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1 ABN Interim Financial Report Contents Directors report 1 Auditor s independence declaration 4 Interim financial report Consolidated statement of comprehensive income 5 Consolidated balance sheet 6 Consolidated statement of changes in equity 7 Consolidated statement of cash flows 8 Notes to the consolidated financial statements 9 Directors declaration 16 Independent auditor s review report to the members 17 Corporate directory 19 This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by (White Energy) during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act This consolidated interim financial report incorporates the assets and liabilities of all subsidiaries of White Energy as at and the results of all subsidiaries for the half-year then ended. White Energy and its subsidiaries together are referred to in this interim financial report as the consolidated entity or group. This means that the interim financial report incorporates 100% of the assets, liabilities and results of operations for the following subsidiaries for the half-year: PT Kaltim Supacoal 51% owned by members of the White Energy consolidated group PT Kaltim Supacoal Singapore Pte Ltd 51% owned by members of the White Energy consolidated group River Energy Company JV Limited 51% owned by members of the White Energy consolidated group River Energy South Africa JV Ltd 51% owned by members of the White Energy consolidated group

2 Directors report Director s report Your directors present their report on the consolidated entity, consisting of ( the Company or White Energy ) and the entities it controlled at the end of, or during, the half-year ended. Directors The following persons were directors of during the whole of the half-year and up to the date of this report: Travers Duncan Brian Flannery Graham Cubbin John Kinghorn Hans Mende Vincent O Rourke John McGuigan was a Director from the beginning of the financial year until his resignation on 5 August John Atkinson was a Director from the beginning of the financial year until his resignation on 5 August Review of operations As previously advised to the market, the shareholders of PT Kaltim Supacoal ( KSC ), White Energy and PT Bayan Resources Tbk ( Bayan ), are currently in dispute over matters relating to the Tabang coal upgrading plant, located at Bayan s Tabang mine in East Kalimantan, Indonesia. On 27 December 2011, White Energy s wholly owned subsidiaries, BCBC Singapore Pte Ltd ( BCBCS ) and Binderless Coal Briquetting Pty Limited ( BCBC ), commenced legal proceedings in the High Court of the Republic of Singapore against Bayan. The issues in the legal proceedings include a claim by BCBCS and BCBC against Bayan for damages for breach of the Joint Venture Deed between the KSC shareholders, including the obligation to supply coal to KSC and the obligation to provide funding to KSC. Bayan has filed a defence to the claim, and also a counterclaim against BCBCS and White Energy seeking damages. As a result of the above dispute, KSC suspended operations at the Tabang plant in late November The Tabang site has since been placed on a care and maintenance program, with around 15 staff remaining on site who are responsible for managing the site. They are being supported by a small number of administrative staff in KSC s Balikpapan office. All other staff were terminated in late December At the time of suspension of operations at Tabang, the various plant modification works being undertaken at site were around 95% complete. Recently Bayan gave BCBCS notice purporting to terminate the Joint Venture Deed. BCBCS considers that, among other matters, Bayan s purported termination amounts to a wrongful repudiation of Bayan s obligations, entitling BCBCS to terminate the Joint Venture Deed. BCBCS has accepted Bayan s repudiation, which brings the joint venture to an end. BCBCS intends to pursue Bayan and all responsible entities for all damages suffered as a result of Bayan s wrongful repudiation, which has brought the joint venture to an end. 1

3 Review of operations (continued) Director s report The directors believe that BCBCS took all steps to fulfil its joint venture obligations and that the failure of the joint venture is due to Bayan s failure to supply coal and provide funding to KSC and its purported termination of the Joint Venture Deed. The U.S. permitting team has commenced the process of submitting a Prevention of Significant Deterioration ( PSD ) permit application to the relevant Wyoming state authorities. However, there is a possibility that the new Green House Gas ( GHG ) regulations may result in some delays as further emissions data may be required. The U.S. team continues to investigate opportunities associated with the recovery and briquetting of coal fines in the North American market. A number of potential sites have now been identified and prioritised, and work on these opportunities will continue over the coming months. During the December 2011 quarter River Energy continued to progress the Detailed Feasibility Study ( DFS ) being undertaken with one of the major coal producers in the South African market. Coal fines samples from the site in question have been successfully processed at the smaller pilot plant located at White Energy s Cessnock Production Plant. An interim DFS report was presented to key stakeholders in early November 2011, and reaction to the progress on the DFS was very positive. The scope for the DFS has now been refined, and it is envisaged that the final study report for the construction of a circa. 500,000 tonne per annum coal fines recovery plant and upgrading plant at the coal producer s mine will be completed by the end of March Following completion of the final DFS, River Energy, which is 51% owned by the White Energy consolidated group, expects to commit to the construction of its first coal fines recovery plant and upgrading plant by the end of June Discussions with a number of major South African coal producers relating to the recovery and briquetting of their discarded fines are ongoing. The Company currently has in excess of 100 tonnes of coal fines samples from these South African companies at the Cessnock Production Plant for testing over the coming quarter. During the December 2011 quarter, work at the Company s Cessnock Production Plant has intensified, with a number of coal samples (mainly reclaimed coal fines samples) being tested at the smaller pilot plant located at the site. In addition, the much larger 90,000 tonne per annum demonstration plant at Cessnock recommenced operations during the half year ended, using both sub-bituminous coal samples which were stockpiled at site as well as South African coal fines. The results continue to be encouraging, and the activities on site are providing further training for existing and new plant operators. White Energy representatives in Indonesia continue to work with PT Tri Mitra Bayany ( TMB ) to identify and explore coal deposits in Indonesia, further to the MOU signed by both parties in June During the past quarter, White Energy and TMB have short-listed three prospective coal projects, two of which are located in East Kalimantan and one which is located in West Papua. Due diligence investigations into these projects are currently being conducted. The Company completed its 2011 drilling program at South Australian Coal Limited s (SAC) Lake Phillipson deposit (EL4534) during December 2011, which is aimed at identifying additional JORC resources as at 31 December The results of the drilling program are currently being analysed by an external consultant, and a report is being prepared for issue by late March During the half year White Energy continued to progress permitting to drill geochemical anomalies at the Cosy Creek Mo and BT020 Sn/Ta/Li targets within the Bridgetown Exploration Project. The Company has recently submitted a Program of Works to the Department of Mines and Petroleum and this has now been granted. Drilling commenced in early March The consolidated entity s net loss for the half year ended was $134.0 million (2010: $18.9 million). 2

4 Director s report Review of operations (continued) Normalised EBITDA loss for half year ended was $11.7 million (2010: $11.4 million), after adjusting for net interest revenue, income tax credits and fair value gains of $21.1 million, non-cash expenses of $134.2 million (impairment expense, depreciation, amortisation, share-based payments and FX losses), one off expenses incurred during the period of $0.6 million (KSC legal costs) and normalised minority partner shares of losses of $8.6 million. Auditors independence declaration A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4. Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the directors' report and financial report. Amounts in the directors report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order. This report is made in accordance with a resolution of the directors. Brian Flannery Managing Director Sydney 9 March

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6 Consolidated statement of comprehensive income For the half-year ended Half-year 31 December 2010 Notes $ 000 $ 000 Revenue from continuing operations 4 7,536 5,169 Gain/(loss) on foreign exchange 1, Cost of goods sold - livestock (842) - Accounting and audit fees (190) (65) Employee benefits expense (4,372) (4,349) Depreciation and amortisation (5,915) (5,741) Finance costs (2,852) (4,152) External advisory fees 5 (2,549) (9,129) Occupancy expenses (645) (815) Travel expenses (830) (505) Plant operating costs (12,184) (8,876) Impairment expense 3 (129,905) - Fair value movement on financial liabilities 17,901 (2,108) Other expenses (1,448) (3,087) Loss before income tax (134,688) (33,401) Income tax benefit/(expense) ,499 Net loss for the half year (133,952) (18,902) Owners of (61,839) (7,381) Non-controlling interest (72,113) (11,521) Total loss for the half year (133,952) (18,902) Other comprehensive Income Exchange differences on translation of foreign operations 2,204 (9,719) Total other comprehensive income for the half year 2,204 (9,719) Total comprehensive loss for the half year (131,748) (28,621) Total comprehensive loss is attributable to: Owners of (57,555) (18,807) Non-controlling interests (74,193) (9,814) Total comprehensive loss for the half year (131,748) (28,621) Earnings per share for loss attributable to ordinary Cents Cents equity Basic and holders diluted of earnings White Energy per share Company Limited (19.56) (2.45) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 5

7 Consolidated balance sheet As at 30 June 2011 Notes $ 000 $ 000 Current assets Cash and cash equivalents 6 152, ,909 Trade and other receivables 7 4,031 8,826 Inventories 8-5,100 Total current assets 156, ,835 Non-current assets Biological assets - livestock 1,538 1,802 Property, plant and equipment 9 18, ,942 Exploration assets 115, ,516 Deferred tax asset 21,796 20,795 Intangible assets 77,428 79,520 Total non-current assets 235, ,575 Total assets 391, ,410 Current liabilities Trade and other payables 10 87,706 41,482 Borrowings 11 27,521 9,738 Provisions Total current liabilities 115,821 51,796 Non-current liabilities Other payables 12 2,718 52,364 Borrowings 13-25,000 Deferred tax liability 34,705 34,682 Total non-current liabilities 37, ,046 Total liabilities 153, ,842 Net assets 238, ,568 Equity Contributed equity , ,259 Reserves (7,960) (11,562) Accumulated losses (143,251) (81,412) Total equity attributable to owners of the company 337, ,285 Non-controlling interest (98,910) (24,717) Total equity 238, ,568 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 6

8 Consolidated statement of changes in equity For the half year ended Attributable to the owners of White Energy Company Limited Contributed equity Reserves Accumulated losses Total Noncontrolling interests Total equity Notes $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 July ,833 5,428 (84,777) 177,484 (5,643) 171,841 Profit/(loss) for the half-year - - (7,381) (7,381) (11,521) (18,902) Other comprehensive income - (11,426) - (11,426) 1,707 (9,719) Total comprehensive profit/(loss) for the half-year - (11,426) (7,381) (18,807) (9,814) (28,621) Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 182, , ,967 Share based payments - (2,126) - (2,126) - (2,126) 182,967 (2,126) - 180, ,841 Balance at 31 December ,800 (8,124) (92,158) 339,518 (15,457) 324,061 Balance at 1 July ,259 (11,562) (81,412) 395,285 (24,717) 370,568 Profit/(loss) for the half-year - - (61,839) (61,839) (72,113) (133,952) Other comprehensive income - 4,284-4,284 (2,080) 2,204 Total comprehensive profit/(loss) for the half-year - 4,284 (61,839) (57,555) (74,193) (131,748) Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs Share based payments - (7) - (7) - (7) Other reserves - (675) - (675) - (675) - (682) - (682) - (682) Balance at 488,259 (7,960) (143,251) 337,048 (98,910) 238,138 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 7

9 Consolidated statement of cash flows For the half year ended Half year 31 December 2010 Notes $ 000 $ 000 Cash flow from operating activities Receipts from customers (inclusive of goods and services tax) 2, Payments to suppliers and employees (inclusive of goods and services tax) (22,432) (28,694) Taxes paid - (692) Interest received 4,824 3,603 Net cash inflow (outflow) from operating activities (14,855) (25,765) Cash flows from investing activities Cash acquired on business combination net of cash paid - 5,264 Payments for exploration assets (3,169) (944) Payments for property, plant and equipment (7,422) (850) Payments for development costs (518) (74) Net cash inflow (outflow) from investing activities (11,109) 3,396 Cash flows from financing activities Proceeds from shares issued - 138,888 Repayment of borrowings (10,140) (6,136) Proceeds from borrowings 4, Borrowing costs (990) (2,117) Cost of equity issue - (1,037) Net cash inflow (outflow) from financing activities (6,422) 130,016 Net increase (decrease) in cash and cash equivalents (32,386) 107,647 Cash and cash equivalents at the beginning of the half-year 183, ,193 Effects of exchange rate changes on cash and cash equivalents Other (217) - Cash and cash equivalents at the end of the half-year 6 152, ,263 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 8

10 Notes to the consolidated financial statements 1. Basis of preparation of half-year report This condensed consolidated interim financial report for the half-year reporting period ended 31 December 2011 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by White Energy Company Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. 2. Segment information (a) Description of segments Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Board of Directors considers the business from both a product and a geographic perspective and has identified three reportable segments: coal technology, mining exploration and agriculture. The coal technology segment has the exclusive licence to patented technology developed by the consortia led by CSIRO which processes relatively poor quality coal into a higher quality product. This activity commenced in June 2006 when the company acquired White Energy Technology Limited. The mining exploration segment holds tenements in Coober Pedy, South Australia and Bridgetown, Western Australia. The agriculture segment reflects the operations of Ingomar farm which was purchased in April 2011 and operates as a working cattle and sheep property. Although the group s sectors are managed on a global basis they operate in five main geographical areas: (i) (ii) (iii) (iv) (v) Australia: The home country of the main operating entity. The areas of operation are coal technology, mining exploration and agriculture. South East Asia: Comprises operations carried on in Indonesia and Singapore. The area of operation is coal technology. South Africa and Mauritius: Currently undertaking marketing activities and feasibility studies to bring the White Energy Coal Technology to the South African market. United States: Currently undertaking marketing activities and feasibility studies to bring the White Energy Coal Technology to the North American market. China: Currently undertaking feasibility studies and marketing activities. 9

11 Notes to the consolidated financial statements 2. Segment information (continued) (b) Segment information provided to the Board of Directors The segment information provided to the Board of Directors for the reportable segments for the half year ended is as follows: Coal technology Mining exploration Agriculture Total Australia South-East South U.S.A China Australia Australia Asia Africa Half-year 2011 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Total segment revenue 6,882 3, ,461 11,916 Inter-segment revenue (1,033) (3,347) (4,380) Revenue from external customers 5, ,461 7,536 Impairment expense (3,822) (126,083) (129,905) Profit/(Loss) before tax (9,093) (142,626) (695) (612) (87) 18, (134,688) Segment assets 224,812-2,411 2, ,841 4, ,382 Segment liabilities (32,031) (71,841) (10,893) (38,567) (40) (153,244) Coal technology Mining exploration Agriculture Total Australia South-East South U.S.A China Australia Australia Asia Africa Half-year 2010 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Total segment revenue 5,272 3, ,572 Inter-segment revenue (778) (2,625) (3,403) Revenue from external customers 4, ,169 Impairment expense Profit/(Loss) before tax (5,746) (21,250) (487) (1,322) (96) (4,500) - (33,401) Segment assets 288, , , , ,723 Segment liabilities (56,721) (68,735) (2,119) (83) - (81,003) - (208,661) 10

12 Notes to the consolidated financial statements 3. Loss for the half year The company s loss for the half year includes the following items that are unusual because of their nature, size or incidence: 31 December 2010 $ 000 $ 000 Impairment of fixed assets KSC (119,323) - Impairment of trade and other receivables KSC (4,789) - Impairment of inventory KSC (5,576) - Impairment of cash KSC (217) - Total impairment expense (129,905) - During the half year the Company undertook an assessment of the carrying value of the assets held by KSC. Based on available evidence the Company determined that the carrying value of KSC assets exceeded their recoverable amount. As a consequence an impairment expense was provided against the above individual assets to reflect management s current uncertainty in respect of the future use of the assets and their recoverable amount which was determined with reference to their fair value less costs to sell. 4. Revenue from continuing operations 31 December 2010 $ 000 $ 000 Interest income 4,904 4,302 Coal sales Government grants Proceeds from the sale of wool and livestock 1,005 - Fair value gain on livestock revaluation Sampling income potential customers Other income ,536 5, Expenses external advisory fees 31 December 2010 $ 000 $ 000 Consulting fees (1,060) (1,137) SAC acquisition costs - (2,221) Cascade coal acquisition costs - (737) External management fees KSC - (4,896) Legal and other professional fees (912) (138) Legal dispute fees - KSC (577) - (2,549) (9,129) 11

13 Notes to the consolidated financial statements 6. Current assets cash and cash equivalents 30 June 2011 $ 000 $ 000 Cash at bank and on hand 152, ,909 Provision for impairment of cash - KSC (217) - 152, , Current assets trade and other receivables 30 June 2011 $ 000 $ 000 Trade debtors Deposits Prepayments 4,108 4,296 Project development 2,699 2,181 Other 1,101 1,389 Provision for impairment of trade and other receivables - KSC (4,789) - 4,031 8, Current assets inventories 30 June 2011 $ 000 $ 000 Raw materials at cost Finished goods at net realisable value 1,881 1,779 Stores and fuel at cost 3,283 3,251 Provision for impairment of inventories - KSC (5,576) - - 5,100 12

14 9. Non-current assets property, plant and equipment Notes to the consolidated financial statements Plant and equipment $ 000 Leasehold improvements Land Total $ 000 $ 000 $ 000 At 30 June 2011 Cost 129, , ,360 Accumulated depreciation (10,223) (195) - (10,418) Net book amount 118, , ,942 Half year ended Opening net book amount 118, , ,942 Additions 13, ,853 Exchange differences 6, ,167 Depreciation (3,735) (82) - (3,817) Provision for impairment of PPE - KSC (119,323) - - (119,323) Closing net book amount 15, ,580 18,822 At Cost 20, ,580 23,328 Accumulated depreciation (4,229) (277) - (4,506) Net book amount 15, ,580 18, Current liabilities trade and other payables 30 June 2011 $ 000 $ 000 Trade creditors 11,955 5,560 Other creditors 13,116 12,878 Other payable SAC contingent consideration 4,708 22,609 Deferred income government grant Loan from shareholders Bayan Resources 46,661 - Loan from shareholders Black River 10,831-87,706 41,482 Other payables comprises $4,707,526 in respect of the fair value of contingent consideration relating to the White Energy 2011 Performance Shares, which were part of the consideration following the takeover of SAC. The contingent consideration is classified as a liability because the number of White Energy ordinary shares that may be issued on conversion of the 2011 Performance Shares is variable and will be determined based on the level of coal resources identified as at. The final updated JORC statement and corresponding 2011 Performance Shares are due to be issued by 31 March

15 10. Current liabilities trade and other payables (continued) Notes to the consolidated financial statements The fair value of the contingent consideration at is assumed to be $0.38 for each performance share, totalling $4,707,526 based on the estimated number of 12,388,222 ordinary shares that will arise on conversion of the maximum possible number of performance shares. The fair value of the contingent consideration at the date of acquisition was based on a price of $3.30 for each Performance Share. The difference between the assessed fair value of contingent consideration at the date of acquisition and the fair value calculated at each reporting balance date has been credited to the statement of comprehensive income. 11. Current liabilities borrowings 30 June 2011 $ 000 $ 000 Working capital facility - KSC 2,089 9,311 Convertible notes Issued October ,000 - Interest accrued on borrowings ,521 9, Non-current liabilities other payables 30 June 2011 $ 000 $ 000 Loan from shareholders Bayan Resources - 40,688 Loan from shareholders Black River - 8,740 Deferred income government grant 2,718 2,936 2,718 52, Non-current liabilities borrowings 30 June 2011 $ 000 $ 000 Convertible notes Issued October ,000 Cost of convertible notes issued - (925) Accrued amortisation ,000 14

16 Notes to the consolidated financial statements 14. Equity securities issued Issues of ordinary shares during the period 30 June June 2011 Shares Shares $ 000 $ 000 Opening balance 316,104, ,766, , ,833 Ordinary shares issued during the half year net of transaction costs - 79,338, , ,104, ,104, , , Events occurring after the reporting period (a) KSC legal dispute On 27 December 2011 White Energy s wholly owned subsidiaries, BCBCS and BCBC, commenced legal proceedings in the High Court of the Republic of Singapore against Bayan. The proceedings relate to BCBCS s 51% owned Indonesian subsidiary company, KSC, which is 49% owned by Bayan. The issues in the proceedings include a claim by BCBCS and BCBC against Bayan for damages for breach of the Joint Venture Deed between the KSC shareholders, including the obligation to supply coal to KSC and the obligation to provide funding to KSC. On 22 February 2012, in response to the legal proceedings commenced by BCBCS and BCBC, Bayan filed a Defence and Counterclaim, which included matters said to arise by way of defence to the claims made by BCBCS and BCBC. On 21 February 2012, Bayan wrote to BCBCS, BCBC and White Energy purporting to terminate the Joint Venture Deed and funding obligations to KSC. BCBCS considers that, among other matters, Bayan s purported termination amounts to a wrongful repudiation of Bayan s obligations. On 2 March 2012, BCBCS accepted Bayan s repudiation, which brings the Joint Venture Deed to an end. BCBCS intends to pursue Bayan and all responsible entities for all damages suffered as a result of Bayan s wrongful repudiation, which has brought the joint venture to an end. (b) Working capital facility (KSC) On 6 and 13 January 2012, KSC made further repayments of principal and interest outstanding on the Standard Chartered Bank working capital facility totalling US$2.1 million. The facility has now been repaid in full. 15

17 Directors Declaration Directors Declaration In the directors opinion: (a) the financial statements and notes set out on pages 5 to 15 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity s financial position as at and of its performance for the half-year ended on that date; and (b) there are reasonable grounds to believe that will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. Brian Flannery Managing Director Sydney 9 March

18 For personal use only

19 For personal use only

20 Corporate Directory Directors Travers Duncan Chairman Brian Flannery Managing Director Graham Cubbin Non-Executive Director Hans Mende Non-Executive Director John Kinghorn Non-Executive Director Vincent O Rourke Non-Executive Director Company Secretary Principal registered office Share registry/principal register Auditor Solicitors Bankers Stock exchange listing Website address David Franks Suite 4, Level George Street Sydney NSW 2000 Computershare Investor Services Pty Limited 117 Victoria Street West End, Queensland 4001 Telephone: Facsimile: (07) PricewaterhouseCoopers Darling Park Tower Sussex Street Sydney NSW 2000 Freehills MLC Centre 19 Martin Place Sydney NSW 2000 Commonwealth Bank of Australia 48 Martin Place Sydney NSW 2000 shares are listed on the Australian Securities Exchange 19