RECOMMENDATION Spec Buy High Risk $0.43/share target (Previously Hold $0.40/share target)

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1 COMPANY Nucoal Resources Ltd NCR $0.32/share Date: 24 February 2012 RECOMMENDATION Spec Buy High Risk $0.43/share target (Previously Hold $0.40/share target) EVENT NuCoal s Plashett acquisition Cluster development opportunities and diversification KEY POINTS NuCoal Resources (NCR) announced a binding heads of agreement to acquire the Plashett Coal exploration licence (EL 6705) with an exploration target of 89 to 300mt. The licence is strategically located between NCR s flagship Doyles Creek underground project (525.5mt JOR resource) and its Savoy Hill block. NCR plan a 12 drill program following transaction s completion with an open-pit targets the focus. The area is prospective for both open pit high ash coal and higher quality export coals likely to be underground. Deal Terms A three stage all-scrip acquisition from The Bloomfield Group, a coal miner and engineer, with an initial $10.5m (for 35m shares) and then two staged payments of $29.25m and $36.25m worth of scrip (at then VWAP). This is dependant upon on achieving resource definition hurdles, the first being 100mt JORC inferred resource. If 200mt JORC inferred resource is discovered the cost of the deal is approximately $0.38/t, fair for a high quality prospect, but comes with an unknown level of future dilution for current NCR shareholders. The deal is subject to conditions including NCR shareholder and Ministerial approval and will likely take to September quarter 2012 to complete. Bloomfield Group s MD, John Richards, will then join then NuCoal Board as Non-Executive Director upon completion. Modest valuation addition now - potentially big upside later Plashett offers NCR shareholders development synergies and mine diversification benefits and a residual value if Doyles Creek licence to operate is impaired in any way. Potential access to port adds value to all NCR s assets. We see the deal offers around $0.02/share in fully diluted value uplift on a 150mt discovery risked to 33% confidence level. Un-risked a Plashett project could add ~$0.23/share value. Recommendation Spec Buy - maintained We believe the market is undervaluing both NCR s existing assets and the management s demonstrated ability to acquire nearby high potential acreage and obtain required access permissions for exploration. Speculative Buy, very high risk recommendation - Our valuation and price target is $$0.43/share with un-risked upside of $1.46/share if all projects can be de-risked. This is before adding extra value for the Plashett deal. Catalysts to performance include the clearing of any negative impacts for shareholders from a current corruption enquiry s review of original Doyles Creek exploration licence award. Upside is likely from further progress on Doyles Creek feasibility study and part monetisation of the project and a meaningful exploration find at Savoy Hill. Risks include political, project and coal market related.

2 Plashett acquisition diversifies the asset base and provides synergy opportunities EL 6705 the transaction subject to shareholders vote NuCoal Resources (NCR) announced a binding heads of agreement with the Bloomfield Group (Bloomfield) to acquire the Plashett Coal exploration licence (EL 6705) with an exploration target of 89 to 300mt in this 942ha permit. The licence is strategically located between NCR s flagship Doyles Creek underground project (525.5mt JOR resource) and the Savoy Hill block currently being drilled and next door to the Bayswater Power Station. The acquisition from Bloomfield will be via a three stage all-scrip acquisition, with an initial $10.5m (for 35m shares) and then two staged payments of $29.25m and $36.25m worth of scrip (at then VWAP). This is dependant upon on achieving resource definition hurdles of first 100mt JORC inferred resource and secondly either 200m JORC inferred or 60mt of proven & probable ore reserves. The acquisition cost using 200mt threshold is $0.38/ resource tonne, which is on par or below recent NSW related transactions for undeveloped resources. Deal is subject to conditions The deal is subject to conditions including NCR shareholder and Ministerial approval and will likely take to September quarter 2012 to complete. Advanced exploration target Approximately 70 historical boreholes of data available which have helped define an exploration target of 89 to 300mt of semi soft coking and a range of thermal coals in multiple seams. NCR plan a 12 drill program following transaction s completion with open-pit targets the focus. The area is prospective for both open pit likely high ash power station coal and higher quality export thermal and semi-soft coals, though likely to be accessed by underground mining techniques. Plashett has open cut potential and the ability to link to the Doyles Creek Project via an underground corridor as the two blocks are as close as 0.5km in distance from each other. Cost and valuation is resource and future share price dependent If 200mt JORC inferred resource is discovered the cost of the deal will be $76.25m inclusive of $5m in exploration and delineation expenditure. The amounts to $0.38/t of inferred resource, fair for a high quality prospect with numerous (~70 historical boreholes). NCR shareholders however face uncertainty on the level of share dilution. Initially Bloomfield will have ~5.1% of NCR. If both performance hurdles are met and the issues price is $0.45/share, Bloomfield will own ~22% of NCR If the share issues price is $0.33/share, Bloomfield secures ~26% of NCR Recently NCR traded as low as $0.23/share. At this price Bloomfield would control 33% of NCR Should the acquisition proceed, Bloomfield will have a significant position on the register and opens the question on other co-operation and strategic acquisition opportunities for NCR with this veteran Hunter Valley producer. Modest valuation addition now, bigger upside potential later We see the deal offers around a $94m or $0.02/share in fully diluted value uplift on a 150mt discovery risked to 33% confidence level. Un-risked the project adds ~$0.23/share value. This assumes also share price for stages 1 and 2 contingent payments to Bloomfield (and capital raised for drilling the prospect) at $0.40/share and $0.50/share respectively. We see a discovery as boosting NCR s share price. This forms our base case for valuing

3 Plashett. However, if the share issue price is only $0.33/share the risked valuation uplift is zero per fully diluted share and $0.21/share for the un-risked valuation. Plashett Coal licence ideally located to NCR s blocks close to infrastructure or customers Source: NCR 20 February 2012 transaction announcement Cluster development opportunities proximity and diversification benefits Plashett offers NCR shareholders a clustering of activities to provide multiple opportunities for development synergies and mine diversification. It also provides a meaningful residual value if Doyles Creek licence to operate is impaired in any way. There are also potential to share or expand port allocation as Bloomfield has capacity at Port Waratah for its Rix s Creek and Bloomfield Colliery producing Hunter Valley mines. Access to infrastructure assists in reducing development risk of Doyles Creek (high quality no wash Whynot seam) as well as a potential Plashett development. The Plashett licence could be co-developed for domestic coal with Savoy Hill to service Bayswater and Liddell coal fired power stations next door. Export quality coal could be conveyed via an underground drive from Plashett to Doyles Creek with sharing of other infrastructure.

4 Doyles Creek is an advanced exploration project with 525.5mt of JORC resource with Measured and Indicated Resources of 129.1Mt. NCR is rapidly advancing development studies with completion of pre-feasibility study by June 2012 and full feasibility study by June The Savoy Hill (and Dellworth) licences are in primary exploration phase. In EL 6812 (Savoy Hill) NCR started drilling in October A 9 drill-hole program is underway with first results in late March Success could see an advantaged domestic coal development as it is next door to NSW s second largest coal-fired power station. At Dellworth, NCR has obtained all required access agreements with the landholders Xstrata, Macquarie Generation and Daracon in preparation for exploration drilling to commence. This block is within 15km of Doyles Creek. Diversification of operations is a key feature of the deal. NCR s shareholders are still yet to receive the results that may or may not impact their interests from a current corruption enquiry s review of original Doyles Creek exploration licence award. Plashett has the potential to provide a robust development project for NCR shareholders should the (unthinkable) worst case scenario occur. Plashett also introduces potentially lower cost and/or lower risk open pit operation to NCR s flagship Doyles Creek high capacity mechanised underground development concept. NuCoal oal s s existing permits Doyles Creek, Savoy Hill and Dellworth locations in relation to Plashett Source: NCR 20 Feb 2012 announcement EL 6705 advanced exploration target well known seams needs confirmatory drilling

5 Potential resource area of Plashett block

6 Recent transaction in NSW Averages $0.53/tonne JORC resource Source: NCR 20 February 2012 transaction announcement Investment Case We believe the market is undervaluing both NCR s assets and the management s demonstrated ability to acquire nearby high potential acreage and obtain required landholder permissions (including Xstrata and Bayswater powers stations) to access for exploration purposes. Plashett potentially adds to this opporunity set. Speculative Buy, high risk recommendation - Our valuation and price target is $$0.43/share with un-risked upside of $1.46/share if all projects can be de-risked. This is before adding extra value for the Plashett deal. Catalysts to performance include the clearing of any negative impacts for shareholders from a current corruption enquiry s review of original Doyles Creek exploration licence award. Upside is likely from further progress on Doyles Creek feasibility study and part monetisation of the project and a meaningful exploration find at Savoy Hill. Risks include poor or long dated outcome from the corruption enquiry, material failure of exploration programs or development studies uncovering difficulties in project development and inability to access fully key infrastructure. Nucoal Resources N.L. NCR share Coal Resource Product Coal Confidence Level Risked Value Risked Value Unrisked Dil.shares % mt mt % A$/t A$m A$ps A$ps Doyles Creek Underground By Seam Whynot + W.Borehole 100% % $ $0.28 $0.94 Whybrow + Other 100% % $ $0.14 $0.47 Doyles Cr - Training 100% % $ $0.00 $0.00 Total Projects Valuation $ $0.42 $1.41 Doyles Cr Upside 100% 5 2 5% $ $0.00 $0.01 Dellworth Exploration Target % $ $0.02 $0.06 Other Exploration 20% 0 $0.00 $0.00 Corporate Costs -22 -$0.03 -$0.03 Partly Paids o/standing 0.0 0% 0 $0.00 $0.00 Cash - Dec'11 net explor $0.01 $0.01 Total Valuation 280 $0.43 $1.46 Source: Austock estimates, NCR company released data Should you have any queries, please do not hesitate to contact me on

7 Lawrence Grech Resource Analyst Austock Securities Limited Level 9, 56 Pitt Street Sydney NSW 2000 Phone: Mobile: Please consider the environment before printing this . Recommendation Criteria Investment View Austock Securities Investment View is based on an absolute 1-year total return equal to capital appreciation plus yield. Buy Hold Sell > 20% 20% - 5% < 5% A Speculative recommendation is when a company has limited experience from which to derive a fundamental investment view. Risk Rating Austock Securities Limited has a four tier Risk Rating System consisting of: Very High, High, Medium and Low. The Risk Rating is a subjective rating based on: Management Track Record, Forecasting Risk, Industry Risk and Financial Risk including cash flow analysis. Disclosure of Economic Interests The views expressed in this research report accurately reflects the personal views of Lawrence Grech about the subject issuer and its securities. No part of the analyst's compensation was, is or will be directly or indirectly related to any recommendation or view expressed in this report. The following person(s) do not hold an economic interest in the securities covered in this report or other securities issued by the subject issuer which may influence this report: -the author of this report -a member of the immediate family of the author of this report Disclaimer/Disclosure This publication has been prepared solely for the information of the particular person to whom it was supplied by Austock Securities Limited ( Austock ) AFSL This publication contains general securities advice. In preparing the advice, Austock has not taken into account the investment objectives, financial situation and particular needs of any particular person. Before making an investment decision on the basis of this advice, you need to consider, with or without the assistance of a securities adviser, whether the advice in this publication is appropriate in light of your particular investment needs, objectives and financial situation. Austock and its associates within the meaning of the Corporations Act may hold securities in the companies referred to in this publication. Austock believes that the advice and information herein is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded). No responsibility for any errors or omissions or any negligence is accepted by Austock or any of its directors, employees or agents. This publication must not be distributed to retail investors outside of Australia. Disclosure of Corporate Involvement Austock Securities Limited has in the previous 12 months been involved in a publicly-announced transaction involving the payment of a fee to Austock Securities Limited by the corporate issuer described in this report. Austock Securities does and seeks to do business with companies covered in its research. Austock Securities reports are available on Bloomberg, Reuters, FactSet, Capital IQ and