Acquisition of Coal Exploration Licences & Placing

Altona Energy Plc

('Altona' or 'the Company')

Acquisition of Coal Exploration Licences and Completion of Placing

Altona Energy Plc, the AIM listed energy company, today announces that it has conditionally agreed to acquire a 95% indirect beneficial interest in two advanced coal exploration licences located in the Xinjiang Uygur Autonomous Region of the People's Republic of China ("PRC"). The Company also announces it has entered into a conditional placing agreement with institutional investors to raise £1million to provide additional working capital.

Highlights of the Acquisition:

o Total coal resource of the licences is estimated to be approximately 1.17 billion tonnes under Chinese standards (not JORC compliant)

o The exploration licences are well connected to good road infrastructure and growing local and regional coal markets

o The coal is a marketable medium to high energy thermal coal

o A large portion of the coal resource is accessible by conventional truck and shovel open cut mining methods

o The consideration payable, excluding the option consideration, is approximately £13 million with payments conditional on the achievement of, and staged to reflect development and performance milestones.

o The exploration assets are advanced and are expected to be readily converted into Mining Licences ("ML"s).

o It is anticipated that the ML application process will commence upon completion of the transaction.

Christopher Lambert, Chairman of Altona commented:

"We are delighted to have secured these two advanced exploration licences, which we believe to have significant potential. These are advanced exploration assets that are expected to have a clear path through the mining licence application process and into production. This is a transformational move for the Company, providing the potential to move into production in the near term on a sustainable basis, and generate strong cash flows underpinning Altona's future, as it actively continues the progression of the bankable feasibility studies on its flagship Arckaringa Project in joint venture with CNOOC-NEI."

"The consideration has been favourably structured against significant performance milestones, including successfully converting each exploration licence into a mining licence and with the cash consideration only payable out of profits following the commencement of production in respect of each mining licence."

"Altona's Managing Director, Chris Schrape (formerly CEO of Griffin Coal) will be heading up the due diligence team alongside Altona Beijing office, and during this period Altona's Technical Director, Peter Fagiano, will be spear heading the Arckaringa Project with continued assistance from Chris and our Beijing office."

The Exploration Licences

The Exploration licences ("EL1") and ("EL2") (together the "Licences") cover a combined area of 36 sq.km and are located in the southern part of the Xinjiang Autonomous Region in north western China . The Licences are connected by existing roads to the National Highway system. The Licences are believed to be all of good standing with valid tenures ranging from July 2012 to July 2013, with both Licences renewable. From historical exploration work , the Licences were reported to contain total coal resources of an estimated 1.17 billion tonnes, according to Chinese ore reporting standards of the time (non JORC compliant). Coal has been produced from the area of the Licences in the past, however, no profits were realised and there has been no material impact on the size of the coal resource due to the small scale nature of the operations.

The coal resources are principally contained in two major seams common to both of the Licences, with the geology indicating that a large portion of the deposits are accessible by conventional truck and shovel open cut mining methods and having the potential for additional underground operations in the future. The available coal analysis reports indicate a bituminous thermal coal with low moisture, sulphur and a medium to high ash content with low impurities and medium to high energy content.

The preliminary observations that can be made from the available data are that the coal resources are potentially significant and, subject to the development of a feasible mine plan, would be capable of sustaining viable mining operations. The in-situ coal quality indicates that the resource already contains a marketable thermal coal but, subject to detailed washability analysis, may have the potential to be washed to reduce ash levels and increase energy content.

More broadly, it can be said that the Xinjiang region is becomingly increasingly important as a coal mining centre in China. According to the Chinese Government's principal economic policy and planning body, the National Reform and Development Commission (NRDC), Xinjiang contains 2.19 trillion tonnes of coal resources (approximately 40% of China's total resources). Historically, production has been small, but recent NRDC statistics indicate that, as a result of new mine developments over the past decade, coal output rose to around 100 million tonnes in 2011. Industry commentators suggest that with the continuing development of transport and industry infrastructure within north western China, output from existing and new mining operations in Xinjiang will continue to rise during the current economic planning period to supply both local markets and other regions of the country.

Prior to completion of the acquisition Altona will conduct detailed due diligence and this requirement is a pre-condition for the completion of the acquisition. On completion of the acquisition the mining licence application process will commence and detailed technical and evaluation studies will be submitted under this process.

The share purchase agreement

Altona has agreed to acquire from Mr. Cheung Wing Kwong (the "Seller"), the entire issued share capital of Cheerful Jade Investment Holding Limited, a company incorporated in the British Virgin Islands (the "Target") that has an indirect 95% beneficial interest in the Licences, each relating to coal mining assets located in the Xinjiang Uygur Autonomous Region of the PRC.

The obligations of Altona under the agreement are conditional upon Altona having concluded, to its satisfaction, technical, legal and financial due diligence in respect of the Target and the Licences; and on Altona receiving shareholder approval to issue ordinary shares ("Shares") in connection with the transaction, by 30 April 2012. In the event that completion does not occur by this date both parties agree to the cancellation of the agreement.

A circular setting out details of a General Meeting to obtain shareholder approval will be sent to shareholders shortly. Further announcements regarding the General Meeting will be made in due course.

Consideration

The entire consideration payable is contingent on the completion of certain milestones (as further summarised below). The consideration can be summarised as follows:

Contingent cash

The cash element of the consideration is conditional upon the following:

·; The conversion of the relevant Licence to a ML;

·; Then for each ML the minimum production achieved must be 900,000 tonnes per annum for the first 12 months from the date of commencement of production; and

·; The net operating profit shall be at least ¥90 million (which equates to £9.06 million at today's exchange rate) for the first 12 months of production.

The cash consideration will only be payable out of the net operating profits of each relevant ML utilising operating cash flows received by Altona. 

Convertible Bonds ("Bonds")

On completion of the transaction, Altona will issue to the Seller two non-interest bearing and unsecured £2,625,000 Convertible Bonds. Each bond is convertible into 50,000,000 Shares (100,000,000 Shares in total) at 5.25 pence per Share. Conversion is conditional upon the conversion of each Licence into an ML.

The EL 1 Option and the EL 2 Option ("Options")

On completion of the transaction, Altona will grant the Seller options to subscribe for 20,000,000 Shares at a subscription price of 10 pence per Share (the EL 1 Option) and 20,000,000 Shares at a subscription price of 15 pence per Share (the EL 2 Option).

Both the EL1 and EL2 Options carry the following conditions relevant to each Licence, each of which must be met before they vest and are exercisable:

·; the conversion of the relevant Licence to an ML;

·; the period of one year from commencement of production of the relevant ML;

·; production of 900,000 tonnes per annum for the first 12 months from the date of commencement of production for each ML; and

·; the net operating profit achieved at each ML shall be ¥90 million for the first 12 months of production.

Each option may be exercised at any time for a period up to the third anniversary of the vesting date.

Lock in

Any Shares issued to the Seller in accordance with the Bonds and the Options will be subject to lock-in arrangements for a period of 24 months from the date on which the Seller's right to convert the relevant Bond or Option came (or is deemed to have come) into effect.

Seller's warranties and undertakings

The Seller has given certain warranties including, but not limited to, enforceability of the agreement, the coal mining assets (including title to the shares in the Target), the Licences, tax and compliance with legal requirements.

The Seller has also given various undertakings including, but not limited to, the following:

·; The Seller will procure conversion of EL 1 to an ML within three months after the date on which Altona makes a resources fee payment to applicable authorities ("Resources Fee Payment for EL 1"), which is expected to be approximately £3m, depending on coal type and the tonnage approved under the ML.

In the event that the Seller fails to procure conversion of EL 1 into an ML then either party may terminate all the agreements. Termination will relieve both parties of all obligations under all the agreements and the Seller shall repay the Resources Fee Payment for EL 1 to Altona;

·; The Seller will procure conversion of EL 2 to a ML within three months after the date on which Altona makes a resources fee payment to applicable authorities ("Resources Fee Payment for EL 2"). This fee is also expected to be approximately £3m depending on coal type and the tonnage approved under the ML.

In the event that the Seller fails to procure conversion of EL 2 into an ML then either party may terminate the agreement in relation to EL 2 only. Termination will include the cancellation of the Options and contingent share agreements with respect to EL 2 only and the Seller shall repay the Resources Fee Payment for EL 2 to Altona. Furthermore Altona will be entitled to buy back for £1 any Shares issued to the Seller in respect of the EL 2 consideration and Altona will procure that the Target sells back to the Seller for £1 its 95% indirect interest in EL 2.

Company's warranties and undertakings

Altona has given certain warranties and has also given various undertakings including, but not limited to, the following:

·; to procure payment of the Resources Fee Payment for EL 1 within three months after completion of the agreement, which is expected to be approximately £3 million;

In the event that the Company fails to do so then either party may terminate the agreement. Termination will relieve both parties of all obligations under all the agreements;

·; to procure payment of the Resources Fee Payment for EL 2 by 31 December 2012, which is expected to be approximately £3 million.

In the event that Altona fails to do so and where the Seller is in breach of any of its warranties, the agreement will terminate as per the Seller's undertakings above; or

In the event that there is no breach of warranty by the Seller and:

·; Altona fails to procure payment of the Resources Fee Payment for EL 2 by 31 December 2012 then 50% of the Bond relating to EL 2 will convert into Shares immediately on 1 January 2013.

·; In addition to the above if Altona fails to procure payment of the Resources Fee Payment for EL 2 by 30 June 2013 then the balance of the Bond relating to EL 2 (the remaining 50%) will convert immediately on 1 July 2013; and

·; Finally if Altona fails to procure payment of the Resources Fee Payment for EL 2, subject to the conversion of EL 2 to an ML, by the third anniversary of completion then the parties will agree to seek to reach agreement on arrangements in respect of EL 2 only.

Placing

The Company has entered into a conditional placing agreement with institutional investors for the placement of 20,000,000 ordinary shares ('the Placing Shares'), at 5.0 pence per share to raise gross proceeds of £1,000,000 ('the Placing'), which will provide additional working capital for the Company. The Placing Shares represent 4.63% of the current issued share capital of the Company and will rank pari passu with the Company's existing Shares. 

The Placing is conditional, inter alia, on the receipt of funds by 8 March 2012, and the admission of the Placing Shares to trading on the AIM market of the London Stock Exchange ("AIM") by 21 March 2012. Upon receipt of the funds an application will be made for the admission of the Placing shares to trading on AIM and a further announcement will be made in due course.

Following admission of the Placing Shares, and completion of the placing announced on 20 January 2012 the Company's total issued share capital will be 471,656,853 ordinary shares.

Qualified Person

Altona engaged Minarco Mineconsult ("MMC"), an international mining consultancy firm to undertake an independent high level technical review of the Licences, particularly in regard to geology, mining potential, coal quality and coal markets. The review was carried out by the Beijing office of MMC, a firm suitably experienced in the assessment of coal assets and mine design in Asia and Australia. MMC's scope of work was undertaken on a desktop basis and MMC's further recommendations is that a full due diligence inclusive of a site visit be carried out in the near future. MMC is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies who has reviewed and approved the technical information contained in this announcement.

**ENDS**