Half Yearly Report

Altona Energy Plc / Index: AIM / Epic: ANR / Sector: Exploration & Production

8 March 2011

Altona Energy Plc 

Interim Results for the six months ended 31 December 2011

Altona Energy Plc ('Altona' or 'the Company'), the AIM-quoted energy company, today announces its results for the six month period ended 31 December 2011. 

Highlights

·; Chinese coal evaluation reports confirm the quality and extent of coal deposits which underpin Arckaringa CTL and power project.

·; Preparations for the commencement of the drilling programme, which is the key component of the 2012 work programme under the BFS, are well advanced.

·; Appointment of Michael Zheng as Deputy Chairman of the Board.

·; Financial loss for the Group of £795,000 (2010: £909,000).

Post Period highlights

·; Conditional agreement to acquire a 95% beneficial interest in two advanced coal exploration licences located in the People's Republic of China.

·; Completion of equity placings totaling £2m gross.

Chairman's Statement

Commenting today Chris Lambert, Chairman, of Altona Energy said: "This period marked an important stage in the progression of the BFS at our flagship Arckaringa project. Our joint venture partner, CNOOC-NEIA, has completed a major milestone in Stage 1 of the Bankable Feasibility Study ("BFS") work programme with the validation of the coal resource and coal quality, thus confirming the enormous potential of the project. With the ongoing support of the South Australian government, significant key approvals have also been accomplished and we look forward to announcing further progress and development milestones on the BFS once they are complete.

Furthermore, the conditional acquisition of two advanced coal exploration licences in the People's Republic of China ("PRC") announced in February is a company changing opportunity. We will be releasing further news once we have finished our due diligence but we believe that, once completed and subject to the conversion of the exploration licences into mining licences, the acquisition will target the start of coal production by the end of 2012. The addition of revenue generating assets and the associated cash flows is aimed at securing Altona's future, with the particular benefits of reducing future dilution to our shareholders and strengthening the Company's ability to develop its Arckaringa project."

Arckaringa project update

During the half year, Altona, working alongside our joint venture partner, CNOOC-NEIA, accomplished significant key approvals for the BFS at the Company's flagship Arckaringa coal-to-liquids project in South Australia ("SA").

Preparations for the commencement of the drilling programme, which is the key component of the work programme under the BFS, are well advanced. Having been granted a works approval (PEPR) by the SA Government (through DMITRE) in November 2011 for the drilling programme, the JV partners have been working to fulfil the conditions of the approval so that drilling can start later this year. In that regard:

·; permits for the water test wells have now been granted

·; heritage clearance discussions with the relevant Native Title claimant group have commenced

·; the selection process for the Chinese geological advisor for the drilling programme has been prepared for internal approval and the setting of conditions for the selection and appointment of Australian drilling contractors is underway

·; discussions with local landholders and community groups about the scope of the drilling programme have continued ahead of the formal lodgement of notices required prior to commencement of drilling operations.

The drilling programme will take place on EL 4512 (Wintinna) area, feeding further data into the mine design studies and coal conversion studies during the coming year and will include:

·; boreholes to further delineate mine design parameters and upgrade the geological model and JORC resource estimates

·;  bulk sampling of coal to finalise coal feedstock characteristics for coal conversion options (including gasification, coal drying, briquetting etc)

·; detailed hydro-geological testing to refine the model and lay the basis for the mine dewatering and groundwater management plan.

The programme will cover up to 34 boreholes. The first six holes will be multi-purpose, for priority water testing and coal sample extraction, and then will be followed by 16 boreholes variously covering hydro-geological testing/observation, coal drilling and/or geotechnical assessment. The requirement for a further 12 boreholes will be assessed as the drilling programme proceeds. The cost of the drilling, as well as other elements of the work programme, is covered by CNOOC-NEIA's funding commitment for the BFS.

The Arckaringa project, as our flagship project, is an important focus for the Company and we remain committed to its development. We believe that the joint venture provides the framework to complete the BFS and the pathway for the project's commercial development. . Reports commissioned by CNOOC-NEIA from the China National Administration for Coal Geology ("CNACG"), and subsequently verified by the Mineral Resources and Reserves Evaluation Centre of China's Ministry of Land Resources during 2011, have confirmed the extent of the Arckaringa coal resources (particularly those in the Wintinna deposit), and have underlined CNOOC-NEIA's confidence in progressing the work programme at Arckaringa.

At their Joint Venture Management Committee meeting in Beijing in November 2011, the JV partners agreed the key elements of the continuing Stage 1 work programme for target completion during 2012. These elements include the drilling programme, the coal sampling and test work and the following preparatory studies to underpin the detailed design work in Stage 2 of the BFS:

·; mine design to Chinese standards;

·; preferred coal conversion options (including coal upgrading, CTL and power);

·; groundwater management and utilisation;

·; project infrastructure requirements;

·; transport and port logistics;

·; product marketing;

·; environmental impact assessment;

·; carbon capture, storage and utilisation and

·; on-going technical support requirements.

Altona believes the rationale for the development of the Arckaringa project remains as strong as ever. The size of the resource (7.8 Billion tonnes, including 1.3 Billion tonnes JORC compliant), a coal quality which is suitable for gasification and synthetic fuels production, combined with a supportive South Australian government and a location which favours both domestic use and international export, positions Arckaringa as a leading Australian energy project and I look forward to announcing the completion of key milestones as they occur.

Carbon capture and storage

During the period Peter Fagiano, our Technical Director presented Altona's plans with respect to its Arckaringa project for CO2 capture and storage at a conference organised by "Finding Petroleum" sponsored by BP and the carbon, capture and storage ("CCS") association.

The conference was entitled "Extending the life of the North Sea - building a CO2 utilisation and storage industry" and was held in January 2012 at the Geological Society of London where Peter is a Fellow member. A copy of the presentation by Peter is available on the Company's website.

Financial results

The financial loss of the Group for the six months ended 31 December 2011 was £795,000 (2010: £909,000). Cash and cash equivalents for the Group at 31 December 2011 totalled £467,000 (2010: £1,494,000)

Post reporting date events - Fund-raising

Since the period end the Company has raised £2million (gross) to fund working capital by way of equity placing's for 40 million shares at a price of 5 pence per share.

Post reporting date events - China Coal exploration licences

On 17 February 2012 the Company conditionally acquired, subject to the completion of due diligence, two exciting advanced coal exploration deposits in the Xinjiang Autonomous Region, PRC, estimated to contain approximately 1.17 billion tonnes (non-JORC) of marketable medium to high energy thermal coal.

The acquisition will be a transformational opportunity for the Company. The key benefits of a successful completion of the acquisition will include:

• a near term source of revenue and profits that will obviate the need to raise funds from shareholders and arrest further dilution of existing shareholders;

• a stronger platform for Altona's participation in the Arckaringa JV, particularly to cover working capital needs during the BFS;

Altona has commenced its detailed due diligence on the target group and the acquisition assets, with this process due to be completed by 30 April 2012. Under the terms of the acquisition agreement the target group has also commenced the process of applying for the conversion of the first exploration licence into a mining licence, alongside the detailed technical and evaluation studies which will support the application. Further details on the conditional acquisition were announced on 7 March 2012.

Outlook

Altona Energy is entering a very exciting period and, together with the continuing development of the Arckaringa project, our provisional acquisition in China represents a very real opportunity to secure the future of the Company. I look forward to being able to further update shareholders in the near future on progress with regard to the BFS on Arckaringa as well as providing information on the progress of our acquisition in China.

Finally I would like to thank both the Board and our shareholders for their ongoing commitment and support to the Company

Chris Lambert

Chairman

**ENDS**

Consolidated Statement of Comprehensive Income

For the half year ended 31 December 2011

Consolidated Statements of financial position

At 31 December 2011

Consolidated Statement of Cashflows

For the half year ended 31 December 2011

Consolidated Statement of Changes in Equity

For the half year ended 31 December 2011

Notes to the Interim Report

For the half year ending 31 December 2011

1. GENERAL INFORMATION

Altona Energy Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 31 December 2011 comprise the result of the Company and its subsidiaries (together referred to as the "Group"). 

The condensed interim financial information for the period 1 July 2011 to 31 December 2011 is unaudited. In the opinion of the Directors the condensed interim financial information for the period presents fairly the financial position, and results from operations and cash flows for the period in conformity with the generally accepted accounting principles consistently applied. The condensed interim financial information incorporates unaudited comparative figures for the interim period 1 July 2010 to 31 December 2010 and extracts from the audited financial statements for the year to 30 June 2011.

The financial information contained in this interim report does not constitute statutory accounts as defined by section 435 of the Companies Act 2006.

The comparatives for the full year ended 30 June 2011 are not the Company's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those financial statements was unqualified but did include a reference to the uncertainties surrounding going concern, to which the auditors drew attention by way of emphasis and did not contain a statement under s498 (2) - (3) of Companies Act 2006.

2. ACCOUNTING POLICIES

The condensed interim financial information has been prepared using International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. The condensed interim financial information has been prepared using the accounting policies which will be applied in the Group's statutory financial information for the year ended 30 June 2012.

Basis of preparation

The accounts have been prepared on a going concern basis. Following a review of the Group's financial position and its budgets, plans and considering the recently completed share capital placings, disclosed in note 7, the Directors remain confident that the Group's current cash position will enable the Group to fully finance its future commitments beyond the period of 12 months of the date of this report.

On 17 February 2012 the Group entered into a conditional agreement to acquire coal exploration assets in China. As part of the due diligence process the Directors are reviewing the funding requirements. Further details on the quantum of any future capital requirements resulting from the acquisition will be provided as the acquisition nears completion. The Directors are confident that should any additional funds be required to finance the operations on the target companies that these will be made available to the Group from existing and/or future shareholders or other sources of finance.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except as described below:

a) Standards, amendments and interpretations effective in 2011:

The following new standards and amendments to standards are mandatory for the first time for the Group for the financial year beginning 1 July 2011. Except as noted, the implementation of these standards did not have a material effect on the Group:

b) Standards, amendments and interpretations effective in 2012 but not relevant for the Group:

c) Standards, amendments and interpretations that are not yet effective and have not been early adopted:

* Not yet endorsed by the EU.

The Group is evaluating the impact of the above pronouncements but they are not expected to have a material impact on the Group's earnings or shareholders' funds.

3. TAXATION

The Group has recognised a £Nil tax credit (31 December 2010: a £Nil and 30 June 2011: £104,000) in respect of the concession for research and development available to the Group. No current taxation has been provided due to losses in the period.

4. LOSS PER SHARE

The basic loss per share is derived by dividing the loss for the period attributable to ordinary shareholders by the weighted average number of shares in issue.

As the inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive and, as such, the diluted loss per share calculation is the same as the basic loss per share.

5. INTANGIBLE ASSET

The Intangible Asset relates to the Arckaringa Coal Project within the Group's 100% subsidiary company Arckaringa Energy Pty Limited.

6. SHARE OPTIONS AND WARRANTS

During the period 9,000,000 options lapsed after they expired. The 9,000,000 options were in 3 equal tranches with exercise prices at 8 pence, 12 pence and 16 pence respectively. There were no other movements in options or warrants in the period. In the period the Group did not recognise a share based payment charge (year ended 30 June 2011: £191,000; 31 December 2010: £133,000). 

7. POST REPORTING DATE EVENTS

Subsequent to the period end the Company raised £2million (gross) to fund working capital by way of equity placing's for 40 million shares at a price of 5 pence per share.

Furthermore on 17 February 2012 the Group announced that it had conditionally agreed to acquire a 95% indirect beneficial interest in two advanced coal exploration licences located in the Xinjiang Autonomous Region of the People's Republic of China. As at the date of this report the due diligence remains ongoing.