maroon

MT MAROON RIVER Rathdowney MT SUPERBUS Dulbolla Bumett Creek

Lamington Barney View Barney 0 5 10 15 20

KILOMETRES

12.5 Resources Runge has built a rough geological model, and estimated an exploration target of. 3 to 3.7 Mt, at an average strip ratio of 7:1. The quantity and quality of the deposit is conceptual in nature, there has been insufficient exploration to define a Coal Resource and it is uncertain that further exploration will result in the determination of a Coal Resource. MDL138 was recently included in a proposed Restricted Area 384 (RA384), under draft legislation introduced by the Queensland Government affecting exploration in urban restricted areas (as defined in RA384). If the legislation is passed, RA384 will prevent any new mineral and coal exploration permit applications from being accepted over land within its boundaries. Holders of exploration permits and those who have lodged applications for exploration permits, including renewals that cover any part of the Restricted Area, will be asked to voluntarily relinquish the land that is within RA384, and open cut mining will be prohibited within RA384. As such, if the legislation is passed, the potential resources within MDL138 do not have reasonable prospects for eventual economic extraction. In this context, the potential resources within the tenement cannot be qualified as a Mineral Resources or Ore Reserves in terms of the JORC Code.

15 Please note that the authors of this report have not consented to the use of the historical geological report references in this Prospectus.

12.6 Future Exploration Allegiance Coal has terminated all exploration work within MDL138 due to RA384, however in the event that the legislation in respect of RA384 is not passed or lapses, it is the Company’s current intention to undertake a two-year exploration Program that has been planned as described in Table 12.3. Initial work will require geophysically logged holes to enable correlation of the plies and identify target areas. Stage 2 will include coal seam cored holes to obtain analytical data. This will enable a robust geological model to be constructed, from which JORC compliant resources can be estimated.

Table 12.3 MDL138 Mintovale Exploration Program

YEAR 1 YEAR 2

p Assessment of historical data p Identify main target area(s) p Drilling 500 m grid over complete MDL of p Infill drill target area at spacing of 180 m. 11 geophysically logged open holes. Estimated to include 18 open holes and 3 cored holes. p Estimation of resources for mine planning and coal quality purposes.

$150,000 $250,000

12.7 Conclusions The analytical results show that the coal can be washed to a high volatile medium ash thermal product suitable for domestic power generation or an export coal market16. Subject to the RA384 policy and any corresponding legislation, further drilling in accordance with modern practices is required to quantify the deposit.

16 This potential grade is conceptual in nature. There has been insufficient exploration to define a JORC compliant resource, andis it uncertain whether further exploration will result in the determination of a JORC compliant resource.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 116 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 13. Other Tenement Applications No comment has been made on M&CI tenement applications where they are a secondary application or a competing application. These applications are:

EPCA2132 North Texas secondary application, application date 2 June 2010

EPCA2154 Parapi competing application, application date 1 July 2010

EPCA2182 Lilyvale competing application, application date 2 August 2010

EPCA2251 Sandy Creek competing application, application date 1 November 2010

EPCA2281 Dingo competing application, application date 1 December 2010

EPCA2374 Mt Marrow competing application, application date 1 March 2011

EPCA 2474 Palmeria competing application, application date 1 April 2011

EPCA 2592 Corsia competing application, application date 1 June 2011

EPCA 2634 Galium competing application, application date 1 July 2011

EPCA 2644 Mayaca competing application, application date 1 July 2011

EPCA 2405 Fleetwood East secondary application lodged 27 July 2011

EPCA 2492 Fleetwood South secondary application lodged 27 July 2011

14 Conclusions Allegiance Coal, through its wholly owned subsidiary M&CI, has assembled a portfolio of tenements from most the of the coal basins in Queensland. Many of these areas are marginal to the more highly explored areas of the basins, however there is potential for coal deposits of economic significance to be discovered in all of these tenements. Comments on each tenement are included in the relevant sections of this report. Drilling programs have been conducted at Back Creek, Kilmain, Lochaber and Townsville during 2011. Results from these areas are encouraging, and drilling programs to be conducted in 2012 will concentrate on exploration target areas outlined in the previous exploration, with the aim of defining indicated and inferred resources. It is emphasised that at this stage of the exploration, it is uncertain if further exploration will result in the determination of a Mineral Resource. In the remainder of the areas very little exploration has been conducted and M&CI’s approach to future exploration is geologically sound. It includes an initial period of literature research prior to any exploration activity. The next step will be to undertake geological mapping prior to drilling. Drilling programs will be a phased approach commencing with a small number of holes. Further drilling will be based on initial results. The aim will be to outline the deposits and progres- sively upgrade their status. The exploration Program for each area has been costed in detail, and it is considered that the exploration program and budgeted expenditure in respect of the tenements is reasonable and appropriate.

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. 117 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT REPORT DATE 31/03/1997 1/03/1996 1/01/1974 1/02/1976 1/05/1979 31/01/2007 19/07/2008 19/07/2009 1/06/1975 1/09/1989 1/10/1978 1/08/1979 TENURE EPC 553 EPC 223 EPC 553 EPC 587 EPC 553 EPC 553 EPC 162 EPC 162 EPC 162 EPC 223 EPC 223 EPC 162 LOCALITY S OF EMERALD NW OF SPRINGSURE S OF EMERALD S OF EMERALD S OF EMERALD OF E. CHINCHILLA OF N. CHINCHILLA CHINCHILLA CHINCHILLA MILES AREA MILES AREA MILES SUBMITTED BY MINING TENEMENT SERVICES TECHMIN PTY LTD LTD AUST SHELL CO OF CRA EXPLORATION CRA EXPLORATION PTY LTD MINING TENEMENT SERVICES SHELL DEVELOPMENT PTY LTD (AUST) OILMIN L. N. PETROMIN L. TRANSOIL N. L. N. LTD AUST SHELL CO OF NEW HOPE PTY LTD EXPLORATION MINING TENEMENT SERVICES SHELL DEVELOPMENT PTY LTD (AUST) LTD AUST SHELL CO OF SHELL DEVELOPMENT PTY LTD (AUST) AUTHOR RAWLINS, J RAWLINS, B J SAUNDERS, D H HERON N H KEMPTON J S BRUNTON C J BARCLAY C J BARCLAY TURNER, T TURNER, B SAUNDERS, MADDEN T J J S BRUNTON C J BARCLAY BREWSTER, D C D BREWSTER, REPORT TYPE 6MTH 6MTH 6MTH RELINQ FINAL RELINQ RELINQ RELINQ EPPOTH 6MTH FINREQ 6MTH REPORT TITLE REPORT EPC 553, MINERVA, REPORT ON SUB-BLOCKS SUB-BLOCKS ON REPORT MINERVA, 553, EPC RELINQUISHED 14/1/97 FOR PERIOD ENDED REPORT PROGRESS SIX MONTHLY A-P 162C 29.2.76 - FOR AND FINAL REPORT REPORT PROGRESS SIX MONTHLY 31.8.76 ENDED PERIOD SUB-BLOCKS, 72 223C,A-P RELINQUISHMENT REPORT 28.4.1979. EPC 553, ATHENA, PARTIAL RELINQUISHMENT REPORT ON RELINQUISHMENT REPORT PARTIAL ATHENA, EPC 553, AREA RELINQUISHED 6/9/06 FOR RELINQUISHMENT REPORT PARTIAL GINDIE, EPC 553, THE PERIOD ENDING 14/2/09 ATP BARAKULA, FOR REPORT PROGRESS MONTHLY SIX 223C, PERIOD ENDING 28.10.78. EPC 587, BOX CREEK, COMBINED ANNUAL AND FINAL ANNUAL COMBINED CREEK, BOX EPC 587, 19/2/96 TO PERIOD THE FOR REPORT A-P 162C. SCOUT DRILLING NEAR CHINCHILLA, THE FOR REPORT 6-MONTHLY A-P 162C, BURNCLUITH, PERIOD 31.08.74-28.02.75. PERIOD FOR REPORT PROGRESS 223C,A-P MONTHLY SIX ENDING 28.4.1979. EPC 553, GINDIE, PARTIAL RELINQUISHMENT REPORT FOR RELINQUISHMENT REPORT PARTIAL GINDIE, EPC 553, PERIOD ENDED 22/10/07 REPORT NO. 6740 7268 29310 45296 7269 53334 31467 57948 4978 5102 5598 5804 M&CI 1297 1296 Appendix A –A Appendix Reports Company Energy & Mines Department of

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 118 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. REPORT DATE 1/03/1981 1/01/1981 1/09/1981 1/12/1981 1/10/1982 1/12/1982 1/10/1983 1/01/1984 1/12/1979 1/03/1982 1/04/1983 1/07/1980 TENURE EPC 223 EPC 223 EPC 312 EPC 312 EPC 312 EPC 223 EPC 312 EPC 312 EPC 312 EPC 312 EPC 312 EPC 312 LOCALITY MILES AREA OF MILES N. BARAKULA N OF MILES N OF MILES OF MILES N. N OF MILES N OF MILES OF MILES N. N OF MILES N OF MILES OF MILES N. SUBMITTED BY SHELL CO OF AUST LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF SHELL CO OF AUST LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF LTD AUST SHELL CO OF SHELL CO OF AUST LTD AUST SHELL CO OF AUTHOR BARCLAY C J BARCLAY E C HOUSTON C L PATTERSON GREEN D R HOUSTON E C HOUSTON E C HOUSTON A E WALTHO HEWSON R D HEWSON R D BARCLAY C J BARCLAY R F REESTON E C HOUSTON REESON R F REESON R F REPORT TYPE 6MTH 6MTH 6MTH RELINQ FINREQ 6MTH FINREQ 6MTH 6MTH 6MTH RELINQ 6MTH REPORT TITLE REPORT A-P 312C, BARAKULA, SIX MONTHLY PROGRESS REPORT PROGRESS MONTHLY SIX 312C,A-P BARAKULA, 23.7.1981. ENDED PERIOD THE FOR RELINQUISHMENT REPORT 28.4.80 28.4.80 RELINQUISHMENT REPORT A-P 223C, BARAKULA. (17 SUB-BLOCKS) RELINQUISHMENTA-P 312C, REPORT BARAKULA, CEPR 27-81. 23.07.81, 156 SUB-BLOCKS, REPORT PROGRESS MONTHLY SIX BARAKULA, 312C A-P FOR PERIOD ENDING 23.1.82 CEPR 3-82. FOR RELINQUISHMENT REPORT QLD, A-P 312C BARAKULA, CEPR 38-82. 51 SUB-BLOCKS 23.7.82, REPORT PROGRESS MONTHLY SIX 312C,A-P BARAKULA, CEPR 5-83. THE PERIOD ENDED 23.01.83, FOR FOR RELINQUISHMENT REPORT QLD, A-P 312C, BARAKULA, CEPR 1-84. 43 SUB-BLOCKS RELINQUISHED 23.07.83, A-P 223C, SIX MONTHLY PROGRESS REPORT FOR PERIOD FOR REPORT PROGRESS 223C,A-P MONTHLY SIX 28/10/79 ENDING REPORT PROGRESS MONTHLY SIX BARAKULA, 223C A-P FOR PERIOD ENDING 28.4.80. SIX MONTHLY A-P 312C, BARAKULA - KENTUCKY, FOR PERIOD ENDING 25.1.81. REPORT PROGRESS FOR PERIOD ENDING REPORT PROGRESS SIX MONTHLY QLD (CEPR 29-82). A-P 312C, BARAKULA, 23.07.82, REPORT PROGRESS MONTHLY SIX 312C,A-P BARAKULA, CEPR 24-83. FOR PERIOD ENDING 23.07.83, REPORT NO. 7992 8411 9673 11256 11617 12569 7474 8695 9500 10079 11158 12332 M&CI 1297 Appendix A –Appendix – Reports Company Department of Mines & Energy continued

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. 119 SECTION 9 | INDEPENDENT GEOLOGIST’S REPORT REPORT DATE 1/12/1986 1/06/1984 1/04/1987 1/03/1982 1/06/1984 1/08/1985 1/07/1986 1/08/1987 1/11/1987 1/10/2002 1/01/1994 TENURE EPC 551 EPC 312 EPC 312 EPC 312 EPC 523 EPC 312 EPC 312 EPC 312 EPC 312 EPC 374 EPC 312 LOCALITY N. OF MILES N. N OF MILES N OF MILES E OF WANDOAN NE OF WANDOAN NE OF WANDOAN NW OF CHINCHILLA E OF SPRINGSURE N OF ROLLESTON TEXAS SE OF WANDOAN SUBMITTED BY MOONIE OIL NL MINE JACIA MANAGEMENT & SERVICES CONSULTING SHELL CO OF AUST LTD AUST SHELL CO OF LTD AUST SHELL CO OF MOBIL ENERGY MINERALS AUST INC RESOURCES TMOC LEBLANG & GARRY ASSOCIATES PTY LTD COAL PACIFIC DEPT NATURAL RESOURCES & MINES GARRY LEBLANG & GARRY ASSOCIATES RESOURCES TMOC LEBLANG & GARRY ASSOCIATES GARRY LEBLANG & GARRY ASSOCIATES AUTHOR LEBLANG G ANONYMOUS N/A LEBLANG G M J R WILTON, A S PRETORIUS, N F STUART RAYNER R A MURPHY P C L PATTERSON SEITLINGER H UNKNOWN REPORT TYPE OTHER 6MTH 6MTH 6MTH 6MTH 6MTH RELINQ FINREQ 6MTH 6MTH RELINQ REPORT TITLE REPORT REPORT ON AREA RELINQUISHED 22.01.86, 10.10.86, 10.10.86, AREA RELINQUISHED 22.01.86, ON REPORT 312C,A-P BARAKULA. REPORT FOR 100 SUB-BLOCKS RELINQUISHED 20.12.83, FOR 100 SUB-BLOCKS RELINQUISHED 20.12.83, REPORT (CEPR 11/84). A-P 312C, BARAKULA, PERIOD FOR REPORT MONTHLY SIX 312C,A-P BARAKULA, ENDED 22.7.85. 312C,A-P BARAKULA, OPERATIONS, ON REPORT SIX MONTH PERIOD ENDED 22.07.87. 312C,A-P BARAKULA, OPERATIONS, ON REPORT SIX MONTH PERIOD ENDED 22.01.87. REPORT ON OPERATIONS, A-P 312C, BARAKULA, 312C,A-P BARAKULA, OPERATIONS, ON REPORT SIX MONTH PERIOD ENDED 22.01.86. INCORPORATING FINAL REPORT ARCTURUS, EPC 523, 20/4/93 PERIOD THE FOR OPERATIONS OF REPORT 19/10/93 TO AREA FOR FINAL REPORT SOUTH, TOGARA EPC 551, DROPPED SUB-BLOCKS 11 INCLUDING 340 MDL OUTSIDE 13/2/02 A-P 312C, COLLINGWOOD, GEOLOGICAL REVIEW, GEOLOGICAL REVIEW, A-P 312C, COLLINGWOOD, (CEPR 12/84). FOR OPERATIONS ON REPORT 312C,A-P BARAKULA, SIX MONTH PERIOD ENDED 22/7/86 FOR REPORT PROGRESS 374C, MONTHLY A-P SIX FIRST REPORT AND FINAL REPORT, PERIOD ENDED 2.05.82 Q82-7. NO. REPORT NO. 25352 35952 10174 13046 14691 17584 13155 15264 15710 16576 16578 M&CI 1297 1298 1324 Appendix A –Appendix – Reports Company Department of Mines & Energy continued

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 120 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. REPORT DATE 1/06/1994 1/01/1990 31/08/2006 1/03/1976 1/01/1977 1/01/1977 1/11/1978 5/07/2007 1/01/1990 1/03/1976 1/07/1977 TENURE EPC 913 EPC 539 EPC 169 EPC 167 EPC 167 EPC 196 EPC 913, EPC 914, EPC 915, EPC 917, EPC 932 EPC 196 EPC 196 EPC 196 EPC 169 LOCALITY COOKTOWN SW OF WARWICK NORMANBY RIVER E OF EIDSVOLD NORMANBY LAURA RIVER, RIVER KENNEDY AREA CAPE YORK PENINSULA COOKTOWN COOKTOWN SW OF WARWICK W OF COOKTOWN SUBMITTED BY NORTHERN ENERGY NORTHERN LTD CORPORATION UNKNOWN NORTHERN ENERGY NORTHERN LTD CORPORATION UNKNOWN CRA EXPLORATION PTY LTD UTAH DEVELOPMENT UTAH CO QUEENSLAND METALS LIMITED CORPORATION CRA EXPLORATION PTY LTD CLIFFORD MCELROY & ASSOC UNKNOWN DEVELOPMENT UTAH CO AUTHOR VICKERS, M D M VICKERS, D MILBURN, CLIFFORD & MCELROY ASSOC S R QUINTON ANONYMOUS ANONYMOUS ANONYMOUS DEVELOP- UTAH MENT COMPANY MCLAUGHLIN, A MCLAUGHLIN, S R QUINTON ANONYMOUS REPORT TYPE FINAL ANNUAL FINAL RELINQ ANNUAL RELINQ FINAL RELINQ ANNUAL OTHER 6MTH REPORT TITLE REPORT NORMANBY RIVER AREA, WEST OF COOKTOWN. WEST OF COOKTOWN. AREA, NORMANBY RIVER MCELROY CLIFFORD BY RESOURCES COAL and GEOLOGY 1975. ASSOC., NOVEMBER & SEASON. FIELD 1976 RESULTS DRILLING 196C A-P EPC 913, 914, 915, 917, 932, TEXAS REGIONAL PROJECT, 932, 917, 915, 914, EPC 913, THE PERIOD ENDING FOR REPORT ANNUAL COMBINED 9/8/06 AND FINAL FIRST SIX MONTHLY LOCHABER, EPC 539, REPORT AREA ON REPORT GEOL. A-P 169C NORMANBY R. RELINQUISHED 30-9-75 AREA ON GEOLOGICAL REPORT R. KENNEDY 167C A-P RELINQUISHED 30-9-75 PERIOD THE FOR REPORT MONTHLY 6 COOKTOWN OF W 25/9/1977 ENDED 23/3/1977 RELINQUISHED, AREA COOKTOWN OF W 196C.A-P REPORT, FINAL EPC 913, FINAL REPORT FOR PERIOD ENDING 31/5/07 ENDING PERIOD FOR REPORT FINAL 913, EPC KENNEDY RIVER AREA, CAPE YORK PENINSULA, WEST PENINSULA, YORK CAPE AREA, RIVER KENNEDY BY RESOURCES COAL and GEOLOGY COOKTOWN. OF ASSOC. 1975. DECEMBER & MCELROY CLIFFORD REPORT NO. 43598 46594 25733 5540 5443 6110 6306 5445 5539 6305 6686 M&CI 1874 1875 1324 1672 Appendix A –Appendix – Reports Company Department of Mines & Energy continued

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 122 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Section 10 Independent Tenements Report

TENEMENT REPORT FOR THE PURPOSES OF DUE DILIGENCE

Prepared by ENVIRONMENTAL & LICENSING PROFESSIONALS PTY LTD 28 February 2012

1 INTRODUCTION

1.1 Purpose Allegiance Coal Limited (Allegiance) has requested that Environmental & Licensing Professionals Pty Ltd (ELP) conduct an independent review of the tenement status and provide a Tenement Report for the following Exploration Permits for Coal (EPC) Applications, granted EPCs and Mineral Development Licence (MDL). p EPC 1296 “Connemara” p EPC 1875 “Pinetree” p EPCA 2374 “Mount Marrow” p EPC 1297 “Back Creek” p EPC 1917 “Kilmain South” p EPCA 2474 “Palmeria” p EPC 1298 “Kilmain” p EPCA 2132 “North Texas Coal” p EPCA 2592 “Corsia” p EPC 1492 “Townsville” p EPCA 2154 “Parapi” p EPCA 2634 “Galium” p EPC 1617 “Townsville Extended” p EPCA 2182 “Lilyvale” p EPCA 2644 “Mayaca” p EPC 1631 “Calen South” p EPCA 2251 “Sandy Creek” p EPCA 2698 “Fleetwood South” p EPC 1672 “Lochaber” p EPC 2278 “Cedar Creek” p EPCA 2699 “Fleetwood East” p EPC 1820 “Boldon” p EPCA 2281 “Dingo” p EPCA 2836 “Kilmain” p EPC 1874 “Normanby” p EPC 2309 “Mobs Creek” p MDL 138 “Mintovale”

All EPCs and EPCAs are held 100% by Minerals and Coal Investments Pty Limited (MCI), MDL 138 is held in the name of Moreton Coal Pty Ltd, a wholly owned subsidiary of MCI. Allegiance owns all of the issued capital in MCI. All tenements are located in Queensland, Australia.

This report details: • the status of all tenements in relation to their compliance with the conditions of the Mineral Resources Act 1989 (Qld) (MR Act); • the status of the Environmental Authorities (EAs) for all tenements in accordance with the Environmental Protection Act 1994 (Qld) (EP Act); • the status of financial assurance for each of the tenements; • mapped environmental constraints such as Category A, B, and C Environmentally Sensitive Areas (ESA), registered historical cultural heritage sites, National Parks etc., existing within the tenements; • Native Title issues; • Indigenous Cultural Heritage issues; and • Historical Cultural Heritage issues.

1.2 Scope of Review ELP compiles all tenement reports in accordance with the requirements of the VALMIN Code. This tenement report would normally be considered an “Independent Expert Report” under the code. ‘Independent’ is defined as “able to satisfy any relevant legal tests of independence and must be perceived to be willing and able to undertake an impartial assessment of valuation and to prepare an Independent Expert Report that is free of bias”. The amount of approximately $20,000 plus any out of pocket expenses in payment of the fee is all the remuneration (including commission) or any other benefits that any “nominated person” is to receive that might reasonably be expected to be or have been capable of influencing ELP in providing this report. In this context, a “nominated person” is any of (i) ELP, (ii) a related body corporate of ELP, (iii) a director or employee of ELP or a related body corporate of ELP, (iv) an associate of any of the above. Otherwise there are no other interests, whether pecuniary or not and whether direct or indirect, of ELP or any associate of ELP, or other associates or relationships between ELP or any associate of ELP and Allegiance Coal Limited that might reasonably be expected to be or have been capable of influencing ELP in providing this report. Neither ELP nor any of its directors or employees has any beneficial interest in Allegiance Coal Limited, nor in any of the tenements which are the subject of this report nor in any adjacent tenements. Consent is hereby given by ELP, for the purposes of Section 716(2) of the Corporations Act 2001 to: • the inclusion of this report in; and • ELP being named in,

the prospectus to be issued by Allegiance Coal Limited for the Company’s initial public offering and listing, in the form and context in which they appear. This consent relates to the distribution of the Prospectus in both paper and electronic form. Other than the statements included in this report, ELP does not make, or purport to make, any other statement that is included in the Prospectus. This report does not constitute legal advice.

1.3 Methodology For the purposes of this report, we have reviewed available environmental documentation for the tenements and conducted searches of the registers maintained by QME in accordance with the MR Act, by the DERM – Environment in accordance with the EP Act, DERM – Resource Management in accordance with the Aboriginal Cultural Heritage Act 2003 (Qld) and by the DEWHA in accordance with the Environmental Protection and Biodiversity Conservation Act 1999 (Qld) (EPBC Act). ELP has also consulted with QME and NNTT to clarify issues where relevant. Results of the findings are dependent on the accuracy of available documentation to ELP and the registers maintained by regulating government agencies. Whilst the searches upon which this report is based are current as at 8 November 2011, there have been updates made to the report between that date and 25 January 2012, in order to present the most current status of the tenements. A few tenement actions that fell due during this period were also verified with QME for compliance. All searches relied upon have been provided to Allegiance Coal Limited.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 124 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 2 SUMMARY OF FINDINGS

2.1 Tenement status We are satisfied that the information and particulars included in this report comprise an accurate statement of these tenements. Based on the results of the searches and enquiries undertaken, the tenements that are the subject of this report are all held in good standing and where a tenement has not been granted that fact has been noted. For the purposes of this report, no other tenement actions are currently overdue. No upcoming actions other than those identified in throughout this report are required on the tenements described. All granted tenements have financial assurances lodged and up-to-date rent payments with QME which are in accordance with QME and DERM requirements. Some tenements are overlapped by petroleum or mineral tenements, which will therefore require MCI to obtain consent for future mining activities or agreement about co-development. There has been nothing presented to ELP to indicate that such consent or negotiation will not be obtained. There are areas of environmental constraint to exploration and mining activities within the project areas reviewed. Exploration or mining may occur within these areas, subject to restrictions, consent, and approvals or conditions of regulators. None of the tenements are significantly constrained to such a degree that exploration cannot proceed. However, restrictions and approvals will be dependent on project expansion (E.g. underground mining or open-cut), field verification of mapped constraints and some further investigation and liaison with regulators. The table in Appendix 1 provides an overview of the constraints affecting the status of each of the tenements. Section 3 of this report summarises the obligations of a holder of an exploration permit for coal and explains the other terms used in the table in Appendix 1.

2.2 Environmental Constraints The following matters potentially prevent, restrict or constrain exploration activities within certain areas of the tenements: p Areas that are mapped as ESA category A, B or C. p Wetlands and waterways. p Wild Rivers High Preservations Areas, Nominated Waterways and Special Floodplain Management Areas. p Restricted Areas, Constrained and Sterile Land. p Urban Restricted Areas.

The potential implications and potential management options for these matters are outlined in section 5 below. The summary of which constraints affect MCI tenements is provided in the table in Appendix 2. Obligations of the Holder of an Exploration Permit for Coal

2.3 Native Title and Indigenous Cultural Heritage Status Tenements may be affected by native title claims under the NT Act. Native title must be addressed in the grant of any mining tenement unless considered extinguished. The existence of a native title claim over an area of land is not itself evidence of the existence of native title. A search of the National Native Title Tribunal’s database has been conducted to determine what registered or scheduled native title claims overlap the various tenements. Please note that native title does not directly affect the legal requirement under theAboriginal Cultural Heritage Act 2003 (Qld) or the Queensland Heritage Act 1992 (Qld) to consider and manage cultural heritage. Any planned ground disturbing activities will require careful consideration of cultural heritage. A search of the Department’s Cultural Heritage Database for recorded cultural heritage sites (eg. artefacts, stone scatters, etc.) has been conducted. Information about the locations of those recorded cultural heritage sites is considered by Aboriginal people to be sensitive; the information will be tabulated and provided in a separate document, and will not be publicly available.

Cultural Heritage Registered Areas, as opposed to recorded cultural heritage sites, are specific areas designated by DERM as being of significant cultural heritage value in accordance with Part 6 of theAboriginal Cultural Heritage Act 2003 (Qld). At the date of writing, there are only three Cultural Heritage Registered Areas in Queensland, namely at Ban Ban Springs (East of Gayndah), Mount Mulligan (West of Cairns), and Palm Island. None of the tenements in this report overlay these areas. The table in Appendix 3 provides an overview of the Native Title and Indigenous Cultural Heritage constraints affecting (or which may affect) each of the tenements. Section 4 of this report further describes the nature of the constraints identified in the table in Appendix 3.

3 OBLIGATIONS OF THE HOLDER OF AN EXPLORATION PERMIT FOR COAL The holder of an application for an EPC has none of the rights and obligations of the holder of a granted EPC. An applicant for an EPC is also precluded from assigning their interest in the application and must instead wait for the EPC to be granted before assigning the tenement. The holder of a granted EPC has the following rights and obligation under the MR Act:

Table 1 Holder Responsibilities under the Mineral Resource Act 1989 (QLD)

SECTION OF RESPONSIBILITY MR ACT

Rental and The Holder must pay rental for the EPC calculated at $127.05 per sub- Section 138 Royalties block in accordance with the Mineral Resources Regulation. Rental for the first year of the term of an EPC is to be paid before the granting of the permit. On renewal of the EPC, rental is payable within 20 business days after the renewal is granted. Failure to comply with rent requirements is not in compliance with the MR Act and could result in the termination of a holder’s tenement.

The Holder does not acquire title to any minerals taken or discovered Section 178 under the EPC unless the Minister consents. If the Minister consents, a royalty will be payable.

Application Subject to compliance with the MR Act, the holder of an EPC may be Section 129 for Superior considered for grant in priority to all other persons, any number of Tenements mineral development licenses and mining leases in respect of any land specified in the EPC or mining leases for other purposes for which mining leases may be granted and may enter that land for the purpose of doing all acts necessary to comply with the MR Act relating to that application.

Records and The holder must give the following reports to the Minister: Section 141 Reporting (a) A report for each year of the term of the EPC, given within one month after each day that is an anniversary of the day the EPC takes effect; (b) A report about reduction in the area of the EPC, given within two months after the reduction takes effect; (c) A report summarising the results of exploration for the whole terms of the EPC, given within two months after the EPC ends; (d) If required by the Minister, any other report about the EPC; and (e) If required by the Minister, a report on materials obtained because of the holder’s activities under the EPC. Failure to comply with the reporting requirements in not in compliance with the MR Act and could result in the termination of a holder’s tenement.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 126 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. SECTION OF RESPONSIBILITY MR ACT

Records and Within 14 days after discovery of any material of commercial value in Section 176 Reporting what appears to be payable quantities within the area of the EPC, the continued holder must report to the Minister the discovery. The Minister may direct the holder of an EPC to apply for a Mineral Development License (MDL) or Mining Lease (ML) over all or part of the land specified in the EPC.

Security Before an EPC is granted or renewed or a condition of the permit is Section 144 varied, the Minister must determine the amount of the security to be deposited by the Holder of that EPC as reasonable security for: (a) compliance with conditions of the EPC; (b) compliance with the provisions of the MR Act; (c) rectification of any actual damage that may be caused by any person whilst purporting to act under the authority of the EPC; and (d) amounts (other than penalties) payable to the State under the MR Act.

An EPC must not be granted or renewed, or a condition of an EPC must Section 144 not be varied, until the applicant for the grant, renewal or variation deposits the security determined.

If the Minister is satisfied a condition of an EPC has not been complied Section 144 with or a provision of the MR Act has not been complied with in relation to an EPC or someone claiming to act under an EPC, or to have entered the land on the permit Holder’s instructions, caused any damage, the Minister may require the permit Holder to take the steps necessary to stop the non-compliance or repair the damage.

The Minister may use any of the security deposited by the Holder to Section 144 stop the non¬compliance or repair the damage.

If security is utilised or the Minister considers that a further amount of Section 144 security should be deposited in respect of that EPC, the Minister shall require the EPC Holder to deposit the further specified security.

If an EPC terminates, the Minister may, not earlier than six months after Section 144 termination, refund to the Holder the amount of security deposited for the permit less the amounts the Minister consider should be kept towards: (a) remedying anything caused by non-compliance with the conditions of the permits or an order given by the Minister to the Holder; and (b) amounts (other than penalties) the Holder owes to the State under the Mining Act (whether they become owing before or after termination).

Renewal The Holder of an EPC may apply to the Minister for a renewal of the Section 147 EPC. Any renewal application must be made no more than 6 months and no less than 3 months prior to expiry of the EPC. Until the renewal application is decided, the EPC continues in force. The application must be: (a) in the approved form; (b) accompanied by the prescribed fee; and (c) accompanied by a statement: (i) describing the Program of work to be carried out if EPC renewed; and (ii) detailing the estimated human, technical and financial resources to be used to carry out the exploration work; and (iii) detailing the applicant’s financial and technical resources for carrying out the exploration work.

SECTION OF RESPONSIBILITY MR ACT

Renewal The Minister may renew an EPC if the Minister is satisfied: (a) the Holder Section 147A continued of the EPC has complied with: (i) the terms of the EPC; and (ii) the MR Act in relation to the EPC; (b) the activities to be undertaken during the renewed term are appropriate; (c) the financial and technical resources available to the Holder are appropriate; and (d) the public interest will not be adversely affected by the renewal. The renewal may be granted for a further term of not more than 5 years. The MR Act does not provide a limit to the number of times an EPC can be renewed. Renewal will be determined by the Minister in accordance with the provisions set out above and will specifically take into consideration whether the Holder complied with the conditions of the EPC during the previous term.

Conditions of EPC The Holder of an EPC shall: (a) carry out programs of work and studies Section 141. for which the EPC was granted in accordance with the MR Act and conditions of the EPC and for no other purpose; (b) carry out improvement restoration for the EPC; (c) prior to the termination of the EPC, remove all equipment and plant on or in the land comprised in the EPC unless authorised by the Minister; and (d) comply with the MR Act, any mining legislation and any conditions such as native title protection conditions determined by the Minister. The Holder shall not: (a) obstruct or interfere with any right of access had at any time during the term of the EPC by any person in respect of land subject of the EPC without prior written consent of the Minister; and (b) assign the EPC without the written consent of the Minister.

Assignment An EPC or an interest in an EPC may be assigned if: (a) the application Section 151. for assignment is made in the approved form and lodged with the Chief Executive; (b) the application is accompanied by: (i) a statement by the assignee agreeing to the conditions of the EPC; (ii) the prescribed fee; and (c) it is approved by the Minister.

Where there are two or more Holders of an EPC, an application for Section 151. assignment must be made by all Holders.

The Minister will not approve the proposed assignment unless the Section 151. Minister is satisfied that the assignee has the human, technical and financial resources to comply with the conditions of the EPC.

Reduction in Land The area of the EPC may be reduced in the way and to the extent Section 139. decided by the Minister during its term according to the terms of the permit when issued or renewed. If the Minister so directs on reasonable grounds, the reduction of the area of land in respect of which a particular EPC applies may be more or less than that prescribed. At least 20 days prior to the date when the area of land is to be reduced, the Holder of the EPC shall make a submission to the Chief Executive identifying the sub-¬blocks of the land to which the Holder desires the EPC to apply after the reduction. Note that compensation is not payable for any of the aforementioned reductions.

In addition to section 139, the Holder of the EPC may make a Section 140. submission to the Chief Executive: (a) voluntarily reducing the area of land to which the permit applies; and (b) identifying the sub¬-blocks of land to which the Holder no longer wants the permit to apply.

Where an MDL or a mining lease is granted upon application of the EPC Section 177. Holder for the same land and mineral, the land to which the EPC formerly applied shall be reduced accordingly and the terms and conditions applying to the EPC may be varied by the Minister.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 128 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 3.1 Competing Applications Competing applications are where an application has been lodged on the same day over (at least some of) the same sub- blocks as another EPCA or EPCAs. To decide the priority applicant, all competing applications are assessed simultaneously by the Department, before a final decision is made. This process may take several months.

3.2 Secondary Applications A secondary application such as EPCA 2132 occurs when an application is made over an area where there is an existing application. The application is therefore considered a secondary application and will only be processed further should the primary application be withdrawn or cancelled. If the primary application is granted, the secondary application is immediately cancelled by QME.

3.3 Mineral Development Licence (MDL) A Mineral Development Licence enables the holder to continue its exploration program as well as conduct pre-feasibility studies, environmental studies etc on the tenement area, but without the burden of a designated expenditure commitment. Typically, MDLs are applied for over areas where a resource is proven and the rest of the overlying EPC is dropped. Neither EPCs nor MDLs allow production of mineral. This can only occur with a Mining Lease. EPCs or MDLs are, however, necessary pre-requisites to applying for a Mining Lease.

3.4 Conditional Surrender EPCs 1917 and 1298 have been conditionally surrendered in favor of EPCA 2836. A conditional surrender means that the surrender of EPC 1298 and EPC 1917 is conditional upon the grant of EPCA 2836. MCI have applied for this in order to simplify work programmes and reporting requirements. In the process they also applied for 3 additional sub-blocks that were available.

3.5 Overlapping Tenements – Part 7AA of the Mineral Resources Act 1989, Petroleum Overlapping tenements which are of a particular concern to an EPC holder are primarily petroleum interests: p PL – Petroleum Lease p EPP – Current Exploration Permit for Petroleum p PPL – Petroleum Pipeline License p PSL – Petroleum Survey License p PFL – Petroleum Facility License

Such overlapping tenements must be considered as these can have implications for grant of an EPC as well as access to the tenement area for exploration purposes. Granting of an MDL or ML is also dependent on the practical implications for the development of the resource. Some of the EPCs reported on currently overlap with petroleum tenements. If the holder/s decide to apply in the future for a coal ML within any of the EPCs, then Part 7AA of the MR Act will need to be observed. Part 7AA requires the ML applicant to consider the overlapping petroleum interests and negotiate with petroleum tenement holders to obtain their consent to any future mining operation or their entry into a co-development agreement. Where there is an overlapping petroleum interest, MCI must ensure compliance with the requirements of section 318CH and 318CI of the MR Act which contain provisions and restrictions in respect of exploration within the overlapping tenement, including a restriction on carrying out exploration activities where they would adversely affect the overlapping petroleum interest.

3.6 Overlapping Tenements – Part 7 of the Mineral Resources Act 1989, Mineral and Coal Section 249 of the Act will require either consent or advice from prior, overlapping mineral or coal tenements, should an application for ML be made. These are listed in the table in Appendix as overlapping tenements for information.

4 NATIVE TITLE AND CULTURAL HERITAGE

4.1 Context The fact that native title may not be extinguished over a particular land parcel is not a constraint on a project proceeding – it simply requires that an additional negotiation process needs to be undertaken in gaining the project approval. The timeframes for the additional negotiation processes are generally run in parallel with other approval processes for the project. Relevant Aboriginal Parties and the location of identified artefacts have been identified in this report but it is important to recognise that the cultural heritage duty of care will always need to be addressed in any project or any activity in Queensland that involves any significant disturbance of the surface of the earth.

4.2 Native Title In order to determine the relevance of native title to a particular tenement, analysis of numerous criteria such as the date of grant of the mining tenement, the conditions of grant, the status of the underlying land tenement etc., must be undertaken. The effect of the Native Title Act 1993 (Cth) (NT Act) is that existing and new tenements which a company may hold or acquire may be affected by native title claims and procedures. Native title must be addressed in the grant of any mining tenement unless native title has been extinguished. The existence of a native title claim over an area of land is not evidence of the existence or otherwise of native title. The existence of native title is a question of fact to be determined by an assessment of the extent to which native title has been adversely affected or extinguished by actions of the State Government, such as the grant of exclusive land tenements. A native title claim can be considered as an expression of interest by a native title group which is subject to a detailed assessment by the Federal Court before the making of a determination of native title rights and interests. In the report, a note has been made of whether there are native title claims over tenements even where native title is considered to have been extinguished.

4.3 Exclusive Land An exclusive tenement is an area over which native title has been extinguished or does not apply. In these instances, QME may elect to grant a tenement where >90% of the background land tenements are exclusive tenements without commencing a native title process. Land tenements which are non-exclusive (that is, land over which native title has not been extinguished), still appearing within the boundaries of the tenement, are deemed to be not included within the grant of the tenement unless the holder specifically applies, under Section 176A of the MR Act, to include the land within into the tenement. Such an application will normally lead to QME triggering the Expedited Procedures of the NT Act.

4.4 The Expedited Process Some of the exploration permits referred to in this report have been notified under the expedited procedures. A brief explanation of the procedure is set out here. Under the NT Act, native title parties have a Right to Negotiate about the terms under which mining and exploration tenements are granted. The Queensland State Government has established an expedited procedure, a more streamlined process compared to the full Right to Negotiate procedure, for the grant of those exploration permits where the exploration activities are only of a level that are: p not likely to involve major disturbance to the land p not likely to interfere with areas or sites of particular significance to native title holders p not likely to interfere with the community or social activities of native title holders.

The State Government instigates the expedited procedure by publishing a notice stating that it intends to grant the exploration permit subject to standard Native Title Protection Conditions.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 130 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. There is an objection period of four months. Objections can be lodged within that period by ‘Native Title Parties’; that is, either: p a native title holder: where there has been a determination of native title by the Federal Court, the party who has been determined to hold native title rights, or p a registered native title claimant: a party who has lodged a claim for native title rights with the Federal Court and that claim has passed the National Native Title Tribunal’s registration test.

If no objection has been lodged within the four month period, or the objection is resolved, then the State Government is able to grant the exploration permit, but makes the grant subject to a set of standard Native Title Protection Conditions. If an objection is made, the Explorer and the registered native title party have an opportunity to negotiate an agreement about access arrangements. If agreement cannot be reached and the objection cannot be resolved, the explorer can still request the Government to trigger the normal Right to Negotiate process for the grant of the exploration permit.

4.5 Native Title Protection Conditions (NTPC) These conditions are in a standard form and are designed to provide a means of minimising the impact of exploration activities on lands where native title rights may exist. The conditions set out a process for the explorer and the native title parties to: p exchange information about the proposed exploration activities p meet and discuss those activities p conduct a field inspection together p reach agreement about ways of minimising the impacts of exploration activities, such as site protection measures, cultural heritage awareness, protecting cultural heritage finds and monitoring.

This report does not address any relevant agreements that may have been entered into with Native Title Parties in regard to the tenements.

4.6 Indigenous Land Use Agreement (ILUA) An ILUA is an agreement between a native title group and other parties about the use and management of land and waters. The Indigenous Land Use Agreement provisions were introduced as a result of amendments to the NT Act in 1998; they provide a mechanism for native title groups to enter into binding contractual arrangements on behalf of their whole group through an authorisation and registration process. ILUAs can be entered into about matters such as: p native title holders agreeing to a ‘future act’; for example, a development such as a mining project; p how native title rights coexist with the rights of other people; p access to an area; p extinguishment of native title; and p compensation.

The presence of an ILUA over the same area as a mining or exploration tenement does not necessarily mean that the ILUA will have any effect upon, or otherwise constrain, that tenement. An ILUA is a contract; if the tenement holder is not a party to that contract then they will not necessarily be affected by the matters agreed to in that contract. For example, an ILUA between a native title group and a shire council for the purpose of establishing approval processes for council infrastructure and road maintenance will not have an impact upon an explorer’s rights under an Exploration Permit.

4.7 Indigenous Cultural Heritage and ‘Aboriginal Parties’ Indigenous cultural heritage is protected under the Aboriginal Cultural Heritage Act 2003 (Qld). The object of the legislation is to provide recognition, protection and conservation of Aboriginal cultural heritage. It does not have a permit or licensing system but instead imposes a ‘duty of care’ on those conducting activities on land to take all reasonable and practicable measures to ensure the activity does not harm Aboriginal cultural heritage. Penalties apply for causing unauthorised harm. The duty of care can be met in a number of ways, including through consultation and agreement making with the relevant Aboriginal Party(s) for the tenement.

Cultural heritage is not the same as native title; cultural heritage can exist on an area regardless of the nature of land tenement and whether or not native title has been extinguished. Likewise, the duty of care to ensure that Aboriginal cultural heritage is not harmed applies to activities on all land tenements, including land where native title has been extinguished. Records of significant sites are kept in the Aboriginal and Torres Strait Islander Cultural Heritage Database and the Aboriginal and Torres Strait Islander Cultural Heritage Register, which are administered by the Cultural Heritage Coordination Unit of DERM – Resource Management. Both records are searchable, but DERM does not conclusively guarantee the accuracy of the search results, and it will always be the obligation of the explorer to satisfy themselves as to meeting their duty of care. The search results of the Database will identify recorded Aboriginal sites and will provide the location (by coordinates) and a description of its nature (eg. artefact, scar tree, stone scatter, etc.). The search results of the Register will identify the relevant Aboriginal Party for the tenement and whether there have been any Cultural Heritage Management Plans undertaken within the area of the tenement. In identifying the Aboriginal Party, the search result reports on currently registered native title claims, previously registered native title claims and Aboriginal Cultural Heritage Bodies. The search results of the Register will also identify significant Aboriginal areas that have been recorded in the Aboriginal Cultural Heritage Register under section 46 of the ACH Act as a cultural heritage registered area. At the time of writing, there are only a small number of areas in Queensland that have been identified in this way. A cultural heritage registered area is given additional protection as a Category B Environmentally Sensitive Area under Schedule 1A of the Environmental Protection Regulation 1998 (Qld).

4.8 Historical Cultural Heritage Established under the Queensland Heritage Act 1992, the Queensland Heritage Register is a list of places, trees, natural formations, and buildings of cultural heritage significance in Queensland. Each entry of a cultural heritage site in the Register includes information about the place’s history, its physical fabric, statements of its significance, and location details. Cultural heritage sites are categorised as Category B ESAs and are searchable via DERM’s EcoAccess database. An initial review of the Queensland Heritage Register indicates there are no registered sites of historical cultural heritage significance. A more detailed analysis of historical cultural heritage may be required prior to any ground disturbing activities.

5 ENVIRONMENTAL CONSTRAINTS

5.1 Matters of National Environmental Significance Searches of the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) protected matters search tool were carried out for the various tenements. These searches identify the NES matters (Matters of National Environmental Significance; matters protected under the EPBC Act) likely to occur within the entire tenement area. It is noted that the search identifies matters that may be present or downstream of the search area, or migratory species that may inhabit the area from time to time (e.g. migratory / marine species of birds). Depending on the actual presence of these matters and the area of disturbance intended, there may be a need to seek approval from the Federal Minister for Sustainability, the Environment, Water, Populations and Communities. The potential requirement for approval under the EPBC Act would need to be verified through: p desktop investigation and confirmation of matters identified in the search tool results p ground truthing of matters reported by the search tool p definition of the project and areas of disturbance p impact assessment in accordance with relevant EPBC Act guidelines.

The potential for impact on a matter of national environmental significance (protected matters identified in the table in Appendix 2) does not necessarily prevent the approval of a project under the EPBC Act.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 132 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 5.2 Category A, B and C Environmentally Sensitive Areas The Code of Environmental Compliance Exploration and Mineral Development Projects specifies that

Environmentally Sensitive Areas – Condition 13 The holder of the environmental authority must not carry out activities in a category A or B Environmentally Sensitive Area. Activities involving machinery must not be carried out within 1km of a category A environmentally sensitive area or within 500m of category B environmentally sensitive area. Prior to carrying out activities in a category C environmentally sensitive area, consult with the relevant administering authority and the Environmental Protection Agency. If it is determined through the consultation that additional conditions are necessary, the holder must comply with those conditions. These potential constraints can be managed by seeking a project specific level 1 environmental authority (non-code compliant) that expressly permits exploration in these areas. The process for seeking a level 1 environmental authority is set out in the Environmental Protection Act 1994, and involves submitting an application together with an exploration project specific environmental management plan (EM Plan) describing environmental management practices to protect the ESAs. The statutory timeframe for the (two stage) assessment process is approximately 40 business days.

5.3 Endangered and Of Concern Regional Ecosystem, Environmentally Sensitive Areas, wetlands and waterways DERM regional ecosystem mapping identifies the type and protection level of vegetation that is covered under the Vegetation Management Act 1999 (Qld) and Environmental Protection Act 1994 (Qld). The potential effects of a project on mapped vegetation would depend on field validation of presence, extent, condition etc and the disturbance and clearing requirements of the mining project. Typically, small areas of ‘endangered’ (the highest level of protection) or ‘of concern’ (the mid-level of protections) regional ecosystems do not represent a critical constraint (i.e. showstopper) to a mining project and can be managed through mine planning, avoidance, impact mitigation measures and if required, environmental offsets. The effect of vegetation as a potential constraint on the development of a project would require detailed assessment. In general, these potential constraints are not concrete and can often be managed and permitted through the environmental impact assessment and approval processes.

5.4 Wetlands and waterways The Code of Environmental Compliance Exploration and Mineral Development Projects specifies that

Drilling, Excavation and Sampling – Condition 27 The holder of the environmental authority must not drill, excavate or clear vegetation: p in standing waters, wetlands or lakes; or p on the sloped banks or within 3m of the top of the bank or 5m of the toe of the bank; or p within, or on the levee banks of the normal flow channel.

The definition of wetlands and waterways in the Code is very broad. Therefore, the code of environmental compliance for exploration activities requires that: mapped or actual waterways and wetlands are avoided. These potential constraints may be managed by seeking a project specific environmental authority (non-code compliant) that expressly permits exploration in these areas. As per ESAs, a level 1 environmental authority can be obtained to allow drilling in areas (incorrectly) mapped as wetlands. It is possible that a level 1 environmental authority may not be granted to drill in areas of actual wetlands or if granted, may include extensive environmental protection conditions.

5.5 Wild Rivers The declaration of a wild river area sets out limitations to exploration and mining activities in certain specified areas. In general, exploration activities are limited to low impact activities (as defined in the MR Act) and limited hand sampling techniques in high preservation areas, special floodplain management areas and nominated waterways. In general, mining activities must not be carried out on the surface of land in a high preservation area, special floodplain management area or nominated waterway, but can be conducted in protection areas, with some conditions. None of MCI’s tenements overlap mapped Wild River Areas

5.6 Strategic Cropping Land DERM has released preliminary information regarding Strategic Cropping Land (SCL). SCL is land identified by DERM as high quality soil and crop areas based on factors including location, climate, soil and landscape. Projects in SCL ‘Management Areas’ can be approved with conditions and suitable mitigations measures to ensure they avoid SCL to the maximum extent possible, and where they are not able to avoid SCL to minimise their impacts. Approval for projects in SCL ‘Protection Areas’ that permanently and unavoidably alienate actual SCL will be refused except in limited exceptional circumstances. The DERM SCL mapping delineates areas where SCL is expected to exist and relate to significant areas. However, DERM SCL mapping needs to be verified in the field against assessment criteria produced by DERM to accurately determine whether any of the tenements contain actual SCL.

5.7 Stock routes and transport infrastructure In general, potential constraints posed by stock routes and transport infrastructure can be managed through the relocation of the stock route, road, rail or other form of infrastructure, typically with the objective of providing no net loss of service or capability. Any effects or changes to infrastructure wouldlikely require permission of the owner/administrator for that infrastructure.

5.8 Restricted Areas, Constrained and Sterile Land These are classifications of land applied by QME, with certain requirements associated with each classification. A Restricted Area (RA) classification means that access may be limited or restricted in a certain area depending on the type of tenements sought, the number of tenements permitted for that area, the size of area required and the term permitted. Additional conditions may be placed on tenements which occur in RAs. Consultation with the referral entity is also required prior to undertaking exploration or mining. A Constrained Land (CL) classification means that access to land may be possible, but only under specific conditions. A Sterile Land (SL) classification means that no access for mining or exploration is permitted. There are a number of areas within the tenements that are classified as RA, CL, and SL. These are identified in the table in Appendix 2, however despite the constraints observed it appears that appropriate exploration of these tenements is achievable.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 134 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 5.9 Urban Restricted Areas An Urban Restricted Area is defined as any land that is within 2 km of cities and towns with a population of more than 1,000 people. Holders of tenements within these areas (made prior to 16 August 2011) were requested to voluntarily relinquish sub-blocks that contained Urban Restricted Areas. No new applications can be made within these areas. MCI have made application to relinquish those sub-blocks containing Urban Restricted Areas, excluding EPCA 2374, where a submission to retain all sub-blocks was lodged. For those tenements that MCI have already voluntarily applied to drop sub-blocks on, a relinquishment “holiday” has been proposed by QME. A new Bill (Resources Legislation (Balance, Certainty and Efficiency) Amendment Bill 2011) is currently before parliament. If passed, it is proposed by QME to allow exploration companies (such as MCI), who lodged voluntarily relinquishments when originally requested, to either confirm their initial relinquishments or be subject to the provisions of the amendment legislation. The new Bill, if passed, will require MCI to gain local government approval prior to further development on affected tenements (EPCA 2374 and MDL 138). An additional condition should either tenement progress to a Mining lease is a proposed prohibition on open cut mining within URAs.

Appendix 1 Tenement Overview

TENURE STATUS PRINCIPAL HOLDER SUB-BLOCKS LOCATION KEY DATES RENT

L Lodged Annual Rent (100%) G Granted E Expired Rent Status

EPC 1296 Granted Mineral & Coal 40 65km SW Emerald L 2/05/08 $5,082.00 Connemara Pending Investments Pty Ltd G 7/04/09 Pay by Renewal E 6/04/11 07/04/2012

EPC 1297 Granted Mineral & Coal 20 61km NW Chinchilla L 2/05/08 $2,541.00 Back Creek Pending Investments Pty Ltd G 22/03/10 Pay by Renewal E 21/03/12 22/03/2012

EPC 1298 Granted Mineral & Coal 16 83km SE Emerald L 2/05/08 $2,032.80 Kilmain Pending Investments Pty Ltd G 7/04/09 Pay by Renewal / 07/04/2012 Cond’l E 6/04/11 Surrender

EPC 1492 Granted Mineral & Coal 154 (pending 20km NW – 26km S L 10/07/08 $8,639.40 Townsville Pending Investments Pty Ltd URA decision of 34km SE Townsville G 21/05/10 Pay by Renewal an 84 sub-block 21/05/2012 relinquishment) E 20/05/12

EPC 1617 Granted Mineral & Coal 65 40km SSE Townsville L 9/10/08 $8,258.25 Extended Investments Pty Ltd G 6/08/09 Pay by Townsville E 5/08/14 06/08/2012

EPC 1631 Granted Mineral & Coal 52 (pending URA 35km W Mackay L 28/10/08 $6,606.60 Calen South Investments Pty Ltd decision of a 4 G 5/11/09 Pay by sub-block 05/11/2011 relinquishment) E 4/11/14

EPC 1672 Granted Mineral & Coal 47 170km W Bundaberg L 8/01/09 $5,971.35 Lochaber Investments Pty Ltd and 5km W G 18/12/09 Pay by Mundubbera E 17/12/14 18/12/2011

EPC 1820 Granted Mineral & Coal 17 (pending URA 18-33km W Mackay L 9/07/09 $1,143.45 Boldon Investments Pty Ltd decision of an 8 G 19/02/10 Pay by sub-block 19/02/2012 relinquishment) E 18/02/15

EPC 1874 Granted Mineral & Coal 86 45km SW Cooktown L 10/08/09 $10,926.30 Normanby Investments Pty Ltd G 19/04/11 Pay by E 18/04/16 19/04/2012

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 136 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. APPROVED EXPENDITURE REPORTING TENEMENT CONSTRAINTS COMMITMENT ($)

Reporting Years Total Status due

7/05/2012 Yr 1 $25,000.00 $75,000.00 No overlapping tenure constraints Yr 2 $50,000.00

22/04/2012 Yr 1 $25,000.00 $75,000.00 PSL 71 Australia Pacific LNG Pty Limited, PSL 62 QGC Pty Limited, PPL 144 Surat Yr 2 $50,000.00 Gladstone Pipeline Pty Ltd, PPL 154 QCLNG Pipeline Pty Ltd, EPP 747 Arrow Energy Ltd

7/05/2012 Yr 1 $25,000.00 $75,000.00 PL 41 Santos QNT Pty Limited, PL 173 Australia Pacific LNG Pty Ltd, PPL 10 Australia Yr 2 $50,000.00 Pacific LNG Pty Ltd, MDL 340 Coal Mines Australia Ltd, EPP 722 BNG (Surat) Pty Ltd, EPP 337 Santos QNT Pty Ltd

21/06/2012 Yr 1 $25,000.00 $75,000.00 PPL 89 North Queensland Pipeline No 1 Pty Ltd Yr 2 $50,000.00

6/09/2012 Yr 1 $37,500.00 $475,000.00 PPL 89 North Queensland Pipeline No 1 Pty Ltd, EPM 18869 ACN Mining Pty Ltd Yr 2 $37,500.00 Yr 3 $100,000.00 Yr 4 $150,000.00 Yr 5 $150,000.00

5/12/2011 Yr 1 $37,500.00 $475,000.00 EPP 787 Arrow Energy Ltd Yr 2 $37,500.00 Yr 3 $100,000.00 Yr 4 $150,000.00 Yr 5 $150,000.00

18/01/2013 Yr 1 $40,000.00 $500,000.00 EPP 687 Arrow Energy Ltd, EPM 18753 (App) Roar Resources Pty Ltd, EPM 18431 Roar Yr 2 $60,000.00 Resources Pty Ltd, EPM 19081 (App) Dysart Coal Mine Management Pty Ltd Yr 3 $100,000.00 Yr 4 $150,000.00 Yr 5 $150,000.00

19/03/2012 Yr 1 $20,000.00 $150,000.00 No overlapping tenure constraints Yr 2 $20,000.00 Yr 3 $30,000.00 Yr 4 $30,000.00 Yr 5 $50,000.00

19/05/2012 Yr 1 $70,000.00 $500,000.00 EPM 15616 MFG Pty Ltd, EPM 19123 Jacaranda Minerals Limited, EPM 18039 Yr 2 $70,000.00 Jacaranda Minerals Limited, EPM 18791 (App) CR Mining Services Pty Ltd, EPM 17586 MIALAW Pty Ltd Yr 3 $70,000.00 Yr 4 $140,000.00 Yr 5 $150,000.00

Continued over page

Appendix 1 Tenement Overview continued

TENURE STATUS PRINCIPAL HOLDER SUB-BLOCKS LOCATION KEY DATES RENT

L Lodged Annual Rent (100%) G Granted E Expired Rent Status

EPC 1875 Granted Mineral & Coal 217 100km WSW L 10/08/09 $27,569.85 Pinetree Investments Pty Ltd Cooktown G 19/04/11 Pay by E 18/04/16 19/04/2012

EPC 1917 Granted Mineral & Coal 2 40km E Sprinsure and L 1/09/09 $254.10 Kilmain Conditional Investments Pty Ltd 70km SE Emerald G 22/03/10 Pay by South Surrender” E 21/03/15 21/03/2012

EPC 2132 Secondary Mineral & Coal 42 17km N Texas L 2/06/10 n/a North Texas Application Investments Pty Ltd Coal

EPC 2154 Competing Mineral & Coal 15 20km W Mackay L 1/07/10 n/a Parapi Application Investments Pty Ltd

EPC 2182 Competing Mineral & Coal 20 36km N Comet and L 2/08/10 n/a Lilyvale Application Investments Pty Ltd 9km E Lilyvale

EPC 2251 Competing Mineral & Coal 37 115km SW Charters L 1/11/10 n/a Sandy Creek Application Investments Pty Ltd Towers

EPC 2278 Granted Mineral & Coal 12 30km NW Injune L 26/11/10 $1,524.60 Cedar Creek Investments Pty Ltd G 31/05/11 Pay by E 30/05/16 31/05/2012

EPC 2281 Competing Mineral & Coal 10 38km NNW Dingo L 1/12/10 n/a Dingo Application Investments Pty Ltd

EPC 2309 Granted Mineral & Coal 28 160km W Brisbane and L 4/01/11 $3,557.40 Mobs Creek Investments Pty Ltd 30km E Dalby G 27/06/11 Pay by E 26/06/16 27/06/2012

EPC 2374 Priority Mineral & Coal 30 10km E Laidley L 1/03/11 n/a Mt Marrow Applicant Investments Pty Ltd

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 138 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. APPROVED EXPENDITURE REPORTING TENEMENT CONSTRAINTS COMMITMENT ($)

Reporting Years Total Status due

19/05/2012 Yr 1 $175,000.00 $910,000.00 ML 20387 (App) WALLACE, Ian Earl, EPM 19342 (App) New Hope Exploration Pty Ltd, Yr 2 $175,000.00 EPM 18400 (App) SCOTT, Walker Yr 3 $180,000.00 Yr 4 $180,000.00 Yr 5 $200,000.00

22/04/2012 Yr 1 $6,000.00 $70,000.00 EPP 337 Santos QNT Pty Ltd Yr 2 $6,000.00 Yr 3 $8,000.00 Yr 4 $30,000.00 Yr 5 $20,000.00

n/a n/a n/a EPC 1324 (Proposed) Baju Exploration Pty Ltd, EPM 18195 Mingoola Gold Pty Ltd

n/a n/a n/a EPC 2142 Eastern Coal Pty Limited, EPC 2138 (Priority Applicant) Matilda Coal Pty Ltd

n/a n/a n/a EPC 2170 Exxaro Australia Pty Ltd, EPC 2175 Eastern Iron Ltd, EPC 2171 Matilda Coal Pty Ltd, EPC 2183 Queensland Coal Investments, EPC 2177 (Priority) Stanmore Coal Ltd, EPC 2179 Argos (QLD) Pty Ltd, EPC 2187 Metrocoal Ltd, EPC 2185 Clean Global Energy Operations Pty Ltd, EPP 806 OME Resources Australia Pty Ltd, PCA 94 (App) OME Resources Australia Pty Ltd, PCA 102 (App) OME Resources Australia Pty Ltd

n/a n/a n/a EPC 2255 Queensland Coal Investments Pty Ltd, EPC 2252 Golden Cross operations Pty Ltd, EPC 2262 (priority) Endocoal Limited, EPC 2259 Guildford Coal Ltd, EPP 1010 Queensland Energy Resources Ltd

30/06/2012 Yr 1 $40,000.00 $400,000.00 No overlapping tenure constraints Yr 2 $40,000.00 Yr 3 $80,000.00 Yr 4 $80,000.00 Yr 5 $160,000.00

n/a n/a n/a EPC 2283 (Priority Applicant) Endocoal Limited, PSL 66 Bow Energy Ltd

27/06/2012 Yr 1 $20,000.00 $1,020,000.00 EPP 818 Eureka Petroleum Pty Ltd Yr 2 $350,000.00 Yr 3 $350,000.00 Yr 4 $300,000.00

n/a n/a n/a EPP 641 BNG Pty Ltd, PPL 2 APT Petroleum Pipelines Pty Ltd, MDL 157 Jeebropilly Collieries Pty Ltd, MDL 357 New Hope Collieries Pty Ltd, EPM 18022 Fernrow Pty Ltd, EPC 2365 Coal Face Resources Pty Ltd, EPC 2364 Shenhuo International Group Pty Ltd, EPC 2376 Coalbank Pty Ltd

Continued over page

Appendix 1 Tenement Overview continued

TENURE STATUS PRINCIPAL HOLDER SUB-BLOCKS LOCATION KEY DATES RENT

L Lodged Annual Rent (100%) G Granted E Expired Rent Status

EPC 2474 Competing Mineral & Coal 21 80km WNW L 1/04/11 n/a Palmeria Application Investments Pty Ltd Rockhampton

EPC 2592 Competing Mineral & Coal 17 70km S Collinsville and L 1/06/11 n/a Corsia Application Investments Pty Ltd 95km W Mackay

EPC 2634 Competing Mineral & Coal 11 37km N and 12km W L 1/07/11 n/a Galium Application Investments Pty Ltd Mackay

EPC 2644 Competing Mineral & Coal 44 220km SW Townsville L 1/07/11 n/a Mayaca Application Investments Pty Ltd

EPC 2698 Secondary Mineral & Coal 41 37km E Mackay and L 29/07/11 n/a Fleetwood Application Investments Pty Ltd 12km N Calen South

EPC 2699 Secondary Mineral & Coal 26 37km E Mackay and L 29/07/11 n/a Fleetwood Application Investments Pty Ltd 10km N Calen East

EPC 2836 Application Mineral & Coal 21 83km SE Emerald L 5/10/11 n/a Kilmain (Amalgamation Investments Pty Ltd EPC 1298 & EPC 1917)

MDL 138 Granted Moreton Coal Pty Ltd 244.6 ha Mintovale – S Boonah L 2/04/93 $5,491.27 Mintovale G 30/11/93 Pay by E 30/11/13 31/08/2012

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 140 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. APPROVED EXPENDITURE REPORTING TENEMENT CONSTRAINTS COMMITMENT ($)

Reporting Years Total Status due

n/a n/a n/a EPC 2461 (Priority) Endocoal Limited, EPC 2464 Clean Global Energy Operations Pty Ltd, EPC 2466 Civil & Mining Resources Pty Ltd, EPC 2469 McKay Brook Resources Pty Ltd, EPC 2470 Rio Tinto Exploration Pty Ltd, EPC 2471 Jindal Steel & Power Pty Ltd, EPC 2476 Blackwood Exploration Pty Ltd, EPC 2479 Yarrabee Coal Company Pty Ltd, EPP 811 New South Oil Pty Ltd, PPL 121 Central Queensland Pipeline Pty Ltd, PCA 32 (App) New South Oil Pty Ltd, PCA 33 (App) New South Oil Pty Ltd

n/a n/a n/a EPC 2581 AUSINDO Coal Pty Ltd, EPC 2588 Coal Face Resources Pty Ltd, EPC 2583 Dysart Coal Mine Management Pty Ltd, EPC 2595 Blackburn Coal Pty Ltd, EPC 2585 Aarti Minerals (Australia) Pty Ltd, EPC 2582 Rio Tinto Exploration Pty Limited, EPC 2596 Endocoal Limited, EPC 2591 Queensland Coal Investments Pty Ltd, EPC 2578 Ashburton Resources Pty Ltd, EPP 688 BNG (Surat) Pty Ltd

n/a n/a n/a EPC 2640 Coal Face Resources Pty Ltd, EPC 2635 AUSINDO Coal Pty Ltd

n/a n/a n/a EPC 2637 Fairway Coal Pty Ltd, EPC 2642 Adani Mining Pty Ltd, EPC 2639 Queensland Coal Investments Pty Ltd, EPC 2638 Coal Face Resources Pty Ltd, EPP 1010 Queensland Energy Resources Limited, EPP 743 Comet Ridge Ltd, EPG 10 (Proposed) Clean Energy Australasia Pty Ltd

n/a n/a n/a EPC 2492 Civil & Mining Resources Pty Ltd

n/a n/a n/a EPC 2405 Kush Commodities Pty Ltd, EPP 787 Arrow Energy Pty Ltd

n/a n/a n/a PL 41 Santos QNT Pty Limited, PL 173 Australia Pacific LNG Pty Ltd, PPL 10 Australia Pacific LNG Pty Ltd, MDL 340 Coal Mines Australia Ltd, EPP 722 BNG (Surat) Pty Ltd, EPP 337 Santos QNT Pty Ltd

1/01/2012 n/a n/a EPC 1662 (App) Altera Resources Limited, EPC 1656 (Priority) Golden Cross Operations Pty Ltd, EPP 791 BNG Pty Ltd

Appendix 2 Environmental Constraints Overview EPC 1875 EPC 1820 EPC 1874 EPC 1672 EPC 1631 EPC 1617 EPC 1492 EPC 1298 EPC 1297 CONSTRAINTS: EPC 1296

EPBC constraints y y y y y y y y y y

DERM mapped Environmentally Sensitive Areas – y y y y y y y y y y Mining Activities

DERM mapped High Value Regrowth Vegetation v 2.1, Vegetation Management Act Regional Ecosystems and Remnant; y y y y y y y y y y v 6.1 and DERM mapped Vegetation Management Act Essential Habitat; v 3.1 (Vegetation Management Act 1999 Class)

DERM mapped Draft SPP Great Barrier Reef (GBR) y n y y y y n y n n Catchment

DERM mapped Wetlands y n y y y y y y y y

DERM mapped Referable Wetlands y n y y y y n y y y

IRTM and DERM mapped Wild Rivers Area n n n n n n n n n n

IRTM and DERM mapped Strategic Cropping Land y y y y y y y y n n (SCL)

Mapped Stock Routes, Railways, Roads and state y y y y y y y y y y controlled roads

IRTM mapped Urban Restricted Areas n n n y n y n y n n

IRTM mapped Constrained Areas n y n y y y n y n n

IRTM mapped Sterile Land n n n y y y n y n y

IRTM mapped Restricted Areas n n n n n y n n n n

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 142 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. EPCA 2836 MDL 138 EPC 2699 EPCA 2698 EPCA 2644 EPCA 2634 EPCA 2592 EPCA 2474 EPCA 2374 EPC 2309 EPCA 2281 EPCA 2251 EPC 2278 EPCA 2182 EPCA 2154 EPCA 2132 EPC 1917

y y y y y y y y y y y y y y y y y

y n y y y y y n n y y y y y y y n

y y y y y y y y y y y y y y y y y

y y y n y n n n y n y y y y y y y

n n n n n n n n n n n n n n n n n

y y y y n y y y y y y y n y y y y

y y y y y n y y y y y y y y y y y

n n n n n n n n y n n n n n n n y

n y y n n n n n n n n n n y n n n

n n n n n n n n n n n y n y y n n

n n n n n n n n n n n n n n n n n

Appendix 3 Native Title and Cultural Heritage Overview

TENURE REGISTERED NATIVE TITLE CLAIMS CULTURAL HERITAGE

Aboriginal Parties Tenure Type Claim Federal Court # Status Cultural Heritage (in addition to Tenure # Status Grant Date Name(s) Tribunal # Date Bodies Registered NT Parties)

EPC 1296 Granted / Exclusive Bidjara People QUD216/08 Registered Yumba Burin Kangoulu People Pending Land QC08/5 12/09/08 Heritage Renewal 7/04/2009 Association Inc.Moonda Gudda Aboriginal Corp.

EPC 1297 Granted Expedited – – – – Western Wakka Procedures Wakka People Grant 22/03/2010

EPC 1298 Granted / Exclusive Karingbal QUD473/06 Registered – Kangoulu People Conditional Land People QC06/19 1/05/07 Surrender 7/04/2009 Kangoulu People #2

EPC 1492 Granted Expedited – – – – Bindal People Procedures Grant 21/05/2010

EPC 1617 Granted Exclusive – – – – Bindal People Land 6/08/2009

EPC 1631 Granted Exclusive – – – – Yuibera People Land 5/11/2009 Wiri People #2

EPC 1672 Granted Exclusive – – – – Wakka Wakka Land People #2 18/12/2009

EPC 1820 Granted Exclusive – – – Wirri Community Yuibera People Land Ltd 19/02/2010 Wiri People #2

EPC 1874 Granted Expedited – – – Jabalbina Yalanji Yalanji Peoples Procedures Aboriginal Corp. Grant RNTBC 19/04/2011

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 144 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. ILUA(S)

Recorded CH Sites Federal Court # Registered % of Registration Tribunal # Areas ILUA Name(s) ID # tenure Status Date

QUD6195/98 Y – – – – – QC98/25 N

QUD6004/99 N QGC Limited and Barunggam Cobble Cobble, QI2010/006 100 Registered 22/12/10 QC99/4 N Jarowair, Western Wakka Wakka and Yiman Groups

QUD6195/98 Y – – – – – QC98/25 N QUD6007/99 QC99/6

QUD6020/99 Y The North Queensland Gas Pipeline Northern ILUA QI2003/020 Registered 15/12/2003 QC99/21 N

QUD6223/98 N – – – – – QC98/37 N QUD6251/98 QC98/11

QUD6032/99 N – – – – – QC99/33 N

QUD6223/98 N – – – – – QC98/37 N QUD6251/98 QC98/11

QUD6008/98 N Western Yalanji People Exploration Permit Backlog QI2004/012 1.04 Registered 24/02/2005 QC94/13 N Project Eastern Kuku Yalanji and Ergon QI2006/005 .26 Registered 05/10/2007 Eastern Kuku Yalanji QI2006/007 .26 Registered 05/10/2007 Eastern Kuku Yalanji and Telstra QI2006/008 .26 Registered 05/10/2007 Eastern Kuku Yalanji the State of Queensland and QI2006/009 .26 Registered 19/10/2007 Cook Shire Council Eastern Kuku Yalanji and Cook Shire Council QI2006/025 .26 Registered 05/10/2007 Eastern Kuku Yalanji the state of Queensland and QI2006/026 .26 Registered 19/10/2007 Wet Tropics Management Authority - National Parks

Continued over page

Appendix 3 Native Title and Cultural Heritage Overview continued

TENURE REGISTERED NATIVE TITLE CLAIMS CULTURAL HERITAGE

Aboriginal Parties Tenure Type Claim Federal Court # Status Cultural Heritage (in addition to Tenure # Status Grant Date Name(s) Tribunal # Date Bodies Registered NT Parties)

EPC 1875 Granted Expedited Olkola/ QUD6010/0 Registered – – Procedures Fairlight QC03/10 12/09/03 Grant 19/04/2011

EPC 1917 Granted / Exclusive Karingbal QUD473/06 Registered Karingbal – Conditional Land People QC06/19 1/05/07 Traditional People Surrender 22/03/2010 Aboriginal Corp.

EPCA 2132 Secondary not yet Bigambul QUD101/09 Registered – – Application assigned People QC09/2 4/06/09

EPCA 2154 Competing not yet – – – Wirri Community Wiri People #2 Application assigned Ltd

EPCA 2182 Competing not yet – – – Lumburra Bimbi Kangoulu People Application assigned Pty Ltd

EPCA 2251 Competing not yet – – – – Kudjala & Jirandali Application assigned People # 2 Kudjala # 5

EPC 2278 Granted Exclusive Bidjara People QUD216/08 Registered – – Land QC08/5 12/09/08 31/05/2011

EPCA 2281 Competing not yet – – – – Kangoulu People Application assigned

EPC 2309 Granted Exclusive – – – – Western Wakka Land Wakka People 27/06/2011 Barunggam People

EPCA 2374 Priority not yet Jagera People QUD6014/03 Registered Jagera Daran Pty – Applicant assigned 2 QC03/15 11/03/04 Ltd

EPCA 2474 Competing not yet – – – – Kangoulu People Application assigned

EPCA 2592 Competing not yet Biri People QUD6244/98 Registered Wirri Community – Application assigned QC98/12 2/04/1998 Ltd Wiri People QUD372/06 Registered Core Country QC06/14 27/08/09 Claim

EPCA 2634 Competing not yet Wiri People QUD372/06 Registered Wirri Community Yuibera People Application assigned Core Country QC06/14 27/08/09 Ltd Claim Wiri People #2

EPCA 2644 Competing not yet – – – – – Application assigned

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 146 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. ILUA(S)

Recorded CH Sites Federal Court # Registered % of Registration Tribunal # Areas ILUA Name(s) ID # tenure Status Date

– Y Rinyirru (Lakefield) National Park (Cape York QI2011/052 0.17 in notifi- – N Penninsula Aboriginal Land) ILUA cation

– Y – – – – – N

QUD6251/98 N – – – – – QC98/11 N

QUD6195/98 N – – – – – QC98/25 N

QUD6016/02 N – – – – – QC02/24 N QUD6030/02 QC02/32

– N – – – – – N

QUD6195/98 Y – – – – – QC98/25 N

QUD6004/99 Y QGC Limited and Barunggam Cobble Cobble, QI2010/006 78.28 Registered 22/12/2010 QC99/4 N Jarowair, Western Wakka Wakka and Yiman Groups QUD6005/99 QC99/5

– Y Jagera Yuggera and Ugarapul and Ipswich City QI2007/037 74.6 Registered 19/09/2008 N Council

QUD6195/98 N Enertrade – Kangoulu CQGP Agreement QI2007/008 4.52 Registered 14/08/2007 QC98/25 N

– Y – – – – – N

QUD6223/98 N – – – – – QC98/37 N QUD6251/98 QC98/11

– N – – – – – N

Appendix 3 Native Title and Cultural Heritage Overview continued

TENURE REGISTERED NATIVE TITLE CLAIMS CULTURAL HERITAGE

Aboriginal Parties Tenure Type Claim Federal Court # Status Cultural Heritage (in addition to Tenure # Status Grant Date Name(s) Tribunal # Date Bodies Registered NT Parties)

EPCA 2698 Secondary not yet – – – Wirri Community Yuibera People Application assigned Ltd Wiri People #2

EPC 2699 Secondary not yet – – – Wirri Community Yuibera People Application assigned Ltd Wiri People #2

EPCA 2836 Application not yet Karingbal QUD473/06 Registered Karingbal Kangoulu People (Amalg of assigned People QC06/19 1/05/2007 Traditional People EPCs 1298 Brown River QUD245/11 Not Aboriginal Corp. Kangoulu People #2 and 1917) People QC11/4 accepted for Registration 7/10/11

MDL 138 Granted Exclusive – – – – – Land 30/11/1993

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 148 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. ILUA(S)

Recorded CH Sites Federal Court # Registered % of Registration Tribunal # Areas ILUA Name(s) ID # tenure Status Date

QUD6223/98 N – – – – – QC98/37 N QUD6251/98 QC98/11

QUD6195/98 Y – – – – – QC98/25 N QUD6007/99 QC99/6

– Y – – – – – N

DRILL SAMPLE FROM THE TOWNSVILLE PROJECT

PHOTO BY THROUGH THE LOOKING GLASS STUDIO WWW.LOOKING-GLASS.COM.AU

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 150 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Section 11 Investigating Accountant’s Report

The Board of Directors Allegiance Coal Limited Level 2, 49-51 York Street Sydney NSW 2000

23 March 2012

Dear Directors,

INVESTIGATING ACCOUNTANT’S REPORT ON THE HISTORICAL AND PRO FORMA FINANCIAL INFORMATION AND FINANCIAL SERVICES GUIDE

Introduction We have prepared this Investigating Accountant’s Report at the request of the Directors of Allegiance Coal Ltd (“Allegiance”) for inclusion in a Replacement Prospectus (“Prospectus”) to be dated on or about 23 March 2012, to be issued by Allegiance, in respect of the planned initial public offering on the Australian Securities Exchange Ltd. Expressions defined in the Prospectus have the same meaning in this report.

Scope Grant Thornton Corporate Finance has been requested to prepare this report on the following financial information:

Historical Financial Information The Historical Financial Information, as set out inSection 7 of the Prospectus comprises the reviewed statement of financial position as at 30 November 2011, hereafter, “Historical Financial Information”.

The Historical Financial Information has been extracted from the reviewed statement of financial position as at 30 November 2011, which was reviewed by Grant Thornton Audit Pty Ltd.

Pro forma Financial Information The Pro forma Financial Information as set out inSection 7 of the Prospectus comprises the pro forma statement of financial position as at 30 November 2011 and includes the Pro forma Adjustments (“Pro forma Adjustments”) as at that date as disclosed in Section 7.5. Hereafter, the “Pro forma Financial Information”, collectively, the “Financial Information”. This report has been prepared for inclusion in the Prospectus. Grant Thornton Corporate Finance disclaim any assumption of responsibility for any reliance on this report or on the Financial Information to which this report relates for any purpose other than the purposes for which it was prepared. This report should be read in conjunction with the Prospectus.

Directors Responsibility for the Historical and Pro Forma Financial Information The Directors have prepared and are responsible for the preparation and presentation of the Financial Information. The Directors are also responsible for the determination of the Pro forma Adjustments as set out in Section 7.5 of the Prospectus. The Financial Information is presented in an abbreviated form insofar as it does not include all of the presentation and disclosures required by Australian Accounting Standards and other mandatory professional reporting requirements.

Our Responsibility Our responsibility is to express a conclusion on the Historical and Pro forma Financial Information based on our review. We have conducted an independent review of the Financial Information in order to state whether on the basis of the procedures described, anything has come to our attention that would cause us to believe that: a) The Historical Financial Information does not present fairly the statement of financial position in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements ) of applicable Accounting Standards in Australia; b) The Pro forma Adjustments do not provide a reasonable basis for the Pro Forma Financial Information; c) The Pro forma Financial Information has not been prepared on the basis of the assumptions set out inSection 7 of the Prospectus; and d) The Pro forma Financial Information does not present fairly the pro forma statement of financial position at 30 November 2011 in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements) of applicable Accounting Standards in Australia as if the Pro forma Adjustments set out in Section 7.5 of the Prospectus had occurred at 30 November 2011. Our independent review of the Financial Information has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our procedures consist of reading relevant Board minutes, reading of relevant contracts and other legal documents, inquiries of management personnel and the Directors and analytical and other procedures applied to Allegiance’s accounting records. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Financial Information.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 152 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Conclusion Statements Review Conclusion on the Financial Information Based on our independent review, which is not an audit, nothing has come to our attention which causes us to believe that: a) The Historical Financial Information does not present fairly the statement of financial position at 30 November 2011 in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements) of applicable Accounting Standards in Australia; b) The Pro forma Adjustments do not provide a reasonable basis for the Pro Forma Financial Information; c) The Pro Forma Financial Information has not been prepared on the basis of the assumptions set out inSection 7 of the Prospectus; and d) The Pro forma Financial Information does not present fairly the pro forma statement of financial position at 30 November 2011 in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements) of applicable Accounting Standards in Australia as if the Pro forma Adjustments set out in Section 7 of the Prospectus had occurred at 30 November 2011.

Independence and Disclosure of Interest Grant Thornton Corporate Finance does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased conclusion in this matter. Grant Thornton Corporate Finance will receive a professional fee for the preparation of this report.

Financial Services Guide We have included our Financial Services Guide as Appendix A to this report. The Financial Services Guide is designed to assist retail clients in their use of any general financial product advice in this report.

Yours faithfully GRANT THORNTON CORPORATE FINANCE PTY LTD

SCOTT GRIFFIN CONOR FARLEY Partner Partner – Audit and Assurance

Appendix A – Financial Services Guide

This Financial Services Guide is dated 23 March 2012.

1. About us Grant Thornton Corporate Finance Pty Ltd (ABN 59 003 265 987, Australian Financial Services Licence no 247140) (“Grant Thornton Corporate Finance”) has been engaged by Allegiance Coal Ltd (“Allegiance”) to provide a report in the form of an Investigating Accountant’s Report (the “Report”) for inclusion in a Replacement Prospectus dated on or about 23 March 2012 (“the Prospectus”) relating to the offer of shares in the Company (“the Issue”). You have not engaged us directly but have been provided with a copy of the report as a retail client because of your connection to the matters set out in the report.

2. This Financial Services Guide This Financial Services Guide (“FSG”) is designed to assist retail clients in their use of any general financial product advice contained in the report. This FSG contains information about Grant Thornton Corporate Finance generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the report, and how complaints against us will be dealt with.

3. Financial services we are licensed to provide Our Australian financial services licence allows us to provide a broad range of services, including providing financial product advice in relation to various financial products such as securities and superannuation products and deal in a financial product by applying for, acquiring, varying or disposing of a financial product on behalf of another person in respect of securities and superannuation products.

4. General financial product advice The report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. You should consider your own objectives, financial situation and needs when assessing the suitability of the report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 154 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 5. Fees, commissions and other benefits we may receive Grant Thornton Corporate Finance charges fees to produce reports, including this report. These fees are negotiated and agreed with the entity who engages Grant Thornton Corporate Finance to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. In the preparation of this report our fees are charged on a fixed basis. Directors or employees of Grant Thornton Corporate Finance, Grant Thornton Australia Ltd, or other associated entities, may receive dividends, salary or wages from Grant Thornton Australia Ltd.

6. Associations with issuers of financial products Grant Thornton Corporate Finance and its authorised representatives, employees and associates may from time to time have relationships with the issuers of financial products. For example, Grant Thornton Australia Ltd may be the auditor of, or provide financial services to the issuer of a financial product and Grant Thornton Corporate Finance may provide financial services to the issuer of a financial product in eth ordinary course of its business. Grant Thornton Audit Pty Ltd is the auditor of Allegiance.

7. Complaints Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a member of the Financial Ombudsman Service (membership no. 11800). All complaints must be in writing and addressed to the Head of Corporate Finance at Grant Thornton Corporate Finance. We will endeavour to resolve all complaints within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service who can be contacted at: PO Box 579 – Collins Street West Melbourne, VIC 8007 Telephone: 1800 335 405 Grant Thornton Corporate Finance is only responsible for this report and FSG. Grant Thornton Corporate Finance will not respond in any way that might involve any provision of financial product advice to any retail investor.

8. Contact Details Grant Thornton Corporate Finance can be contacted by sending a letter to the following address: Head of Corporate Finance Grant Thornton Corporate Finance Pty Ltd Level 17, 383 Kent Street Sydney, NSW, 2000

DRILL SAMPLE FROM THE BACK CREEK PROJECT

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 156 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Section 12 Business and Investment Risks

12.1 Overview There are factors, both specific to the Company and of a general nature, which may affect the future operating and financial performance of the Company and the value of its Securities. Some of these risks may be mitigated by the Company, however many of these factors are outside the control of the Directors and management of the Company. This section identifies some, but not all, of the risks associated with an investment in the Company. Applicants should consider the risk factors described below, together with information contained elsewhere in this Prospectus, before deciding whether or not to apply for Securities under this Prospectus. Any potential investor should be aware that subscribing for Securities under this Prospectus involves various risks, and an investment in the Company should be considered speculative. The Shares to be issued pursuant to this Prospectus carryno guarantee with respect to the payment of dividends, return of capital or the market value of those Shares, and the future performance of the Shares may be influenced by a range of factors, some of which are set out below. 12.2 Specific business risk Investors should be aware of the risks specific to an investment in the Company described below.

12.2.1 Exploration and evaluation Potential investors should understand that mineral exploration and development companies such as the Company are high risk. Although the Company has identified a prospective coal exploration target, there is no guarantee that it, or any others that are identified, can be economically exploited. The Company’s exploration, development and appraisal activities are also dependent upon the grant and maintenance of appropriate licences, permits, resource consents and access arrangements which may not be granted, may be withdrawn or delayed or made subject to limitations or material changes by the relevant granting authority, including dilution of the Company’s interest in, or even loss of, the relevant licence or consent. The business of resource development and production involves a degree of risk. Successful development and production by the Company is dependent on a range of factors, including designing, constructing and operating efficient mining, processing and transportation facilities. Even if the Company discovers or recovers potentially commercial quantities of coal from its exploration, there is no guarantee that the Company will be able to successfully transport those resources to commercially viable markets or sell the resources to customers to achieve a commercial return.

12.2.2 Acquisition and title to tenements Although the Company will endeavour to maintain sound management of its tenements, the conditions attached to tenement licences may change, or the Company may not be able to comply with some or all of the conditions associated with those licences. There is a material risk that the Company may not be able to acquire, or may lose title to its tenements.

12.2.3 Application renewal risk The Company has a number of applications for renewal of EPCs (EPC 1298 in relation to Kilmain and EPC 1296 in relation to Connemarra). Whilst the Company is not aware of any reason why the renewal applications will not be granted, the grant involves the exercise of administrative functions (including discretion), which is beyond the control of the Company. Any failure of these renewal applications to be granted may have a material adverse effect on the ability of the Company to explore for minerals on the areas comprised in those renewal applications.

12.2.4 Majority shareholders and liquidity Gullewa will continue to be the majority Shareholder of the Company after the Offer, holding 100,000,000 Shares (approximately 56.6% of the Company’s enlarged Share capital). CRA will also continue to be a major Shareholder of the Company after the Offer, holding 25,000,000 Shares (approximately 14.2% of the Company’s enlarged Share capital). Other investors will together hold only 51,666,674 Shares (approximately 29.2% of the aggregate Share capital of the Company after the Offer). As such, new investors will have limited ability to influence the management, operation and control of the Company. Gullewa and CRA will be in a position to exert substantial influence over the outcome of matters relating to the Company. The interests of these Shareholders may be different from those of investors who subscribe for Securities under the Offer. Further, the Company expects that at least 70.8% of Shares on issue following the Offer (being those Shares held by Gullewa and CRA) will be subject to some form of escrow restriction under the ASX Listing Rules or otherwise. Such a large proportion of escrowed securities may adversely impact upon the liquidity of the Company’s Shares.

12.2.5 Land access and native title Land access is critical for exploration and exploitation to succeed. Access to land for exploration purposes can be affected by land ownership, including private (freehold) land, pastoral lease and native title land. The Company may need to enter into compensation arrangements with landowners or occupiers for the impact on land by the proposed exploration. The Company’s exploration activities in Australia are subject to the Native Title Act 1993 (Cth). Native title and Aboriginal land rights may affect the Company’s ability to gain access to prospective exploration areas and may generally affect the Company’s planned exploration and development activities. The Company may also be required to settle native title claims lodged over any of its Tenements. The level of impact of these matters will depend, in part, upon the location and native title status of the Company’s tenements. Native title is discussed in further detail in the Independent Tenements Report set out in Section 10 of this Prospectus.

12.2.6 Aboriginal cultural heritage Within Australia, Commonwealth and State legislation allows for the protection of Aboriginal cultural heritage and sites that are significant to Aboriginal custom and tradition. The Company is aware of its obligations in this respect and proposes to carry out ‘clearance surveys’ before conducting any exploration work that might disturb the surface area of the land. The Company’s tenements are likely to contain some sites of significance, which would need to be avoided during field exploration programs. It is possible that some areas containing an economic resource may also contain sacred sites, in which case they may remain unexploited. A detailed discussion of Aboriginal cultural heritage is contained in the Independent Tenements Report set out in Section 10 of this Prospectus.

12.2.7 Resources and reserves The Company’s success depends on its ability to find or acquire coal reserves that are economically recoverable. No assurance can be given that any identified exploration target will ever qualify as a commercially viable resource, which can be legally and economically exploited. There can be no assurance that the Company’s exploration program as disclosed in this Prospectus will result in the identi- fication of significant economic coal reserves. Even if the Company is successful in finding or acquiring coal reserves or resources, reserve and resource estimates are estimates only and no assurance can be given that any particular level of recovery from coal resources or reserves will in fact be realised or that any identified coal resource will ever qualify as commercially viable which can be legally and economically exploited.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 158 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 12.2.8 Coal quality Coal type and quality is known to vary across a wide spectrum of parameters. No guarantee can be given as to the type of coal identified, the quality characteristics of that coal in situ, or whether the coal is weathered or oxidized. As such, there is a risk that any coal identified may not be of sufficient quality to develop commercial mining operations, which could have an adverse impact on the Company.

12.2.9 Key personnel The Directors’ and management’s ability to successfully manage the Company’s performance and to expand and exploit the opportunities identified in this Prospectus will directly affect the success of the Company. The Company may be adversely affected if any of the Directors or management leaves the Company and cannot be suitably replaced. More generally, in the event that the Company progresses the development and commercialisation of any of its assets toward production, it is likely to require a large number of personnel for these operations. There is a risk that the Company may not be able to procure the required number of skilled workers for any of its future operations, which could have an adverse impact on the Company.

12.2.10 Coal markets Any substantial decline in the prices of coal or changes in industry factors, including demand and supply of coal, production cost levels in major producing regions and other macroeconomic factors, could have a material adverse effect on the Company. Changes in the coal market price may render the exploitation of any coal reserves and resources discovered or acquired by the Company, as commercially unviable.

12.2.11 Foreign exchange As a globally priced commodity, coal and therefore the revenues, earnings, assets and liabilities of the Company may be exposed adversely to foreign exchange rate fluctuations.

12.2.12 Commercialisation risks There is a high degree of risk associated with the development and commercialisation of the Company’s tenements. If the Company discovers commercial quantities of coal, there is a risk that the market price of the coal could be less than the costs of production. The Company could experience losses on exploration and may be forced to curtail or suspend some or all of its proposed exploration and/or mining activities. Obtaining necessary regulatory and environmental approvals before implementing its projects may be a lengthy and costly process for the Company, and there is a risk that these approvals may not be obtained at all.

12.2.13 Infrastructure access In the event that the Company progresses to production, there is no guarantee that suitable and affordable rail and port capacity will be available, which could have a material adverse impact on the Company. In the event that the Company progresses the development and commercialisation of any of its assets toward production, it will also require the use of both power and water infrastructure. There is a risk that the Company may not be able to procure access to power and water, which could have a material adverse impact on the Company.

12.2.14 Environmental The Company’s projects are subject to Australian State and Federal environmental laws. Despite efforts to conduct its activities in an environmentally responsible manner and in accordance with all applicable laws, the Company could be subject to liability due to environmental risks inherent in its activities. These include risks such as groundwater contam- ination, subsidence, accidental spills, leakages or other unforeseen circumstances. The Company is also subject to environmental protection legislation, which may affect the Company’s access to certain areas of its properties, and could result in unforeseen expenses and areas of moratorium or impact adversely on the Company’s Share price and its financial viability. Further information on environmentally sensitive areas is provided in the Independent Tenements Report set out in Section 10 of this Prospectus.

12.2.15 Strategic Cropping Land Without limiting the generally of the risks described in Section 12.2.14 above, the strategic cropping land legislation in Queensland (administered through the Department of Environment and Resource Management) is designed to protect the use of land that is highly suitable for cropping (known as Strategic Cropping Land”) from activities (for instance, mining) which will permanently impact the land. A determination that land is “Strategic Cropping Land” may prevent future mining activity on that land where that mining activity will permanently alienate the land from use for cropping. A number of the Company’s projects fall within areas identified on the “Strategic Cropping Land” trigger maps. Where that land is determined to be “Strategic Cropping Land”, this may adversely affect (or prevent) the Company’s ability to exploit any discovered coal resources in those areas.

12.2.16 Urban Restricted Areas Without limiting the generally of the risks described in Section 12.2.14 above, draft legislation has been introduced by the Queensland Government which affects exploration and mining in “Urban Restricted Areas” (being areas within two kilometres of cities or towns with a population of more than 1,000 people). If that draft legislation is passed, it will prevent any new mineral and coal exploration permit applications from being accepted over land within “Urban Restricted Areas”, holders of exploration permits and those who have lodged applications for exploration permits, including renewals that cover any part of the “Urban Restricted Areas”, will be asked to voluntarily relinquish the land, and open cut mining will be prohibited within “Urban Restricted Areas”. A number of the Company’s tenements (including MDL 138 which relates to the Mintovale Project) fall within “Urban Restricted Areas”. As such, if that legislation is passed, it may adversely affect the Company’s ability to exploit any discovered coal resources in those areas. In particular, as open cut mining will be prohibited in “Urban Restricted Areas”, if the legislation is passed, the potential resources within the Mintovale Project do not have reasonable prospects for eventual economic extraction.

12.2.17 Carbon tax On 13 September 2011 the Australian government introduced a package of legislation to implement the policy set out in “Securing a clean energy future: The Australian Government’s Climate Change Plan”. The Clean Energy Future legislation package has now been passed by the Commonwealth Senate. From July 2012, the Company may be required to pay a carbon price, depending on the level of emissions produced. The carbon price will start at $23 per tonne of carbon in 2012 and rise by 2.5% a year in real terms until an emissions trading scheme is introduced on 1 July 2015. As the Company is currently a coal explorer a carbon tax is not likely to have an immediately impact. However, it is difficult to accurately determine how the carbon price mechanism may affect the Company and its business activities in the future. If the Company does have increased input and other costs, and if the Company cannot successfully offset the effect of the carbon price, it may have an adverse effect on its financial position and cash flow.

12.2.18 Mineral resources rent tax On 2 July 2010, the Australian government announced that a minerals resource rent tax (MRRT) will apply to coal and iron ore from 1 July 2012. A draft package of legislation for the MRRT has been passed by the House of Representatives and is the subject of a report by the Senate Economics Committee due to be delivered to the Senate by 14 March 2012. The draft MRRT legislation is proposed to apply to the assessable profit based on the value of the resource extracted in all iron ore and coal projects at an effective rate of 22.5%. The draft MRRT legislation proposes that companies with annual MRRT profits of less than $75 million will not pay the tax, and companies with annual MRRT profits between $75 million and $125 million will receive a partial offset in MRRT liability. The extent to which the Company will be affected by the MRRT will depend upon the final legislative form of the MRRT, and its application to current and future projects that may be developed by the Company.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 160 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 12.2.19 Future financing Future financing may be required by the Company to support proposed exploration and development plans. There can be no assurance that such funding will be available on satisfactory terms or at all. Inability to obtain funding could adversely affect the Company and result in a default in tenement obligations which, if not remedied, could result in forfeiture of permits or licences.

12.2.20 Operational If the Company discovers commercially viable coal reserves and decides to develop and commission mining operations, the operations of the Company, including mining and processing, will carry significant risks. These include, but are not limited to, potential failure to achieve predicted coal quality specifications in exploration, mining and processing, technical difficulties encountered in commissioning and operating plant and equipment, mechanical failure, adverse weather conditions, industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of consumables, spare parts, plant or equipment.

12.2.21 Contractual As a party to many contracts, the Company will have various contractual rights. However, no assurance can be given that all contracts will be fully performed by all contracting parties and that the Company will be successful in securing compliance with the terms of each contract by the relevant third party. 12.3 General risks 12.3.1 Share market The price of Shares may rise or fall depending upon a range of factors beyond the Company’s control and which are unrelated to the Company’s operational performance. Investors who decide to sell their Shares after the Company is admitted to the Official List may not receive the entire amount of their original investment. The price of Shares listed on the ASX may also be affected by a range of factors including the Company’s financial performance, and by changes in the business environment specifically affecting the Australian resources sector and exploration companies. The Shares carry no guarantee in respect of profitability, dividends, return on capital, or the price at which they may trade on the ASX. There are a number of national and international market factors that may affect the Share price including movements in international stock markets, economic conditions and the general economic outlook, interest rates and exchange rates, inflation rates, commodity supply and demand, government taxation and royalties legislation, monetary and other policy changes, and general investor sentiment. Neither the Company nor its Directors have control over any of these factors nor can they guarantee that the price of Shares will not be affected by one or more of these factors.

12.3.2 General economic conditions Factors affecting the general economic climate may adversely affect the performance of the Company. These factors include the general level of international and domestic economic activity, inflation and interest rates, commodity pricing and the general level of activity within the resources industry. These factors are beyond the control of the Company and their impact cannot be predicted.

12.3.3 Changes in laws and government policy Changes in government regulations and policies, both domestically and internationally, may adversely affect the financial performance and/or the current and proposed operations of the Company. Other than as identified in this Prospectus the Company is not aware of any other current or proposed material changes in any relevant regulations or policy.

12.3.4 Taxation There may be tax implications arising from Applications for Securities, the receipt of dividends (both franked and unfranked) (if any) from the Company, the exercise of Options and the disposal of Securities. All potential investors in the Company should seek their own independent advice in relation to taxation matters.

12.3.5 Government actions The impact of actions by domestic and international governments may affect the Company’s activities, including in relation to access to infrastructure, compliance with environmental regulations, export and general trade regulations, taxation and royalties.

12.3.6 Unforeseen expenses The proposed expenditure on the Company’s projects may be adversely affected by any unforeseen expenses which arise in the future and which have not been considered in this Prospectus.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 162 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Section 13 Material Contracts

13.1 Underwriting Agreement The Company has entered into an underwriting agreement with Patersons Securities Limited ABN 69 008 896 311 dated 14 March 2012 (Underwriting Agreement). Pursuant to the Underwriting Agreement, the Underwriter has agreed to underwrite the Offer subject to the termination rights described further below. The Underwriter may appoint sub-underwriters to sub-underwrite up to the Underwritten Amount.

13.1.1 Conditions of Underwriting Amongst other matters, the Underwriting Agreement is condition on: a) the ASX admitting the Shares and Attaching Options to quotation on the ASX subject only to customary conditions; and b) the Company providing a notice to the Underwriter within 2 business days of the Closing Date of the Public Offer, of the number of Securities for which Applications have not been received.

13.1.2 Fees payable to Underwriter The Company will pay the Underwriter an underwriting fee equal to 5% of the Underwritten Amount (being a fee of $350,000), and a management fee equal to 1% of the gross dollar amount raised under the Offer plus GST (being a fee of $77,000). The Underwriter must pay, out of its fee, fees to sub-underwriters. In the event that the Company or the Underwriter terminate the Underwriting Agreement, the Company must pay a termination fee of $25,000 (excluding GST) to the Underwriter.

13.1.3 Underwriters termination rights Other than in respect of the extension of the Exposure Period and the lodgement of this replacement Prospectus, in respect of which the Underwriter has waived its rights of termination, the Underwriter may terminate the Underwriting Agreement in each of the following circumstances: a) Indices fall: any of the All Ordinaries Index, the S&P/ASX 200 Index or the S&P/ASX 300 Metals and Mining Index falls 10% or more below its respective level as at the close of business on the business day prior to the date of the Underwriting Agreement; or b) Prospectus: the Company does not lodge the Prospectus on the date stipulated in the timetable or the Prospectus or the Offer is withdrawn by the Company; or c) Copies of Prospectus: the Company fails to provide to the Underwriter sufficient copies of the Prospectus as the Underwriter may reasonably require; or d) No Official Quotation: ASX gives formal or informal notice that the Shares or Attaching Options will not be quoted on the ASX; or e) Supplementary prospectus: if the Underwriter forms the view on reasonable grounds that a supplementary or replacement prospectus should be lodged with ASIC for any of the reasons referred to in section 719 of the Corporations Act and the Company fails to lodge a supplementary or replacement prospectus in such a form and content within such time as the Underwriter may reasonably require, or if the Company lodges a supplementary or replacement prospectus without the prior written agreement of the Underwriter; or f) Non compliance with disclosure requirements: it transpires that the Prospectus does not contain all the information that investors and their professional advisers would reasonably require to make an informed

assessment of the assets and liabilities, financial position and performance, profits and losses and prospects of the Company and the rights and liabilities attaching to the Shares; or g) Misleading Prospectus: it transpires that there is a statement in the Prospectus that is, or becomes, misleading or deceptive or likely to mislead or deceive, or that there is an omission from the Prospectus (having regard to the provisions of sections 710, 711 and 716 of the Corporations Act); or h) Restriction on allotment: the Company is prevented from allotting the Shares and Attaching Options within the time required by the Underwriting Agreement, the Corporations Act, the ASX Listing Rules, any statute, regulation or order of a court of competent jurisdiction by ASIC, ASX or any court of competent jurisdiction or any governmental or semi governmental agency or authority; or i) Withdrawal of consent to Prospectus: any person (other than the Underwriter) who has previously consented to the inclusion of its, his or her name in the Prospectus or to be named in the Prospectus, withdraws that consent, where it is required for the Prospectus or any replacement or supplementary prospectus; or j) ASIC application: an application is made by ASIC for an order under section 1324B of the Corporations Act in relation to the Prospectus and that application has not been dismissed or withdrawn before the Company is required to notify the Underwriter of any shortfall in Applications; or k) ASIC hearing: ASIC gives notice of its intention to hold a hearing under section 739 of the Corporations Act in relation to the Prospectus to determine if it should make a stop order in relation to the Prospectus or the ASIC makes an interim or final stop order in relation to the Prospectus under section 739 of the Corporations Act; or l) Takeovers Panel: the Takeovers Panel makes a declaration that circumstances in relation to the affairs of the Company are unacceptable circumstances under Part 6.10 of the Corporations Act, or an application for such a declaration is made to the Takeovers Panel; or m) Indictable offence): a director or senior manager of the Company or its subsidiaries is charged with an indictable offence; or n) Sub-underwriters: any sub-underwriter introduced to the Underwriter by the Company does not comply with their material obligations under their respective obligations under the sub-underwriting agreements. As at the date of this Prospectus, sub-underwriters introduced to the Underwriter by the Company have agreed to sub- underwrite $2,000,000 of the Securities the subject of the Offer.

13.1.4 Underwriters termination rights subject to a material adverse effect Other than in respect of the extension of the Exposure Period and the lodgement of this replacement Prospectus, in respect of which the Underwriter has waived its rights of termination, the Underwriter may also terminate the Underwriting Agreement in the following circumstances, provided that in the reasonable opinion of the Underwriter reached in good faith, the circumstance (either alone or together with two or more of the following circumstances) is likely to have a material adverse effect (in respect of the Offer or the Company or its Securities), or could give rise to a liability of the Underwriter under the Corporations Act: a) Exposure period: before the end of the exposure period ASIC notifies the Company of any deficiency of any kind in the Prospectus or ASIC gives any notice, whether written or oral, to the Company extending (or further extending) the exposure period or giving notice of its intention to so extend; or b) Authorisation: any authorisation which is material to anything referred to in the Prospectus is repealed, revoked or terminated or expires, or is modified or amended in a manner unacceptable to the Underwriter; or c) Default: default or breach by the Company under the Underwriting Agreement of any terms, condition, covenant or undertaking; or d) Incorrect or untrue representation: any representation, warranty or undertaking given by the Company in the Underwriting Agreement are or become untrue or incorrect; or e) Contravention of constitution or Act: a contravention by the Company or its subsidiaries of any provision of its constitution, the Corporations Act, the ASX Listing Rules or any other applicable legislation or any policy or requirement of ASIC or ASX; or f) Error in Due Diligence Results: it transpires that any of the results of the due diligence investigation in relation to the Company or any part of the Prospectus verification materials was false, misleading or deceptive or that there was an omission from them; g) Significant change: a “new circumstance” as referred to in section 719(1) of the Corporations Act arises that is materially adverse from the point of view of an investor; h) Public statements: without the prior approval of the Underwriter a public statement is made by the Company in relation to the Offer or the Prospectus;

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 164 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. i) Misleading information: any information supplied at any time by the Company or any person on its behalf to the Underwriter in respect of any aspect of the Offer or the affairs of the Company or its subsidiaries is or becomes misleading or deceptive or likely to mislead or deceive; j) Official Quotation qualified: the quotation of the Shares and Attaching Options is subject to qualification or conditions that are not customary; k) Change in Act or policy: there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia or any of its States or Territories any Act or prospective Act or budget or the Reserve Bank of Australia or any Commonwealth or State authority adopts or announces a proposal to adopt any new, or any major change in, existing, monetary, taxation, exchange or fiscal policy (other than a law or policy which has been announced before the date of the Underwriting Agreement), any of which does or is likely to prohibit or regulate financial institutions or credit providers, capital issues or stock markets; l) Hostilities: there is an outbreak of hostilities or a material escalation of hostilities (whether or not war has been declared) after the date of the Underwriting Agreement involving one or more of Australia, New Zealand, Indonesia, Japan, Russia, the United Kingdom, the United States of America, India, Pakistan, or the Peoples Republic of China, Israel or any member of the European Union, or a terrorist act is perpetrated on any of those countries or any diplomatic, military, commercial or political establishment of any of those countries anywhere in the world; m) Prescribed Occurrence: certain prescribed occurrences occur, other than as disclosed in the Prospectus; n) Suspension of debt payments: the Company suspends payment of its debts generally; o) Event of Insolvency: an event of insolvency occurs in respect of the Company or its subsidiaries; p) Judgment against the Company or its subsidiaries: a judgment in an amount exceeding $25,000 is obtained against the Company or its subsidiaries and is not set aside or satisfied within 7 days; q) Litigation: litigation, arbitration, administrative or industrial proceedings are after the date of the Underwriting Agreement commenced or threatened against the Company or any of its subsidiaries, other than any claims foreshadowed in the Prospectus; r) Board and senior management composition: there is a change in the composition of the Board or a change in the senior management of the Company before completion of the Offer without the prior written consent of the Underwriter; s) Change in shareholdings: there is a material change in the major or controlling shareholdings of the Company or any of its subsidiaries or a takeover offer or scheme of arrangement pursuant to Chapter 5 or 6 of the Corporations Act is publicly announced in relation to the Company or any of its subsidiaries; t) Timetable: there is a delay in the agreed timetable which is greater than 5 business days; u) Force Majeure: a force majeure event affecting the Company’s business or any obligation under the Underwriting Agreement lasts in excess of 7 days; v) Certain resolutions passed: the Company or any of its subsidiaries passes or takes any steps to pass a resolution under section 254N, section 257A or section 260B of the Corporations Act or a resolution to amend its constitution without the prior written consent of the Underwriter; w) Capital Structure: the Company or any of its subsidiaries alters its capital structure in any manner not contem- plated by the Prospectus; x) Breach of Material Contracts: any of the Company’s material contracts (as disclosed in the Prospectus) is terminated or substantially modified; y) Investigation: any person is appointed under any legislation in respect of companies to investigate the affairs of a related body corporate of the Company; or z) Market Conditions: a suspension or material limitation in trading generally on ASX occurs or any material adverse change or disruption occurs in the existing financial markets, political or economic conditions of Australia, Japan, the United Kingdom, the United States of America or other international financial markets.

13.1.5 Underwriter’s indemnity The Company agrees to indemnify the Underwriter, officers, employees and agents (Indemnified Parties) against any prosecutions, losses, penalties, actions, suits, claims, expenses, costs, liabilities or demands which the Indemnified Party pays, suffers, incurs or is liable for (including legal costs and expenses on a full indemnity basis) in respect of: a) the Offer; b) the Prospectus; c) any advertising, publicity or announcements in relation to the Offer; or d) any breach of the terms of, or representations and warranties in, the Underwriting Agreement, except to the extent that the losses arise from the wilful default, misconduct, fraud, negligence or breach of contract of the Indemnified Party.

13.2 Employment Agreement – Mr Colin Randall The Company has entered into an employment contract with Colin Randall dated 9 May 2011 (and amended 21 November 2011) for him to act as Managing Director of the Company (Randall Employment Agreement). Mr Randall will be responsible for the effective and prompt overall conduct of the Company’s business. If the Offer is successful, the Randall Employment Agreement requires Mr Randall to work four days per week, for such hours as reasonably necessary for the effective and prompt performance of his duties as Managing Director. It also recognises that Mr Randall may engage in certain specified non-competing business activities, but prohibits Mr Randall from engaging in any additional business activities without the prior written consent of the Board, which will not be unreasonably withheld. Mr Randall’s gross remuneration will be $250,000 per annum (including employer statutory superannuation contri- butions), which will be reviewed annually at approximately 1 January. The term of the Randall Employment Agreement is three years, unless terminated earlier. The agreement is terminable on six months notice by either party, but the Company may terminate the agreement immediately in the event of Mr Randall’s misconduct, incompetence or behaviour, which, in the reasonable opinion of the Board, is prejudicial to the commercial or other interests of the Company. It was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in relation to this agreement on the basis that it constituted reasonable remuneration for an officer or employee of the Company (section 211 of the Corporations Act). 13.3 Service Agreements 13.3.1 Gullewa Services Agreement Under a services agreement between the Company and Gullewa dated 5 May 2011 (and amended 29 February 2012), Gullewa provides services to the Company to assist with its administration and certain other procedural and reporting obligations, including the maintenance of a general ledger, the preparation of monthly accounts, assistance with the preparation of half yearly and annual statutory financial reports, liaising with auditors and taxation officials and attending to the payment of salaries and creditors. In addition, Gullewa will provide exploration management and secretarial services required by the Company (Gullewa Services Agreement). The Company will pay a service fee of $11,640 per month to Gullewa, plus a fee to cover the costs associated with exploration management and secretarial staff engaged to provide those service (which are estimated at $13,693 per month). The Company must also reimburse Gullewa for reasonable out of pocket expenses incurred in performing those services. The Gullewa Services Agreement is terminable on three months written notice by either party, and immediately in certain other circumstances. In the circumstances, the terms of the Gullewa Services Agreement are no less favourable to MCI than arm’s length terms. As such, it was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in respect of this agreement.

13.3.2 CRA Services Agreement Under a services agreement between the Company and CRA dated 5 May 2011 (CRA Services Agreement), CRA will provide office accommodation for staff and data for which it will charge a fixed fee of $600 per month. CRA will also provided exploration management services as required by the Company (estimated at $13,000 per month), which include the cost associated with the engagement of David Dempster. The Company must also reimburse CRA for reasonable out of pocket expenses incurred in performing these services. The CRA Services Agreement is terminable on three months written notice by either party, and immediately in certain other circumstances. In the circumstances, the terms of the CRA Services Agreement are no less favourable to MCI than arm’s length terms. As such, it was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in respect of this agreement.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 166 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 13.4 Facilities Deeds 13.4.1 Facility Deeds – Float Costs Each of Gullewa and CRA entered into separate facility deeds with MCI (a wholly-owned subsidiary of the Company) on 5 May 2011 under which they agreed to advance funds to MCI to cover the costs associated with the Offer Facility( Deeds – Float Costs). The material terms of Gullewa’s and CRA’s respective Facility Deed – Float Costs are set out below. In the circumstance, the terms of the Facility Deeds – Float Costs are no less favourable to MCI than arm’s length terms. As such, it was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in respect of these deeds. The Company reserves the right to repay any amounts outstanding in respect of the Facility Deeds – Float Costs before 30 June 2014, but it is not the current intention of the Company to do so.

PROVISION GULLEWA CRA

Facility limit (fully drawn) $400,000 $100,000

Capitalised Interest $32,232 $8,968

Interest Interest accrues daily and is capitalised monthly at a rate of BBSW + 4%

Repayment Date No later than 30 June 2014

13.4.2 Facility Deeds – Operating Costs Each of Gullewa and CRA entered into separate facility deeds with MCI on 5 May 2011 under which they agreed to advance funds to MCI to cover MCI’s operating costs (Facility Deeds – Operating Costs). The material terms of Gullewa’s and CRA’s respective Facility Deed – Operating Costs are set out below. In the circumstances, the terms of the Facility Deeds – Operating Costs are no less favourable to MCI than arm’s length terms. As such, it was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in respect of these deeds. 13.5 Guarantees and Indemnities

PROVISION GULLEWA CRA

Facility limit $1,580,000 $320,000

Amount drawn down as at the $1,543,602 $310,900 date of this prospectus

Capitalised Interest $124,383 $27,882

Interest Interest accrues daily and is capitalised monthly at a rate of BBSW + 4%

Repayment Date The debt under each Facility Deed – Operating Costs is repayable on 30 June 2014, unless at least 14 days before the repayment date MCI provides to Gullewa or CRA (as relevant) evidence on the basis of which MCI reasonably considers that if it were to repay the debt the Allegiance Coal Group would not have sufficient cash to cover its 12 month operating budget. In which case, the repayment date will be extended by 90-days. The repayment date can continue to be extended by 90-day periods in this manner until a sunset repayment date of 30 June 2017, at which time all of the debt under the Facility Deed – Operating Costs must be repaid. However, if on the repayment date MCI reasonably considers that it can pay part of the money comprising its debt under the respective Facility Deeds – Operating Costs, such that the Allegiance Coal Group will have sufficient cash to cover its 12-month operating budget, it must repay that part of the debt.

The Company entered into separate deeds of guarantee and indemnity with each of Gullewa and CRA on 5 May 2011 under which it agreed, subject to being listed on the ASX, to guarantee MCI’s obligations under the Facility Deeds – Float Costs and the Facility Deeds – Operating Costs to Gullewa and CRA respectively (Facility Guarantees). In addition, the Company indemnifies Gullewa and CRA respectively against losses, damages, costs, charges, liabilities and expenses which they suffer or incur as a result of a failure of MCI to meet its obligations under those agreements. In the circumstances, the terms of the Facility Guarantees are no less favourable to the Company than arm’s length terms. As such, it was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in respect of these agreements. 13.6 Surat Royalty Agreement On 21 October 2010, Echidna Coal Pty Ltd ACN 146 608 764, a wholly owned subsidiary of MCI, acquired all of the shares in Moreton Coal Pty Ltd ACN 010 913 836 from Surat Coal Pty Ltd ACN 010 678 869. The purchase price for the acquisition of those shares was a 4% royalty that Echidna Coal must pay to Surat Coal on the amount it receives, if any, from the first five million tonnes of coal sold pursuant to MDL 138. However, we note that MDL 138 falls within an area proposed by draft legislation to be designated as an “Urban Restricted Area”. If that legislation is passed, it will prohibit open cut mining within MDL 138, such that the potential resources within MDL 138 do not have reasonable prospects for eventual economic extraction. For further information see the summary of the Independent Tenements Report in Section 10. 13.7 Deeds of access, indemnity and insurance The Company has entered into a Deed of Access, Indemnity and Insurance with each Director and the Company secretary (Officers). Under each Deed, the Company indemnifies the Officers to the extent permitted by law against legal proceedings costs, damages, losses, liabilities, costs, charges or expenses, (however described) incurred by the Officers in connection with their offices. The Deed provides for advances to Officers to defend claims so that in the event that an Officer incurs or is likely to incur legal costs in circumstances where the Company may be obliged to indemnify the Officer for the legal costs, the Company must advance the money to the Officer to enable him or her to pay for the legal costs. If the Company advances an amount to the Officer and it is later established that the Officer is not entitled to be indemnified for those costs, the Officer must repay the amount to the Company. Until 12 years after the date that the Officer ceases to be an Officer, the Company must provide access to all Board papers relevant to defending any claim brought against the Officer in their capacity as an officer of the Company. In addition, until seven years after the date that the Officer ceases to be an Officer, the Company will maintain a contract of insurance to insure the Officer against liabilities incurred in connection with their office, excluding liabilities prohibited by law. It was not necessary to obtain Shareholder approval in relation to these deeds of access, insurance and indemnity as section 212 of the Corporations Act provides an exception for the entry in to deeds of access, insurance and indemnity on terms which are reasonable in the circumstances. 13.8 Drilling contract MCI and Cedars Rest Pty Limited ACN 141 988 427 (trading as Wizard Drilling) entered into a drilling contract on or about 2 February 2011 under which Cedars Rest agreed to provide drilling services on an ‘as required’ basis for a period ending on the earlier of two years after the date of the agreement, 12 months after the commencement of work under contract (or such period as may be extended by written notice of MCI) and the date that the contract is terminated. MCI may terminate the contract by written notice to Cedars Rest.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 168 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Section 14 Additional Information

14.1 Incorporation The Company was incorporated on 13 April 2011 and registered in Victoria. 14.2 Rights and liabilities attaching to Shares in the Company A summary of the key rights attaching to the Shares is set out below. The provisions of the Constitution relating to the rights attaching to the Shares must be read subject to the Corporations Act, the ASX Listing Rules and, in certain circumstances the ASX Settlement Operating Rules. This summary is not intended to be exhaustive and does not constitute a definitive statement of the rights, liabilities and restrictions attaching to the Shares.

14.2.1 Voting At a general meeting, every Shareholder present in person or by proxy, attorney or representative has one vote on a show of hands, and on a poll, one vote for every fully paid Share held. On a poll, partly paid Shares confer a fraction of a vote proportional to the amount paid up on the Share. A poll may be demanded by at least five Shareholders entitled to vote on the resolution, by Shareholders with at least 5% of the votes that may be cast on the resolution, or by the chairperson.

14.2.2 General meetings and notices Each Shareholder is entitled to receive notice of, and except in certain circumstances, to attend and vote at general meetings of the Company and receive all notices, accounts and other documents required to be sent to Shareholders under the Constitution or the Corporations Act.

14.2.3 Dividends Shares carry the right to receive dividends. The Directors may from time to time pay dividends to Shareholders out of the profits of the Company. The Directors may pay any interim and final dividends as, in their judgement the financial position of the Company justifies. The Directors may fix the amount and time for and method of payment of the dividends. The payment of a dividend does not require any confirmation by Shareholders of the Company in a general meeting. As the Company is a coal exploration and development company and is not currently making any profits, the Directors do not anticipate that the Company will pay dividends in the immediate future.

14.2.4 Transfer of Shares Shareholders may transfer Shares electronically by a transfer effected in accordance with the ASX Settlement Operating Rules, the Corporations Act and the ASX Listing Rules or by a written transfer instrument in any usual or common form or any other form that the Directors approve. The Company will not issue Share certificates to Shareholders. Where the Shares are quoted on ASX, the Directors may in their absolute discretion refuse to register any transfer in any of the circumstances permitted by the ASX Listing Rules. The Company must not refuse or fail to register or give effect to, or delay or in any way interfere with, a proper transfer of Shares quoted by ASX.

14.2.5 Issue of further shares The Directors may (subject to the restrictions on the issue of Shares imposed by the Constitution, the ASX Listing Rules and the Corporations Act) issue, grant options over, or otherwise dispose of, Shares on such terms as the Directors determine.

14.2.6 Winding up Shares attract the right in a winding up to participate equally in the distribution of the assets of the Company (subject to any amounts unpaid on a Share). On a winding up of the Company, the liquidator may, with the approval of a special resolution of the Company, divide among the Shareholders in kind, all or any of the Company’s assets and determine how such division is to be carried out between different classes of Shareholders.

14.2.7 Directors – appointment and removal The minimum number of Directors is three and the maximum number of Directors is 10, unless the Shareholders pass a resolution varying that number. Directors are elected at annual general meetings of the Company. Retirement will occur on a rotational basis so that generally one-third of the Directors plus any Director who has held office for three or more annual general meetings retire at each general meeting of the Company. A Director retiring by rotation is eligible for re- election, subject to certain restrictions. The Directors may also appoint a Director to fill a casual vacancy on the Board or in addition to the existing Directors, who will then hold office until the next annual general meeting of the Company.

14.2.8 Directors voting Questions arising at a meeting of Directors will be decided by a majority of votes of the Directors present at the meeting and entitled to vote on the matter. In the case of an equality of votes, the chairperson has a second or casting vote.

14.2.9 Shareholder liability As the Shares offered under this Prospectus are fully paid, they are not subject to any calls for money by Directors and will therefore not become liable to forfeiture.

14.2.10 Variation of rights Under the Constitution, the rights attached to any class of shares in the Company (including the Shares) may be varied in accordance with the Corporations Act by special resolution of the Company and special resolution of a meeting of members holding shares in that class.

14.2.11 Alteration of the constitution The Constitution can only be amended by a special resolution passed by at least three quarters of the votes cast by members entitled to vote on the resolution.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 170 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 14.3 Details of Shares issued prior to the Prospectus The Company only has one class of shares on issue - fully paid ordinary Shares. As at the date of this Prospectus, the Company has 141,666,674 Shares on issue. 100,000,000 of these Shares are held by Gullewa, 25,000,000 of these Shares are held by CRA, and the remaining 16,666,674 Shares are held by 28 other Shareholders. These Shares were issued as follows:

DATE OF ISSUE SHARES ISSUED CIRCUMSTANCES OF ISSUE AND CONSIDERATION

13 April 2011 4 Shares issued to Gullewa on incorporation of the Company as fully paid up to $0.20 each

13 April 2011 1 Shares issued to CRA on incorporation of the Company as fully paid up to $0.20 each

4 May 2011 99,999,996 Shares issued to Gullewa as fully paid up to $0.20 each in consideration for the acquisition by the Company of the entire issued share capital of MCI

4 May 2011 24,999,999 Shares issued to CRA as fully paid up to $0.20 each in consideration for the acquisition by the Company of the entire issued share capital of MCI

23 November 2011 16,666,674 Shares issued at $0.15 each to 28 sophisticated and professional investors pursuant to the Pre-IPO Capital Raising

Total 141,666,674

14.4 Terms of Attaching Options Subject to the successful completion of the Offer, the Company will issue 8,750,000 Attaching Options, on the following terms and conditions.

14.4.1 Issue price Each Attaching Option will be issued for no consideration.

14.4.2 Exercise and Expiry Each Attaching Option entitles the holder to subscribe for one Share upon payment of $0.25 per Share subscribed. Attaching Options may be exercised by written notice to the Company at any time, and from time to time, before 5.00pm, Eastern Standard Time on 30 March 2014 at which time they lapse. The Company will allot Shares in relation to Attaching Options that are validly exercised within 10 business days. Those Shares will rank equally with other Shares on issue.

14.4.3 Transfers of Attaching Options Attaching Options are freely transferrable and may be listed for official quotation on the ASX. The Company will apply for the Attaching Options to be quoted on the ASX.

14.4.4 New issues Holders of Attaching Options are not entitled to participate in any new issues of Shares that may be offered to Shareholders, unless they exercise their Attaching Options prior to the date for determining entitlements to any such issue. The Company will grant holders of Attaching Options a period of 10 business days in which to exercise their Attaching Options before closing a new issue of Shares. If a pro rata issue (except a bonus issue) is made to Shareholders, the exercise price of the Attaching Options may be reduced in accordance with the ASX Listing Rules.

14.4.5 Reorganisations If the issued share capital of the Company is re-organised (including through a reconstruction, consolidation, sub-division, reduction or return of capital), the Attaching Options will be re-organised in accordance with the ASX Listing Rules. 14.5 Terms and Details of Unlisted Shareholder Options Pursuant to the Pre-IPO Capital Raising completed in November 2011, for every three Shares issued to a sophisticated or professional investor, the Company issued one option to subscribe for an additional Share for $0.25 expiring 30 March 2014 (Unlisted Shareholder Options). A total of 16,666,674 Shares and 5,555,561 Unlisted Shareholder Options were issued. These are held by the Company’s existing Shareholders other than Gullewa and CRA. The terms and conditions of the Unlisted Shareholder Options are the same as the terms of the Attaching Options, except that Unlisted Shareholder Options are not transferrable and may not be listed on ASX. It is the current intention of the Company, following successful completion of the Offer, to seek to amend the terms of the Unlisted Shareholder Options so that they are identical to the Attaching Options, and then apply to the ASX for quotation of those Options. 14.6 Employee Option Scheme The Company adopted an employee option scheme on 5 May 2011 EOS( ). The key terms of the EOS are set out below.

14.6.1 Purpose The purpose of the EOS is to attract, motivate and retain directors and employees of the Company (and its associated bodies corporate) (Eligible Employees) through ownership of Shares.

14.6.2 Commencement The EOS commenced on 5 May 2011, in accordance with a resolution of the Board.

14.6.3 Administration The Board has broad powers to administer the EOS, which includes termination and suspension of the EOS, provided that it does not adversely affect or prejudice the rights of the participants holding Employee Options at the time.

14.6.4 Offer of Employee Options Under the EOS the Board may in its discretion offer Employee Options to Eligible Employees. Offers must be made under an offer document, which complies with applicable laws. Eligible Employees may accept such offers by completing and returning to the Company an application form within the timeframe specified in the offer document.

14.6.5 Rights of participants Each Employee Option held by an employee or director entitles them to subscribe for and be allotted one fully paid ordinary share in the capital of the Company. Employee Options are personal to the participant and may not be exercised by another person, or transferred, disposed of or otherwise dealt with, except in certain limited circumstances. A participant has no rights to participate in new issues of capital offered to shareholders. However, the Company will ensure that for the purposes of determining entitlements to such an issue, the record date will be at least seven Business Days after the issue is announced. The rights of a participant may be changed to the extent necessary to comply with the ASX Listing Rules in respect of a reorganisation of capital.

14.6.6 No consideration for grant of Employee Option Employee Options are issued under the EOS for no consideration.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 172 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 14.6.7 Exercise price The board will determine the exercise price of Employee Options, which must be greater than zero, subject to the ASX Listing Rules.

14.6.8 Exercise period Subject to compliance with applicable laws, participants may exercise their Employee Options between the time that all conditions to the exercise of the Employee Options set out in the offer document (if any) have been satisfied and the date that the Employee Options lapse (as described below).

14.6.9 Lapsing of Employee Options Employee Options will lapse if: (i) where the conditions of exercise of the Employee Options have not been met, the participant ceases to render services to the Allegiance Coal Group; (ii) the conditions of exercise of the Employee Options are unable to be met; (iii) five years, or any other lapsing period specified in the offer document, has passed after the grant of the Employee Options; or (iv) where the conditions of exercise of the Employee Options have been met, the participant does not exercise his or her Employee Options within 28 days after ceasing to render services to the Allegiance Coal Group. All of a participant’s rights in respect of Employee Options are immediately lost if the Employee Options lapse.

14.6.10 Acceleration of Exercise Period In the event that: (i) a notice of meeting to consider a scheme of arrangement under section 411 of the Corporations Act is despatched; (ii) a takeover bid in respect of the Company is announced, or the Company receives a bidder’s statement in respect of a takeover bid for the Company; or (iii) there is a change in control of the Company, the board may determine that Employee Options may be exercised from the date of determination, or use their reasonable endeavours to procure that an offer is made to holder of Employee Options on like terms.

14.6.11 Exercise of Employee Options A participant may exercise Employee Options at any time during the exercise period by issuing a notice of exercise to the Company together with the Employee Option certificate, and making payment to the Company of an amount equal to the exercise price multiplied by the number of Employee Options exercised.

14.6.12 Rights and restrictions on shares issued Shares issued on the exercise of Employee Options under the EOS rank equally in all respects with all existing Shares on and from the date of issue.

14.6.13 Application for listing Employee Options will not be quoted on the ASX. However, after the Company is listed on the ASX, the Company will make an application for Shares, which are issued after that time on the exercise of Employee Options to be quoted in accordance with the ASX Listing Rules.

14.6.14 Amendments The Board may from time to time amend all or any of the rules of the EOS in any respect whatsoever, by an instrument in writing, provided that rights or entitlements in respect of any Employee Option granted before the date of amendment shall not be reduced or adversely affected unless prior written approval from the affected holder(s) is obtained. Subject to the Listing Rules, the Board may also adjust the terms of exercise of Employee Options. However, no adjust of variation will be made without the consent of the participant who holds the relevant Employee Option if it would have a materially prejudicial effect on the participant.

14.6.15 Details of existing Employee Options The Company has a total of 4,900,000 unlisted Employee Options on issue as at the date of this Prospectus. These Employee Options are held by the Directors as set out in the following table.

DIRECTOR EMPLOYEE OPTIONS

Anthony W Howland-Rose 1,200,000

David Deitz 1,000,000

Colin Randall 1,700,000

Peter Donkin 1,000,000

Total 4,900,000

These Employee Options were granted under the Company’s Employee Option Scheme and have the following terms: a) the exercise price of each Employee Option is $0.25; b) there are no conditions on the exercise of the Employee Options, such that each Employee Option may be exercised immediately; and c) each Employee Option will lapse on 9 May 2016. 14.7 Consultant Option Scheme The Board adopted a consultant option scheme on 5 May 2011 COS( ). The terms of the COS are materially the same as the EOS.

14.7.1 Purpose The purpose of the COS is to attract, motivate and retain consultants or contractors that provide goods or services to the Company and its associated bodies corporate through ownership of Shares.

14.7.2 Details of existing Consultant Options The Company has a total of 750,000 unlisted Consultant Options on issue as at the date of this Prospectus. These are held by the Company Secretary, Graham Hurwitz. The Consultant Options were granted under the Company’s Consultant Option Scheme and have the following terms: a) the exercise price of each Consultant Option is $0.25; b) there are no conditions on the exercise of the Consultant Options, such that each Consultant Option may be exercised immediately; and c) each Consultant Option will lapse on 9 May 2016. 14.8 Escrow arrangements As a condition of admitting the Company to the Official List, the ASX may classify certain existing Shares and Options in the Company as restricted securities in accordance with the ASX Listing Rules. Any such classification will restrict the transfer of effective ownership or control of any restricted securities without the written consent of the ASX and for such period as the ASX may determine. Shares and Options issued prior to the Offer to promoters and seed capital investors are likely to be classified by ASX as restricted securities. Prior to the Company’s Shares and Attaching Options being listed on the ASX, the parties holding restricted securities must enter into restriction agreements with the Company on the terms set out in the ASX Listing Rules. Details of those restriction agreements will be disclosed to the market on the ASX’s announcements platform prior to the Company’s Shares and Attaching Options being listed on the ASX.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 174 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. The Company and each of Gullewa and CRA have agreed that if the ASX does not impose a two-year escrow period in relation to all of the Shares held by Gullewa and CRA, the Company will enter into voluntary restriction agreements with Gullewa and CRA on substantially the same terms as prescribed by Appendix 9A of the ASX Listing Rules for a period of two years after the date that the Company is Listed– except that Gullewa and CRA will be entitled to sell their Shares if at any time that is more than 12 months after the date the Company is admitted to the Official List the three month volume weighted average price of Shares exceeds $0.60. In addition, Gullewa has provided a written commitment that it will not conduct an in-specie distribution of its Shares in the Company to Gullewa’s shareholders within 24 months of the Company being admitted to the Offical List. Accordingly, as at the date of this Prospectus, the Company expects that all of Gullewa’s Shares, and all of CRA’s Shares will be subject to some form of restriction whether under the ASX Listing Rules or otherwise. As such at least 70.8% of Shares on issue following the Offer is likely to be subject to some form of escrow restriction. 14.9 Corporate governance 14.9.1 Corporate governance policies The Company has adopted comprehensive systems of control and accountability as the basis for the administration of corporate governance, including: a) a board charter; b) an audit committee and charter; c) a nominations committee and charter; d) a remuneration committee and charter; e) a remuneration policy; f) a code of conduct for board and management; g) a policy and procedure for the selection and (re)appointment of Directors; h) a performance evaluation process; i) a policy for trading in Company securities; j) a diversity policy; k) procedures for compliance with ASX continuous disclosure requirements; l) procedures for the selection, appointment and rotation of the Company’s external auditor; m) a shareholder communication strategy; and n) a risk management policy. A summary of the Company’s corporate governance policies and practices is set out in the Corporate Governance Statement, which is incorporate by reference into this Prospectus and can be obtained free of charge by contacting the Company on +61 2 9299 5007, or by email at [email protected], and will be available on the Company’s website at www.allegiancecoal.com.au.

14.9.2 ASX Corporate Governance Council Principles and Recommendations To the extent they are applicable and appropriate, the Company has adopted the Corporate Governance Principles and Recommendations as published by the ASX Corporate Governance Council (ASX Guidelines). The Board sets out below its "if not, why not" report. Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice, in compliance with the "if not, why not" regime. A more detailed description of the way in which the Company’s corporate governance practices follow a recommendation, is set out in the Corporate Governance Statement which is incorporated by reference into this Prospectus and can be obtained free of charge by contacting the Company on +61 2 9299 5007, or by email at [email protected], and will be available on the Company’s website at www.allegiancecoal.com.au.

ASX NOTIFICATION EXPLANATION GUIDELINE(S) OF DEPARTURE OF DEPARTURE

2.1 The Board does not have a Based on the ASX Guidelines relating to independence, some board majority of Directors who are members could not be considered to be independent. Anthony W independent. Howland-Rose and David Deitz are Directors of Gullewa, the controlling shareholder of the Company. Colin Randall is a Director of CRA, a substantial shareholder of the Company. The sole independent Director of the Company is Mr Peter Donkin. Mr Donkin is independent as he is a non-executive Director who is not a member of management and who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of his judgment. While the Company does not presently comply with this Recommendation 2.1, the Company may consider appointing further independent Directors in the future. The Company believes that given the size and scale of its operations, non-compliance by the Company with this Recommendation 2.1 will not be detrimental to the Company.

2.2 The Chair of the Board is not The non-independent Chair of the Board is Anthony W Howland- independent. Rose. Anthony W Howland-Rose is the Chairman of the Company and Gullewa, the controlling shareholder of the Company. The Company is of the view that the size and scale of its current operations do not warrant the appointment of an independent chairperson and that non-compliance with this Recommendation 2.2 will not be detrimental to the Company.

2.4 The Board has not established a Given the current size and composition of the Board, the Board separate nomination believes that there would be no efficiencies gained by establishing a committee. separate nomination committee. Accordingly, the full Board performs the role of the nomination committee.

2.6 The Board’s policy for A summary of the Company’s policy for nomination and nomination and appointment appointment of Directors is available on the Company’s website at of directors has not been made www.allegiancecoal.com.au under the section marked Corporate publicly available. Governance. The Board considers that the summary on the Company’s website provides all material information to investors in relation to the policy for nomination and appointment of Directors.

4.1 and 4.2 The Board has not established a Given the current size and composition of the Board, the Board separate audit committee and believes that there would be no efficiencies gained by establishing a therefore it is not struc tured in separate audit committee. Accordingly, the full Board performs the accordance with the guidance role of audit committee. provided for Recom mendations 4.1 and 4.2.

4.4 The audit committee charter A summary of the Company’s audit committee charter is available has not been made publicly on the Company’s website at www.allegiancecoal.com.au under the available. section marked Corporate Governance. The Board considers that the summary on the Company’s website provides all material information to investors in relation to the audit committee charter.

8.1 and 8.2 The Board has not established Given the current size and composition of the Company, the Board a separate remuneration believes that there would be no efficiencies gained by establishing a committee and therefore it is separate Remuneration Committee. Accordingly, the full Board not structured in accordance performs the role of Remuneration Committee. with the guidance provided for Recommendations 8.1 and in 8.2.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 176 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. 14.10 Interests of advisers and named persons Except as set out in this Section 14 and elsewhere in this Prospectus, no person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus: a) holds or has held in the two years before the date of this Prospectus, any interest in: i. the formation or promotion of the Company; ii. any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or iii. the Offer; or b) has been paid or agreed to be paid any amount, and no value or any benefit has been given or agreed to be given, for services provided in connection with: i. the formation or promotion of Allegiance Coal; or ii. the Offer. The Company has engaged the following professional advisers. a) Patersons Securities Limited has acted as the Lead Manager and Underwriter to the Offer, for which it will receive fees as set out in Section 13.1 of this Prospectus. Patersons Securities Limited also acted as Lead Manager for the Pre-IPO Capital Raising, for which it received a fee of $50,621 (inclusive of GST). b) Minter Ellison has acted as legal adviser to the Company in relation to the Offer, has advised the Company generally in relation to its admission to the Official List and has also performed work in relation to due diligence enquiries on legal matters. The Company has paid, or agreed to pay, approximately $46,000 (plus disbursements and GST) for these services. Minter Ellison has previously provided legal services to the Company in the last two years for which it received approximately $180,000 (plus disbursements and GST) in legal fees c) Runge Limited has acted as the Independent Geologist and has prepared the Independent Geologist’s Report. The Company has paid, or agreed to pay, approximately $20,000 (plus disbursements and GST) for these services. d) Grant Thornton Corporate Finance Pty Ltd acted as Investigating Accountant, has prepared the Investigating Accountants’ Report and has performed a range of other services in connection with the Offer, including work in relation to due diligence inquiries. The Company has paid, or agreed to pay, approximately $15,000 (plus disbursements and GST) for these services. e) Grant Thornton Audit Pty Ltd acted as the Company’s Auditor. The Company has paid approximately $15,000 (plus disbursements and GST) for these services. f) Environmental and Licensing Professionals Pty Ltd has prepared the Independent Tenements Report. The Company has paid, or agreed to pay, approximately $20,000 (plus disbursements and GST) for these services. g) Computershare Investor Services Pty Limited acts as Share Registry for the Company. The Company has paid, or agreed to pay, approximately $6,000 (plus disbursements and GST) for these services. 14.11 Interests of Directors Except as disclosed in this Section 14.11 and elsewhere in this Prospectus: a) no Director, proposed Director or promoter of the Company, holds or has held in the two years before the date of this Prospectus, any interest in: i. the formation or promotion of the Company; ii. any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or iii. the Offer; and b) no amount has been paid or agreed to be paid, and no benefit has been given or agreed to be given to: i. any Director or proposed Director to induce them to become, or to qualify as a Director of the Company; or ii. any Director, proposed Director or promoter of the Company for services that he or she has provided in connection with the formation or promotion of the Company or the Offer.

14.11.1 Directors interests in Shares and Options Peter Donkin has an interest in 333,334 Shares and 111,112 Unlisted Shareholder Options acquired pursuant to the Pre- IPO Capital Raising. Anthony W Howland-Rose has an interest in 666,667 Shares and 222,222 Unlisted Shareholder Options acquired pursuant to the Pre-IPO Capital Raising. Furthermore, Howlandrose Holdings Pty Limited has been appointed as a sub-underwriter of the Offer. In the event of a shortfall in the subscriptions for Securities, Howlandrose Holdings Pty Limited may be required to subscribe for up to $1,000,000 of Securities (being, up to 5,000,000 Shares and up to 1,250,000 free Attaching Options). As Mr Anthony W Howland-Rose is a director and the controlling shareholder of Howlandrose Holdings Pty Limited, he will have an interest in any Shares and free Attaching Options, which Howlandrose Holdings Pty Limited is required to subscribe for as a sub-underwriter of the Offer. David Deitz has an interest in 666,667 Shares and 222,222 Unlisted Shareholder Options acquired pursuant to the Pre- IPO Capital Raising. Colin Randall, as a director and controlling shareholder of CRA, has an interest in the 25,000,000 Shares in the Company held by CRA. Each of David Deitz and Anthony W Howland-Rose have an interest in the 100,000,000 Shares in the Company held by Gullewa as a result of them being directors of Gullewa (for which they are paid fees) and substantial holders of shares (and in the case of David Deitz, options over shares) in Gullewa. Based on Gullewa’s most recent ASX filings: a) David Deitz has an interest in approximately 19.11% of the shares in Gullewa, and holds options to acquire 4,200,000 Gullewa shares at an exercise price of $0.1187 expiring 30 November 2014; and b) Anthony W Howland-Rose has an interest in approximately 8.82% of the shares in Gullewa. Each of the Directors holds Employee Options to be issued Shares in the Company. The number of Employee Options that each Director of the Company holds is set out in Section 14.6.15 of this Prospectus.

14.11.2 Non-executive Director’s Fees The Constitution provides that the Directors as a whole (other than Executive Directors) may be paid or provided fees or other remuneration for their services as a Director of the Company, the total amount or value of which must not exceed $500,000 (excluding mandatory superannuation) per annum or such other maximum amount determined by the Company in a general meeting. A Non-Executive Director may be paid remuneration as the Directors determine where the Director performs services outside the scope of the ordinary duties of the Director. Non-Executive Directors may also be paid expenses properly incurred in attending meetings or otherwise in connection with the Company’s business. At the date of this Prospectus, the Board of the company is constituted by one executive director and three non-executive directors. The executive director (Mr Colin Randall) has been engaged by the Company pursuant to an employment agreement, the terms of which are summarised in Section 13 of this Prospectus. The Board has agreed that Mr Randall will not be paid director’s fees in addition to the fees payable pursuant to that agreement. The non-executive chairman is being paid $60,000 per annum, and the remaining non-executive directors are being paid $50,000 per annum.

14.11.3 Interests in property acquired by the Company On 4 May 2011, the Company acquired all of the issued share capital in MCI from its shareholders CRA (which held 240 ordinary MCI shares) and Gullewa (which held 960 ordinary MCI shares) in consideration for the issue of 24,999,999 Shares to CRA and 99,999,996 Shares to Gullewa. Colin Randall, as a director and controlling shareholder of CRA, had an interest in the MCI shares acquired by the Company. David Deitz and Anthony W Howland-Rose, as directors and substantial holders of shares (and in the case of David Deitz, options over shares) in Gullewa had an interest in the MCI shares acquired by the Company.

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 178 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Of the 960 MCI shares the Company acquired from Gullewa, 900 had previously been held by Anthony W Howland- Rose and 60 had previously been held by CRA. Each of Anthony W Howland-Rose and CRA transferred these MCI shares to Gullewa on 17 September 2009 in consideration for the issue of shares in Gullewa.

14.11.4 Other interests of Directors Mr Colin Randall, as a director and controlling shareholder of CRA, has an interest in any amounts paid or payable to CRA pursuant to the CRA Services Agreement, CRA's Facility Deed– Float Costs, CRA's Facility Deed– Operating Costs and CRA's Facility Guarantee. Mr David Deitz and Mr Anthony W Howland-Rose, as directors and substantial holders of shares (and in the case of David Deitz, options over shares) in Gullewa, have an interest in any amounts paid or payable to Gullewa pursuant to the Gullewa Services Agreement, Gullewa's Facility Deed– Float Costs, Gullewa's Facility Deed– Operating Costs and Gullewa's Facility Guarantee. The terms of these agreements are summarised in Section 13 – Material Contracts. Mr Anthony W Howland-Rose, as a director and controlling shareholder of HowlandRose Holdings Pty Limited, has an interest in the sub-underwriting fee payable to HowlandRose Holdings Pty Limited in respect of its role as a sub- underwriter of the Offer. The sub-underwriting fee ($20,000) is 2% of the amount sub-underwritten. This sub-underwriting arrangement is on terms no more favourable to HowlandRose Holdings Pty Limited than arm's length terms. As such, it was not necessary to obtain Shareholder approval under sections 217 to 227 of the Corporations Act in respect of this arrangement. 14.12 Litigation The Company is not engaged in any litigation which has or would be likely to have a material adverse effect on either the Company or its business. 14.13 Consents Each of the parties referred to as Consenting Parties in the table below: a) other than as specified in the table, has not made any statements in this Prospectus or any statement on which a statement made in this Prospectus is based; b) was not involved in the preparation of any part of this Prospectus (other than statements or reports included with their consent in this Prospectus in the form and context in which it appears) and did not authorise or cause the issue of this Prospectus; c) to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any statements in or omissions from this Prospectus, other than the reference to its name and (if applicable) any statement or report included with their consent in this Prospectus in the form and context in which it appears; d) has given and has not, before the lodgement of this Prospectus with the ASIC, withdrawn its consent: i. to be named in this Prospectus in the form and context in which it is named; and ii. to the inclusion in this Prospectus of the statements specified in the table below.

CONSENTING PARTY ROLE STATEMENT IN THIS PROSPECTUS

Patersons Securities Limited Underwriter None

Minter Ellison Legal advisers None

Environmental and Licensing Tenement Manager Independent Tenements Report Professionals Pty Ltd

Runge Limited Independent Geological Consultant Independent Geologist’s Report

Merryl Peterson Competent person preparing Independent Geologist’s Report Independent Geologist’s Report

Grant Thornton Corporate Investigating Accountant Investigating Accountants’ Report and the Finance Pty Ltd Company’s financial information in Section 7

Grant Thornton Audit Pty Ltd Auditor Review of the Company’s statement of financial position as at 30 November 2011

Computershare Investor Share Registry None Services Pty Limited

14.14 Cost of the Issue The total estimated expenses connected with the Offer paid or payable by the Company, including advisory, legal, accounting, tax, listing and administrative fees, as well as printing, advertising and other expenses, are currently estimated to be approximately $687,000 (excluding GST). 14.15 Consent to lodge The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds to believe that any statements made by the Directors in this Prospectus are not misleading or deceptive and that in respect to any other statements made in the Prospectus by persons other than Directors, the Directors have made reasonable enquiries and on that basis have reasonable grounds to believe that persons making the statement or statements were competent to make such statements, those persons have given their consent to the statements being included in this Prospectus in the form and context in which they are included and have not withdrawn that consent before lodgement of this Prospectus with the ASIC, or to the Directors knowledge, before any issue of the Shares and free Attaching Options pursuant to this Prospectus. Each Director consents to the lodgement of this Prospectus with ASIC, and has not withdrawn that consent prior to this Prospectus being lodged.

Signed for and on behalf of Allegiance Coal.

Anthony W Howland-Rose Chairman

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 180 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Section 15 Defined Terms

TERM DEFINITION

$ Australian dollars (unless otherwise indicated)

Allegiance Coal or the Company Allegiance Coal Limited ACN 149 490 353

Allegiance Coal Group Allegiance Coal Ltd and its subsidiaries Applicant A person applying for Securities under the Public Offer and/or the Priority Offer pursuant to this Prospectus Application An application for Securities under the Public Offer and/or the Priority Offer pursuant to this Prospectus Application Form The Public Offer Application Form and, where applicable, the Priority Offer Application Form enclosed with and forming part of this Prospectus Application Monies The monies received by the Company from Applicants with respect to Applications

ASIC Australian Securities and Investments Commission ASX ASX Limited ACN 008 624 691 or, as the context requires, the market that it operates ASX Guidelines The Corporate Governance Principles and Recommendations as published by the ASX Corporate Governance Council

ASX Listing Rules The official listing rules of ASX

ASX Settlement Operating Rules The rules relating to settlement of trades on the ASX Attaching Options The Options offered under this Prospectus for no additional consideration on the basis of one Attaching Option (exercisable at $0.25 and expiring on 30 March 2014) for every four Shares issued

BBSW The 90-day bank bill swap reference rate

Board The board of Directors of the Company from time to time

Business Day Has the meaning given to it in the ASX Listing Rules

Cedars Rest Cedars Rest Pty Limited ACN 141 988 427 (trading as Wizard Drilling)

CHESS Clearing House Electronic Sub-registry System operated by ASX

Closing Date of the Priority Offer 16 April 2012

Closing Date of the Public Offer 23 April 2012

Constitution Constitution of the Company

COS The consultant option scheme adopted by the Board on 5 May 2011

Consultant Option An Option granted pursuant to the COS

Corporate Governance Statement The description of the Company’s corporate governance policies and procedures which is incorporated into this Prospectus by reference

Corporations Act Corporations Act 2001 (Commonwealth)

COS The consultant option scheme adopted by the Board on 5 May 2011

CRA C.Randall & Associates Pty Limited ACN 003 813 689

CRA Services Agreement The services agreement between CRA and the Company dated 5 May 2011

Directors The directors of the Company

Echidna Coal Echidna Coal Pty Ltd ACN 146 608 764, a wholly-owned subsidiary of MCI

Eligible Employees Has the meaning given in the EOS as summarised in Section 14.5 Eligible Shareholders The holders of ordinary shares, as at the date of this Prospectus with a registered address in Australia, in any of Allegiance Coal (other than Gullewa and CRA), Gullewa and/or CRA.

Employee Option An Option granted pursuant to the EOS

EOS The employee option scheme adopted by the Board on 5 May 2011

EPC Exploration Permit (Coal)

EPCA Exploration Permit (Coal) Application Expiry Date 5.00 pm (Melbourne time) on the date that is 13 months after the date of this Prospectus Exposure Period The period of seven days after the date of lodgement of this Prospectus with ASIC, which may be extended by the ASIC by not more than seven days pursuant to section 727(3) of the Corporations Act. Facility Deeds – Float Costs The agreements between MCI and each of CRA and Gullewa in relation to funds advanced to MCI to cover the costs of the Offer dated 5 May 2011. Facility Deeds – Operating Costs The agreements between MCI and each of CRA and Gullewa in relation to funds advanced to MCI to cover the operating costs of MCI dated 5 May 2011. Facility Guarantees The agreements between Allegiance Coal and each of CRA and Gullewa dated 5 May 2011, under which Allegiance Coal guarantees the obligations of MCI to repay the amounts advanced to it under the Facility Deeds – Float Costs and the Facility Deeds – Operating Costs.

GST Goods and Services Tax

Gullewa Gullewa Limited ACN 007 547 480 Gullewa Services Agreement The services agreement (as amended) between the Company and Gullewa dated 5 May 2011.

Indemnified Parties Has the meaning given in Section 13.1.5

Independent Geologist’s Report The report contained in Section 9 of this Prospectus Independent Tenements Report The report on tenements, a summary of which is contained in Section 10 of this Prospectus

Indicated Resource Has the meaning given in the JORC Code

Inferred Resource Has the meaning given in the JORC Code

Investigating Accountant’s Report The report contained in Section 11 of this Prospectus

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 182 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. JORC Code The Australasian Joint Ore Reserves Committee Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves

km Kilometre(s)

kV Kilovolts

Lead Manager Patersons Securities Limited ACN 008 896 311

m Metre(s) MCI Mineral & Coal Investments Pty Ltd ACN 130 862 458, a wholly-owned subsidiary of the Company

MDL Mineral Development Licence

Measured Resource Has the meaning given in the JORC Code Moreton Coal Moreton Coal Pty Ltd ACN 010 913 836, a wholly-owned subsidiary of Echidna Coal

MRRT Mineral Resource Rent Tax

Mt Million tonnes

Mtpa Million tonnes per annum Offer The offer to be issued Shares and one free Attaching Option for every four Share issued pursuant to the Public Offer and/or the Priority Offer on the terms set out in this Prospectus

Offer Price $0.20 per Share

Officers The Board and the Company secretary

Official List The official list of the ASX

Option An option to subscribe for a Share in the Company Original Prospectus The prospectus that was lodged with ASIC on 14 March 2012. The Prospectus replaces the Original Prospectus.

PCI Coal Coal suitable for pulverized coal injection into a blast furnace Pre-IPO Capital Raising The raising of approximately $2,500,000 on or about 23 November 2011, through the issue of 16,666,674 Shares together with 5,555,561 Unlisted Shareholder Options to sophisticated and professional investors Priority Offer The offer of up to 15,000,000 Shares together with free Attaching Options to Eligible Shareholders pursuant to this Prospectus Priority Offer Application Form The personalised application form accompanying this Prospectus that is provided to Eligible Shareholders and which relates to the Priority Offer

Prospectus This replacement Prospectus and any supplementary prospectus Public Offer The offer of 20,000,000 Shares together with free Attaching Options and any Shares together with free Attaching Options not applied for under the Priority Offer to public investors pursuant to this Prospectus Public Offer Application Form The application form attaching to or accompanying this Prospectus and which relates to the Public Offer Randall Employment Agreement The employment agreement between the Company and Mr Randall dated 9 May 2011.

ROM Run of Mine

Securities Shares, together with free Attaching Options

Securityholder A holder of Securities

Share A fully paid ordinary share in the capital of the Company

Shareholder Means a holder of Shares in the Company

Share Registry Computershare Investor Services Pty Ltd ACN 078 279 277

Surat Coal Surat Coal Pty Ltd ACN 010 678 869

Underwriter Patersons Securities Limited ABN 69 008 896 311 Underwriting Agreement The agreement between the Company and the Underwriter dated 14 March 2012 described in Section 13.1

Underwritten Amount $7,000,000 Unlisted Shareholder Options The Options issued pursuant to the Pre-IPO Capital Raising exercisable at $0.25 and expiring on 30 March 2014 and otherwise on the terms set out in Section 14.5

ALLEGIANCE COAL LIMITED THIS IS A REPLACEMENT PROSPECTUS DATED 23 MARCH 2012. IT REPLACES A PROSPECTUS DATED 184 14 MARCH 2012 IN RESPECT OF SHARES AND FREE ATTACHING OPTIONS IN ALLEGIANCE COAL. Make yourchequeorbank draftpayableto ✃ Payment details–Pleasenotethatfundsareunable to bedirectlydebitedfromyourbankaccount G H D C A E F (the Company) ACN 149490353 Allegiance CoalLimited Public OfferApplication Form)arecompleteandaccurate.I/we agreetobeboundbytheConstitution oftheCompany. on thereverseofthis PublicOfferApplicationFormandI/we declarethatalldetailsandstatements made byme/us(including the declarationonreverse ofthis By submittingthisPublicOfferApplication Form,I/wedeclarethatthisapplicationiscompletedandlodgedaccordingto theProspectus andthedeclarations/statements Individual/Joint applications-refertonamingstandardsoverleafforcorrectformsofregistrabletitle(s) Shares appliedforandallocatedtome/us. the basisthatI/wewillalsoreceiveatnoadditionalcostone(1)freeAttachingOptiontoacquireShareonterns setoutintheProspectusforeachfour(4) Number ofOrdinaryShares(Shares)inAllegianceCoalLimited(theCompany)at$0.20perShareorsuchlessernumberwhichmaybeallocatedtome/usupon I/we applyfor accompanied by,theProspectus. completing thisform.TomeettherequirementsofCorporationsAct,PublicOfferApplicationFormmustnotbedistributed unlessincludedin,or delay. YoushouldreadtheentireprospectusforAllegianceCoalLimiteddated14March2012andexpiring13monthslater(Prospectus) carefullybefore This PublicOfferApplicationFormisimportant.Ifyouareindoubtastohowdealwithit,pleasecontactyourstockbroker orprofessionaladviserwithout Drawer Holder IdentificationNumber(HIN) CHESS Participant Contact Name Enter yourcontactdetails Enter youremailaddress City /SuburbTown StreetNameorPOBox/OtherInformation StreetNumber Unit Enter yourpostaladdress-IncludeStateandPostcode Title orCompanyName Public OfferApplicationForm Joint Applicant2orAccountDesignation Joint Applicant3orAccountDesignation X Given Name(s) Cheque Number AllegianceCoalLimited – ShareOfferAccount BSB Number on theCompany’sIssuerSponsoredsubregister. without theCHESSHIN,andanysecuritiesissuedasaresultofCompany’sinitialpublic offerwillbeheld correspond exactlywiththeregistrationdetailsheldatCHESS,yourapplicationwillbedeemed tobemade Please notethatifyousupplyaCHESSHINbutthenameandaddressdetailsonyourform donot B I/we lodgefullApplicationMoney A$ Surname Account Number Telephone Number-BusinessHours/After () See back of formforcompletion guidelines State Amount ofcheque A$ Postcode .

133061_017QVE included bywayofanaccountdesignationifcompletedexactlyasdescribedin the examplesofcorrectformsregistrabletitle(s) below. the CorporationsAct.Atleastonefullgivennameandsurnameisrequiredfor eachnaturalperson.Thenameofthebeneficial owner oranyotherregistrablenamemaybe Note thatONLYlegalentitiesareallowedtoholdsecurities.Applicationsmustbemadeinthename(s)ofnaturalpersons,companies orotherlegalentitiesinaccordancewith Correct formsofregistrabletitle(s) +61 399384326. If youhaveanyenquiriesconcerningyourapplication,pleasecontacttheComputershareInvestorServicesPtyLimitedon1300577 428(withinAustralia)or Pty Limitedusingthedetailsprovidedonfrontofthisformore-mailprivacy@computershare.com.au communications. YoumayelectnottoreceivemarketingmaterialbycontactingComputershareInvestorServicesPtyLimited.cancontact Pty Limited.InaccordancewiththeCorporationsAct2001,youmaybesentmaterial(includingmarketingmaterial)approvedby the Companyinadditiontogeneralcorporate Computershare InvestorServicesPtyLimited,oryouwouldliketocorrectinformationthatisinaccurate,incorrectoutofdate, pleasecontactComputershareInvestorServices to externalservicecompaniessuchasprintormailproviders,otherwiserequiredpermittedbylaw.Ifyouwould likedetailsofyourpersonalinformationheldby maybedisclosedtoourrelatedbodiescorporate, of securityholders,facilitatingdistributionpaymentsandothercorporateactionscommunications.Yourpersonalinformation Personal informationiscollectedonthisformbyComputershareInvestorServicesPtyLimited,asregistrarforsecuritiesoftheCompany,thepurposemaintainingregisters Privacy Statement other means. atanyotheraddressorby Neither ComputershareInvestorServicesPtyLimitednortheCompanyacceptsanyresponsibilityifyoulodgeApplicationForm MELBOURNE VIC3001 GPO Box2115 c/- ComputershareInvestorServicesPtyLimited Allegiance CoalLimited 16 April2012unlessvariedbythecompany.Youshouldallowsufficienttimeforthistooccur.ReturnPublicOfferApplication Formwithcheque(s)attachedto: Public OfferApplicationFormsmustbereceivedbytheMelbourneofficeofComputershareInvestorServicesPtyLimitednolaterthan5.00pm(Melbournetime)on Lodgement ofApplication Prospectus Company withone(1)freeAttaching Prospectus) willbemadeavailableonrequest,freeofcharge. Before completingthePublicOfferApplicationFormApplicant(s)shouldreadProspectus.PapercopiesofProspectus(andanyreplacementorsupplementary How tocompletethisform and declaresthatalld - Donot usethename ofthefund - Usethename oftrusteethefund Superannuation Funds - Donotusethenameof clubetc - Useofficebearer(s)personal name(s) Clubs/Unincorporated Bodies/Business Names - Donotusethenameof partnership - Usepartnerspersonalname(s) Partnerships - Usethenameofaresponsibleadultwithanappropriate designation Minor (apersonundertheageof18) - Donotusethenameofdeceased - Useexecutor(s)personalname(s) Deceased Estates - Donotusethenameoftrust - Usetrustee(s)personalname(s) Trusts - Usecompanytitle,notabbreviations Company - Usegivenname(s)infull,notinitials Joint - Usegivenname(s)infull,notinitials Individual Type ofInvestor D C A B E contact youinrelationtotheofferorCompanygenerally. Enter youremailaddress.Thisisnotcompulsorybutwillassistusifweneedto Email joint Applicants,onlyoneaddresscanbeentered. from theRegistrywillbemailedtoperson(s)andaddressasshown.For Enter yourpostaladdressforallcorrespondence.Allcommunicationstoyou Postal Address complete theirnameidenticallytothatpresentlyregisteredintheCHESSsystem. Clearing HouseElectronicSubregisterSystem(CHESS)participantsshould of registrabletitle.Applicationsusingthewrongformnamesmayberejected. Applicants mayregister.Youshouldrefertothetablebelowforcorrectforms This mustbeeitheryourownnameortheofacompany.Upto3joint Enter thefullnameyouwishtoappearonstatementofshareholding. Applicant Name(s) number ofSharesbythepriceperShare. Enter theamountofApplicationMonies.Tocalculateamount,multiply Application Monies out intheProspectus. no additionalcost(1)AttachingOptiontoacquireoneShareonthetermsset applied forandallocatedtotheApplicant(s),Applicant(s)willreceiveone Shares mustbeinmultiplesof500($100).Foreachfour(4) a minimumof10,000Shares($2,000).Applicationsforgreaterthan Enter thenumberofSharesyouwishtoapplyfor.Theapplicationmustbefor Shares Appliedfor and theConstitutionofCompany,agreestotakeanynumberShares Address etails andstatementsmadearecompleteaccurate.ItisnotnecessarytosignthePublicOfferApplicationForm. Option to acquire one (1) Share for every four (4) Shares applied for and allocated to the Applicant(s) is upon and subject to the termsof Option toacquireone(1)Shareforeveryfour(4)SharesappliedandallocatedtheApplicant(s)isuponsubject John SmithPty Ltd Mrs JanetSmith Mr MichaelSmith Mr JohnSmith& Mr JohnAlfredSmith Mr MichaelSmith Ms PennySmith ABC PtyLtd Mrs JanetMarieSmith Mr JohnAlfredSmith& Mr JohnAlfredSmith Correct FormofRegistration BylodgingthePublicOfferApplicationForm,Applicant(s)agreesthatthisapplicationforSharesin G H F Attaching Cash willnotbeaccepted.Receipt for paymentwillnotbeforwarded. not staple)yourcheque(s)tothePublicOfferApplicationFormwhereindicated. re-presented andmayresultinyourApplicationbeingrejected.Paperclip(do funds mustbeheldinyouraccountaschequesreturnedunpaidmaynot Cheques willbeprocessedonthedayofreceiptandassuch,sufficientcleared directly debitedfromyourbankaccount. agree withtheamountshowninboxB.Pleasenotethatfunds are unabletobe Complete thechequedetailsinboxesprovided.Thetotalamountmust or bankdraftmustbedrawnonanAustralianBank. Offer AccountinAustraliancurrencyandcrossit Not Negotiable.Yourcheque Make yourchequeorbankdraftpayabletoAllegianceCoalLimited–Share Payment Company andallocatedaSecurityholderReferenceNumber(SRN). leave thissectionblankandonallotment,you will besponsoredbythe Application ontheCHESSSubregister,enteryourHIN.Otherwise, participant) andyouwishtoholdSharesOptionsallottedunderthis Options allotted.IfyouareaCHESSparticipant(orsponsoredby not beissuingcertificatestoapplicantsinrespect of SharesandAttaching will makeuptheCompany’sprincipalregisterof securities. The Company will Sponsored Subregisterofsecurityholdings.TogetherthetwoSubregisters an electronicCHESSSubregisterofsecurityholdingsandIssuer wholly ownedsubsidiaryofASXLimited.InCHESS,theCompanywilloperate in CHESS,operatedbyASXSettlementandTransferCorporationPtyLtd,a Allegiance CoalLimited(theCompany)willapplytotheASXparticipate CHESS need tocontactyou. Enter yourcontactdetails. These are notcompulsorybutwillassistusifwe Contact Details Options thatmaybeallottedtotheApplicant(s)pursuantProspectus Peter Smith Estate of Late John Smith Penny Smith Family Trust ABC Co ABC P/L J.A Smith John SmithPty LtdSuperannuationFund ABC TennisAssociation John Smith&Son Janet MarieSmith John Alfred& Incorrect FormofRegistration

133061_017QVE Make yourchequeorbank draftpayableto ✃ Payment details–Pleasenotethatfundsareunable to bedirectlydebitedfromyourbankaccount G H D C A E F (the Company) ACN 149490353 Allegiance CoalLimited Public OfferApplication Form)arecompleteandaccurate.I/we agreetobeboundbytheConstitution oftheCompany. on thereverseofthis PublicOfferApplicationFormandI/we declarethatalldetailsandstatements made byme/us(including the declarationonreverse ofthis By submittingthisPublicOfferApplication Form,I/wedeclarethatthisapplicationiscompletedandlodgedaccordingto theProspectus andthedeclarations/statements Individual/Joint applications-refertonamingstandardsoverleafforcorrectformsofregistrabletitle(s) Shares appliedforandallocatedtome/us. the basisthatI/wewillalsoreceiveatnoadditionalcostone(1)freeAttachingOptiontoacquireShareonterns setoutintheProspectusforeachfour(4) Number ofOrdinaryShares(Shares)inAllegianceCoalLimited(theCompany)at$0.20perShareorsuchlessernumberwhichmaybeallocatedtome/usupon I/we applyfor accompanied by,theProspectus. completing thisform.TomeettherequirementsofCorporationsAct,PublicOfferApplicationFormmustnotbedistributed unlessincludedin,or delay. YoushouldreadtheentireprospectusforAllegianceCoalLimiteddated14March2012andexpiring13monthslater(Prospectus) carefullybefore This PublicOfferApplicationFormisimportant.Ifyouareindoubtastohowdealwithit,pleasecontactyourstockbroker orprofessionaladviserwithout Drawer Holder IdentificationNumber(HIN) CHESS Participant Contact Name Enter yourcontactdetails Enter youremailaddress City /SuburbTown StreetNameorPOBox/OtherInformation StreetNumber Unit Enter yourpostaladdress-IncludeStateandPostcode Title orCompanyName Public OfferApplicationForm Joint Applicant2orAccountDesignation Joint Applicant3orAccountDesignation X Given Name(s) Cheque Number AllegianceCoalLimited – ShareOfferAccount BSB Number on theCompany’sIssuerSponsoredsubregister. without theCHESSHIN,andanysecuritiesissuedasaresultofCompany’sinitialpublic offerwillbeheld correspond exactlywiththeregistrationdetailsheldatCHESS,yourapplicationwillbedeemed tobemade Please notethatifyousupplyaCHESSHINbutthenameandaddressdetailsonyourform donot B I/we lodgefullApplicationMoney A$ Surname Account Number Telephone Number-BusinessHours/After () See back of formforcompletion guidelines State Amount ofcheque A$ Postcode .

133061_017QVE Design & Production APM Graphics Management R 1800 806 930 R www.apmgraphics.com.au ACN 149 490 353

Phone: +61 2 9299 5007 Fax: +61 2 9299 5006 [email protected] www.allegiancecoal.com.au Address: Level 13, 49-51 York Street, Sydney NSW 2000