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AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORTFOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012

DIRECTORS’ REPORT

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directors’ and financial report for the period 1 July 2012 to 31 December 2012

Ambre Energy Limited

About Ambre EnergyAmbre Energy Limited is an unlisted public company headquartered in Brisbane, Australia with coal export infrastructure developments and mining assets located in the USA.

The company’s jointly owned western US coal mines currently produce more than 3 million metric tons of thermal coal per year, with output sold domestically to power utilities.

Ambre is planning to extend the scale of its coal mining operations and commence the export of coal to power utilities located in Asia through its own port facilities in the US Pacific Northwest: Millennium Bulk Terminals (MBT) in Washington State (62% owned by Ambre), and the Morrow Pacific project (MPP) at Port of Morrow and Port Westward in Oregon (100% owned by Ambre).

The company is also planning to demerge its Ambre Fuels subsidiary to allow both Ambre Fuels and its parent Ambre Energy to focus on their respective core business.

Ambre Energy business structure

Other activities

Oil shaleAmbre Fuels

LimitedAustralian coal

exploration

Ambre Energy Limited

International coal trading and marketing

US coal export infrastructure

Millennium Bulk Terminals - Longview (62%)

Morrow Pacific project (100%)

US coal production

Decker mine (50%)

Black Butte mine (50%)

Big Horn deposit (100%)

Rosebud deposit (100%)


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CONTENTS

Directors’ report ................................................................................................. 4

Auditor’s independence declaration ............................................................... 19

Financial report ................................................................................................. 20

Consolidated statement of comprehensive income ...................................21

Consolidated statement of financial position .............................................22

Consolidated statement of cash flows .......................................................23

Consolidated statement of changes in equity ............................................24

Notes to the financial statements ...............................................................25

Directors’ declaration ...................................................................................... 78

Independent auditor’s report ........................................................................... 79

Corporate directory .......................................................................................... 84


DIRECTORS’ REPORT

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DIRECTORS’ REPORTAmbre Energy Limited, in December 2012, changed its financial year end from 30 June to 31 December. Due to the change of year end, Ambre Energy is required to report on the six month period 1 July 2012 to 31 December 2012 (the period). The annual report subsequent to this report will account for the year 1 January 2013 to 31 December 2013.

The annual report for the financial year ended 30 June 2012 was signed on behalf of directors on 12 December 2012. Consequently, certain information in this report overlaps with information in the annual report for the financial year ended 30 June 2012.

The directors of Ambre Energy Limited present their report together with the financial statements of the consolidated group, being Ambre Energy Limited (the parent) and its controlled entities (the group), for the period 1 July 2012 to 31 December 2012.

Directors The following persons were directors of the parent entity during the whole of the period and up to the date of this report, unless otherwise noted:

Terry O’Reilly BCom, MBA, MApplied Finance, CPA, FAICD, FAIMChairman

Appointed: 23 January 2012 Chairman of Nomination and Remuneration Committee Member of Audit and Risk Management Committee Terry O’Reilly has extensive board, chief executive and senior executive experience after working principally in the resources, energy and manufacturing sectors in Australia and internationally.

Terry has served as managing director of: Conzinc Asia, based in Singapore; Pacific Coal, based in Brisbane; and Coal and Allied Industries, based in Sydney. He has also served on the boards of the Port Waratah and Dalrymple Bay coal terminals.

With a commerce degree and MBA from Melbourne University, and a Masters in Applied Finance from Macquarie University, Terry is a Certified Practicing Accountant, a Fellow of the Australian Institute of Company Directors and a Fellow of the Australian Institute of Management.

Terry has served as Chairman of the Australian Coal Association, Queensland Coal Operators, the NSW Minerals Council and the World Coal Institute Promotions Committee, and was President of the Australia Philippines Business Council.

On the board of Macarthur Coal from October 2008 to October 2011, he served on the Audit and Special Projects committees and as Chairman of the Nomination and Remuneration Committee. Terry is a non-executive director with Thomas & Coffey Limited and Bandanna Energy Limited.

Edek Choros MSc (Geol), BE (Mining)Chief Executive Officer and Managing Director

Appointed: 17 June 2005

Edek Choros founded Ambre Energy in June 2005. With more than 25 years of geological and engineering experience, Edek has demonstrated an innate ability to identify and develop new project opportunities.

Before forming Ambre Energy, Edek established and sold the Millennium Coal Project in Queensland’s Bowen Basin. His experience developing innovative and profitable ventures ensures Ambre Energy continues to attract investment and international interest.

Edek gained his qualifications as a geologist and mining engineer in Krakow, Poland before moving to Australia in 1989. He worked for the Electricity Trust of South Australia and as a private consultant in the coal mining industry before establishing Millennium Coal.


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Michael Mewing BEc

Executive Director, Coal Business Development and Marketing

Appointed: 14 April 2008 Michael Mewing joined the board of Ambre Energy in April 2008 as Non-Executive Chairman and assumed a full-time executive role in September 2008.

Michael was President of Ambre Energy’s US subsidiary, Ambre Energy North America, from December 2008 to December 2010 and is now an executive director based in Brisbane. His primary responsibilities include strategic development and coal trading and marketing.

Instrumental in progressing Ambre Energy’s US acquisition and development program, Michael joined Ambre Energy with 30 years of experience in the international energy field, working in New South Wales, Queensland, Japan, Indonesia and the USA. He has held commercial, marketing and business development roles with BP Oil, BP Coal, Rio Tinto, PT Berau Coal and Millennium Coal.

Michael van Baarle BCom, LLBExecutive Director, Corporate Development

Appointed: 10 April 2006 Michael van Baarle has been an executive director of Ambre Energy Limited since 2006, shortly after the company’s inception. In that time, he has assisted with business and corporate development, which has seen Ambre grow from a small coal exploration and technology business starting out in Brisbane to a global resources group that employs and manages over 300 personnel.

Michael’s role has included raising capital in Australia and internationally, attending to the legal and corporate requirements involved in various acquisitions, including US technology and mining companies and port assets, managing communication with shareholders and other stakeholders, and overseeing corporate development generally. Prior to this time, Michael was a solicitor for 20 years, mainly in private practice in Brisbane. He is a graduate of the University of Queensland with degrees in law and commerce.

David Usasz BCom, FCA

Non-Executive Director

Appointed: 1 February 2009 Chairman of Audit and Risk Management Committee Member of Nomination and Remuneration Committee David Usasz is an expert in financial and strategic affairs with 31 years of service at PricewaterhouseCoopers, including 20 years as a partner. Throughout his career, David has advised businesses in both government and the private sector on management issues around success and growth.

David gained extensive experience in corporate finance with a focus on tax and mergers and acquisitions. Three years working in Hong Kong, coupled with extensive travel to Japan, Taiwan, Jakarta and Singapore, gives David a strong understanding of Asian markets and investors.

David is currently a non-executive director of the publicly listed corporation Cromwell Group and of Queensland owned corporation Queensland Investment Corporation Limited. He was Chairman of Queensland Mining Corporation (2007-2013) and director of unlisted company URBIS Pty Ltd (2008–2013).

David’s diversified interests and networks are boosted by former directorship of the Australian Rugby Union Limited (2005–2007) and honorary positions held with the Princess Alexandra Hospital Research Foundation and the Australia Taiwan Business Council.


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Jayson Newitt BSc, MBA


Appointed: 1 December 2010 Member of Nomination and Remuneration Committee

Jayson Newitt holds a Bachelor of Science from Brigham Young University and received a Master of Business Administration degree from the Marriott School of Management (BYU).

Jayson is co-founder and managing director of Ritchie Opportunity Fund I, a private equity and investment fund with investment allocations in energy, manufacturing and healthcare, based in Salt Lake City, Utah. He is also a principal of The Ritchie Group, a private equity company with investments and projects across a diversified industry base, across two countries and across nine US states.

Jayson has substantial experience in project management, real estate, healthcare and private equity projects as a manager, limited partner, investor and board member.

Dr Ross Bhappu BSc, MSc, PhD (Mineral Econ.)


Appointed: 16 November 2011 Member of Audit and Risk Management Committee Since 2005, Ross has been a partner with Resource Capital Funds, a series of private equity funds investing in the mining and minerals industry. From 2001 until 2005, he was vice-president/principal of Resource Capital Funds.

Since 2010, Ross has served as Chairman of the board of Molycorp Inc. and since 2008 has been on the board of directors of EMED Mining Public Ltd, a copper mining company. He has been a director of Traxys SA, a metal trading and distribution company, since 2007.

From July 2002 until November 2007, Ross served on the board of directors of copper mining company Constellation Copper Corporation, and from November 2005 until September 2006 on the board of gold mining company Anglo Asian Mining.

Ross has experience in constructing and operating complex mining and processing operations, as well as mining-related merger and acquisition activities. He has worked for Newmont Mining Corporation, GTN Copper Corporation and Cyprus Minerals Company.

Company SecretaryNeil McGregor BMus, MMus, MBA

Appointed: 15 March 2012 Neil McGregor joined Ambre Energy in August 2008. He has held the position of Company Secretary for Ambre Fuels Limited since September 2011 and was appointed as Company Secretary and GM Corporate Communications for Ambre Energy Limited in March 2012. Neil holds a Masters of Business Administration and is currently studying for a Graduate Diploma in Applied Corporate Governance. Prior to joining Ambre Energy, Neil was Director of Bands/Head of Woodwind at a Brisbane private school and enjoyed an active performance schedule as a professional clarinettist with symphony orchestras in Australia, New Zealand and the USA for 14 years.


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PRINCIPAL ACTIVITIESAmbre Energy is engaged in the following principal activities:

Export infrastructurea) Jointly with partner Arch Coal, Inc., operating and rehabilitating a bulk commodities terminal, Millennium Bulk Terminals-

Longview, on the Columbia River in Washington State, USA, and developing an expansion of the terminal to handle up to 44 million metric tons of coal per year for delivery into the international seaborne market

b) Developing a proposed coal barging and transloading project known as the Morrow Pacific project on the Columbia River in Oregon, USA, with the capacity to handle up to 8 million metric tons of coal per year for delivery into the international seaborne market

International coal marketing and tradinga) Developing an international coal marketing business to sell US coal into the seaborne market, principally to service

North Asian power utilities in South Korea, Japan and Taiwan

Coal mininga) Operating the Decker coal mine in south-east Montana, USA, on behalf of itself and joint venture partner,

Cloud Peak Energy, and selling the coal to domestic US power utilities

b) Operating the Black Butte coal mine in south-west Wyoming, USA on behalf of itself and joint venture partner, Anadarko Petroleum, and selling the coal to domestic US power utilities

Alternative fuelsa) Developing processing facilities in the USA for the production of liquid fuels and chemicals from coal.

REVIEW OF OPERATIONS AND ASSETSThe following review of operations and assets provides further detail on the separate businesses in the Ambre Energy group.

Principal activities

US bulk commodities terminal operation and coal export infrastructure developmentAmbre Energy’s infrastructure business is responsible for operating and implementing expansion projects at the jointly-owned Millennium Bulk Terminals (Washington State, USA), and the wholly-owned Morrow Pacific project (Oregon, USA).

Millennium Bulk Terminals-Longview

Millennium Bulk Terminals-Longview (MBTL) is a bulk materials port on the Columbia River in Washington State, USA.

Ambre Energy owns 62 per cent of MBTL, with the remaining 38 per cent owned by Arch Coal, Inc. The site operated as an aluminum smelter from 1941 through 2000. Since 1968, the dock has been used to import alumina and materials for smelting.

A significant works program to maintain and upgrade the existing facilities is underway, including clean-up projects related to decades of aluminum smelting. The works have improved the safety and condition of the site for staff while addressing government requirements and community expectations. On 16 February 2012, Barlow Point Land Company, LLC, a State of Washington limited liability company wholly owned by MBTL, acquired the 20 acre Barlow Point property adjacent to the site for future environmental mitigation.

Since the company commenced operations in January 2011, MBTL has registered one loss time injury and no environmental citations. MBTL annually handles approximately 300,000 to 350,000 metric tons of alumina for Alcoa and 100,000 metric tons of coal for the neighbouring Weyerhaeuser paper mill. The company employed an average of 35 people on site during the reporting period, led by Chief Executive Officer, Ken Miller.


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MBTL submitted permit applications on 23 February 2012 seeking approval to build a coal export facility at its Longview site. A contractor assigned to complete the Environmental Impact Statement for the proposed facility was appointed in March 2013. If approved, the US$450 million first stage will result in a coal export terminal with approximately 25 million metric tons per annum (Mtpa) capacity. The second stage, projected to cost US$200 million, will take total export capacity to approximately 44Mtpa.

The proposed new terminal facilities will include a rail yard to house trains arriving from western US coal mines, and two new docks to create a modern and efficient port capable of receiving, stockpiling, blending and loading coal for export. At full build-out, two vessels per day are anticipated to depart for offshore markets.

Morrow Pacific project

The Morrow Pacific project is a proposed coal barging and transshipping operation involving two industrial sites on the Columbia River, in Oregon, USA.

At the publicly owned Port of Morrow located 272 miles up the Columbia River near Boardman, Oregon, a wholly owned Ambre Energy subsidiary will construct the Coyote Island Terminal. The terminal will be capable of unloading coal from incoming trains using the Port of Morrow’s existing rail loop. The coal will be stored in covered warehouses before being barged 219 miles downriver to a second site at Port Westward.

This site is an existing dock at the Port Westward Industrial Park, also located on the Oregon side of the Columbia River and approximately 50 miles from the Pacific Ocean. It is capable of receiving ocean-going vessels up to Panamax class. The coal in the barges arriving from Coyote Island Terminal will be transloaded directly onto ships berthed at the Port Westward dock. The ships will be loaded via a state-of-the-art, fully enclosed, floating transloading facility.

The Union Pacific transcontinental rail line, also historically used by BNSF Railway, provides the Port of Morrow with a rail link to coal mines in Montana, Wyoming, Colorado and Utah, including Ambre Energy’s co-owned mining operations at Decker and Black Butte.

Permits to build a barge loading terminal at the Port of Morrow were lodged in February 2012 and in May 2012, the United States Army Corps of Engineers (USACE) completed a 60 day comment period. In August 2012, Anderson Perry & Associates, Inc., a civil engineering, surveying and natural resource firm completed an Environmental Review (ER) of the Morrow Pacific project. The ER looks at the potential environmental, economic and social impact that the project would have regionally. The ER was submitted to USACE as part of the permitting process.

In September 2012, USACE determined that the project at the Port of Morrow would be subject to an Environmental Assessment. In May 2013, Oregon’s Department of Environmental Quality issued draft air, stormwater and process water permits, followed by a public comment period which closed on 12 August 2013. These permits, if granted, would allow construction to begin on the Coyote Island Terminal.

Initially, Ambre Energy anticipates shipping 3.5 million metric tons of coal per year from 2015 to countries such as South Korea, Japan and Taiwan. Full operational and permitted capacity is expected to be 8 million metric tons annually, subject to necessary approvals.

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International coal marketing and tradingAmbre Energy’s international coal marketing and trading business is aiming to source, market and sell high quality US thermal coal to customers predominantly in the Asia-Pacific market.

Total coal demand from Asia until 2030 is forecast to grow at 6.7 per cent per year – 1.3 billion additional metric tons of coal. The US is currently a minor supplier of thermal coal into the Pacific export market, accounting for only 8 million of Asia’s 650 million metric tons of thermal coal demand.

As export facilities are commissioned on the US north-west coast, western US coal producers will increase their share of the Asian market. Ambre Energy believes its port developments, the Morrow Pacific project and Millennium Bulk Terminals-Longview, will be among the first projects to be permitted and developed.

Ambre Energy’s international coal marketing and trading business will optimise sales from its current operations and underpin the potential development of the company’s new projects. The marketing business will also seek to buy coal from other western US producers and export through Ambre Energy’s wholly and jointly owned export infrastructure, once commissioned. The primary markets will be South Korea, Japan and Taiwan – the markets geographically closest to the US west coast.

New sales will build on Ambre Energy’s current 10-year coal supply agreements with two South Korean companies: Korea South East Power Co. Ltd (KOSEP) and Korea Southern Power Co. Ltd (KOSPO). In May 2012, KOSEP entered into an agreement to purchase up to three million metric tons of coal each year from Ambre Energy for 10 years and in June 2012, KOSPO agreed to purchase up to two million metric tons from Ambre Energy for 10 years. The agreements with KOSEP and KOSPO will commence from commissioning of Ambre Energy’s first US coal export terminal.

Within the US, Ambre Energy’s marketing focuses on expanding sales to current and new customers for its jointly held Decker and Black Butte mines.

US thermal coal productionIn November 2011, through the purchase of a US company, KCP, Inc., Ambre Energy assumed the operation of, and acquired a 50 per cent ownership interest in, the Decker coal mine in Montana and the Black Butte coal mine in Wyoming, USA. The company also secured interests in two reclaimed Wyoming mines with significant remaining coal resources, Big Horn and Rosebud.

Ambre Energy’s thermal coal production business fulfills operating and marketing responsibilities for the Decker and Black Butte mines, and is also responsible for investigating the viability of redeveloping the Big Horn and Rosebud deposits.

Decker coal mine

The Decker coal mine is in the northern Powder River Basin. Located within Montana’s Big Horn County, the mine is divided into two areas – East Decker and West Decker – each with its own rail loadout facilities. The mine is serviced by BNSF Railway.

Since operations began in the 1970s, Decker has produced approximately 300 million metric tons of coal. Decker coal has the highest calorific value in the Powder River Basin (PRB) at 5000 Kcal/kg NAR, making it attractive for the export market as well as offering domestic users a quality premium to other PRB coals. Decker mine also has the shortest railing distance to Canadian and prospective US Pacific Northwest ports of all PRB mines.

Ambre Energy has operated the Decker mine since acquiring its 50% interest on 14 November 2011. In the period 1 July 2012 to 31 December 2012:

+ Decker had one lost time injury and zero significant environmental citations

+ Decker sold approximately 1.6 million metric tons of coal into the US domestic market, thereby achieving total sales for 2012 of 2.6 million metric tons

+ A new geological model for the Decker resource was completed, which has resulted in an improved mine plan and a better understanding of the extent of the resource

+ Ambre Energy was sued (on 9 July 2012) by its joint venture partner (a subsidiary of Cloud Peak Energy) in connection with, inter alia, the future plans for Decker mine, and Ambre Energy counterclaimed. As set out below, there was a subsequent agreement between the parties to resolve the dispute

+ Ambre Energy and Cloud Peak Energy (CPE) entered into a series of agreements on 5 December 2012 (through respective subsidiaries) whereby the parties would discontinue their lawsuits against each other, and Ambre Energy would purchase CPE’s indirect 50% joint venture share in the Decker Coal Company and related assets, including entitlement to certain royalties payable by Decker.


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On 28 August 2013, Ambre Energy and CPE announced jointly that the potential transaction related to the agreements reached in December 2012 has not been completed and is not expected to be completed in the foreseeable future. The timing of any potential closing is uncertain and will depend on Ambre Energy’s ability to replace CPE’s outstanding reclamation and lease bonds for the Decker Mine. The companies continue to be in discussions and have jointly dismissed the previously disclosed Decker litigation without prejudice to allow time for their ongoing discussions and evaluations. For further information, see Note 34 (a) in the financial statements.

Black Butte coal mine

Black Butte coal mine is in the Green River Basin in Sweetwater County, south-west Wyoming, USA. The mine is a 50/50 joint venture between Ambre Energy and Anadarko Petroleum Corporation (APC). As with the Decker mine, Ambre Energy operates the mine and is responsible for marketing.

Ambre Energy has operated the Black Butte mine since acquiring its 50% interest on 14 November 2011. During the period, one loss time injury and one citation has occurred.

The mine, a combination of dragline and truck and shovel stripping, is serviced by Union Pacific Railroad and the existing rail loop can support throughput of 14.5 million metric tons per annum. The mine targets production of approximately 3.6 million metric tons of coal each year and in the period 1 July 2012 to 31 December 2012, the mine sold approximately 1.2 metric tons, thereby achieving total sales for 2012 of 2.6 million metric tons. An average of 186 people were employed during the period.

Along with supplying the existing domestic market, Ambre Energy is working towards exporting coal from Black Butte to the international market.

Rosebud deposit

Rosebud coal mine – located north of Hanna, in the Hanna Basin, Carbon County, Wyoming – opened in 1955 and operated until the early 1990s. The mine produced approximately 2.7 million metric tons per year at the height of its productivity in the 1970s. Today, the mine is nearly fully reclaimed and no coal production occurs.

As with the Big Horn deposit, there are significant remaining resources available at Rosebud. Developing these deposits is a potential future option for Ambre Energy.

Big Horn deposit

Located in the Northern Powder River Basin in Sheridan County, Wyoming, a mine operated at the Big Horn site from 1944 until 2000, producing up to 4.1 million metric tons of coal per year at its peak.

While the Big Horn deposit is not currently being mined, it has significant remaining resources.

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Additional Ambre Energy group activities

Ambre Fuels Limited

Ambre Fuels Limited, a wholly-owned subsidiary of Ambre Energy, is developing projects and technologies in Australia and the USA to convert coal into transport fuels. An independent board directs Ambre Fuels Limited.

Ambre Fuels has investigated sites in Queensland, Wyoming, Montana, Colorado and Texas to identify the location of the company’s first coal-to-liquids project, while working with US research partners to investigate alternative methods for fuel production. At this stage, Wyoming is the most prospective location for the first project.

In Australia, while Ambre Fuels continues to maintain coal exploration permit EPC935 near Pittsworth, Queensland, there are no longer any immediate prospects for developing a project within the permit area. This will be reviewed periodically.

It is Ambre Energy’s intention to demerge Ambre Fuels Limited and its subsidiaries from the Ambre Energy group at the earliest opportunity, subject to approval from shareholders and secured creditors. The demerger will provide the necessary independence for Ambre Fuels Limited to pursue its strategy to develop coal-to-liquids projects in North America and will allow Ambre Energy to dedicate its resources to the company’s US coal export business.

Research and development

During the financial period, Ambre Fuels pursued the development and application of the following technologies:

+ Coal gasification to produce liquid fuels such as methanol, unleaded petrol, LPG and next-generation fuels such as DME

+ Catalyst for syngas conversion

+ Converting biomass and municipal waste to alternate fuels

+ Co-firing biomass and coal

+ Lignin-to-fuels conversion technologies

+ Coal liquefaction (dissolving coal).

Oil shale

Ambre Energy is the largest private owner of oil shale leases in Utah, USA, with 38,000 acres across 18 mineral leases and in-place resources of 8.7 billion metric tons containing 5.5 billion in-situ barrels of oil.

Approximately 1 billion in-situ barrels of this oil are contained in shale resources occurring at less than 500ft of cover, with the majority of near-surface resources well placed for surface mining techniques1.

Australian coal exploration

Ambre Energy holds coal exploration permits in Queensland, located roughly between Millmerran, Pittsworth and Warwick.

These exploration permits are located within the region currently under review as part of the Queensland Government’s statutory regional planning process.

Due to uncertainty and in accordance with Australian accounting standards, Ambre Energy’s coal exploration tenements were written down to zero value.

Operating results (Corporate and financial position)The net accounting loss for the group for the period was $30,741,000 (Jun 2012: $62,759,000). Cash flow (negative) from operations was $17,644,000 (Jun 2012: $26,366,000).

1 Ambre Energy Oil Shale Resource Determination Report, Norwest Corporation, August 2011


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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the reporting period, the following significant changes in the state of affairs occurred:

+ Prior to the period, permit applications were lodged seeking approval to build a coal storage and barge loading terminal at the Port of Morrow, Oregon, as part of the Morrow Pacific project. In August 2012, Ambre Energy subsidiary Coyote Island Terminal, LLC (CIT) submitted an Environmental Review to USACE which investigates the potential environmental, economic and social impact that the coal barging terminal would have on the Port of Morrow region. In September 2012, CIT was informed that USACE will move forward with an Environmental Assessment of works proposed at the Port of Morrow.

+ Ambre Fuels Limited was informed by the Queensland Government in August 2012 that its Australian coal-to-liquids project, ambreCTL, would not be declared a significant project for which an environmental impact statement is required. The Queensland Government announced its intentions to undertake a regional planning process to resolve land use conflicts such as those arising between agricultural and mining activities.

+ On 9 July 2012, the 50% joint venture owner of the Decker Mine, Western Minerals LLC, filed a Complaint and Jury Demand with the US District Court in Billings, Montana. The defendants named in the Complaint were KCP, Inc., Ambre Energy North America, Inc. (AENA) and Ambre Energy Limited. KCP and AENA filed an Answer and Counterclaim on 30 July 2012, which Counterclaim also added Cloud Peak Energy, Inc. (CPE) as a defendant. Western Minerals and CPE filed a Response and Jury Demand to Counterclaims and Third Party Claims on 10 September 2012.

+ On 5 December 2012, a subsidiary of Ambre Energy Limited entered into an agreement with a CPE subsidiary to purchase CPE’s indirect 50% joint venture share in the Decker Coal Company and related assets, including entitlement to certain royalties payable by Decker. The terms of this agreement included a settlement of the previously disclosed Decker litigation.

+ On 5 December 2012, the board of directors resolved to change the financial year end for the Ambre Energy group to 31 December. Therefore, this financial period is for the six months ending 31 December 2012.

+ On 10 December 2012, Ambre and Resource Capital Fund V L.P. (RCF) agreed to amend, restate, modify, extend and continue their existing loan agreement. Under the amended agreement RCF made available to Ambre Energy North America, Inc. an additional $25 million senior, secured, non-revolving, convertible loan, of which $5 million was drawn down in the period and the remaining $20 million was drawn down between 1 January 2013 and 4 April 2013.

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EVENTS ARISING AFTER BALANCE SHEET DATEThe following events occurred after the end of the financial period:

+ On 20 March 2013, the company’s Managing Director elected to cancel 30 million options over Ambre Energy Limited shares. Refer to note 34 (c) in the financial statements for further information.

+ Subsequent to the loan agreement executed by Ambre Energy and RCF on 10 December 2012, Ambre Energy and RCF entered into a second amended and restated loan agreement on 20 August 2013 to provide an additional financing facility to Ambre Energy. For further information on these agreements see note 11 (b) i. ii, and note 34 (b).

+ Ambre Energy entered into agreements with KOSEP and KOSPO to restructure the repayment terms of convertible notes held by the Korean power companies, which were originally due for repayment in May and June 2013 respectively. For further information see note 34 (f), (g).

+ On 28 August 2013, Ambre Energy and CPE announced jointly that the potential transaction related to agreements reached in December 2012 whereby Ambre Energy was to purchase CPE’s 50% interest in Decker mine has not been completed and is not expected to be completed in the foreseeable future. Nevertheless, the parties agreed to dismiss the Decker litigation without prejudice.

Otherwise, there has not been any matter or circumstance that has significantly affected, or may significantly affect, the operations of the group, the results of those operations, or the state of affairs of the group in future financial periods, other than those matters disclosed on pages 76 and 77 of the financial report.

LIKELY DEVELOPMENTSLikely developments include:

+ progress on permitting for the Morrow Pacific project and the Environmental Impact Statement for Millennium Bulk Terminals

+ a demerger of the alternative fuels division from the group, subject to approval from Ambre Energy shareholders and secured creditors

+ restructuring of the board of directors and changes to the company’s staffing requirements to reflect Ambre Energy’s increased focus on its North American export infrastructure and mining business.

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DIRECTORS’ MEETINGSThe number of meetings of the company’s board of directors held during the period 1 July 2012 to 31 December 2012, and the number of meetings attended by each director was as follows:

DIVIDENDSThe directors declare that no amount has been paid or declared by way of a dividend since the start of the financial year. The directors do not recommend the payment of a dividend in respect of the financial year.

SHARE OPTIONS

Share options granted to directors and executivesNo options were granted to directors and executives over unissued ordinary shares in Ambre Energy Limited during the period.

EvENTS ARISING AFTER BALANCE SHEET DATEDetails of events arising since the end of the financial period are disclosed in the significant changes in the state of affairs on page 14 of the annual report. otherwise, there has not been any matter or circumstance that has significantly affected, or may significantly affect, the operations of the group, the results of those operations, or the state of affairs of the group in future financial periods, other than those matters disclosed on pages xx of the financial report

LIkELy DEvELOPMENTSLikely developments include:

+ closing of the acquisition of Cloud Peak energy’s 50 % interest in the Decker mine

+ progress on permitting for the Morrow Pacific project and the environmental impact statement for Millennium Bulk terminals

+ expansion of Decker mine based on a revised geological model and mine plan

+ a demerger of the alternative fuels division from the group and restructuring resulting in a Us entity becoming the head entity of the fuels business. shareholder approval for the demerger will be sought at the next annual general meeting of the company. the restructure will allow the fuels business to focus on the development of projects to convert coal and oil shale to liquid fuels while the parent will concentrate on the development and operation of the coal mining, export and infrastructure businesses.

DIRECTORS’ MEETINGSthe number of meetings of the company’s board of directors held during the period 1 July 2012 to 31 December 2012, and the number of meetings attended by each director was as follows:

Meetings of committees

Full meetings of directors

Audit and Risk Management Committee

Nomination and Remuneration

Committee

Total – 4 Total – 1 Total – 1

Number Attended

Number eligible

to attend

Number Attended

Number eligible

to attend

Number Attended

Number eligible

to attend

T O’Reilly Non-Executive 4 4 1 1 1 1

E Choros Executive 3 4 0 0 0 0

M Mewing Executive 4 4 0 0 0 0

SMJ van Baarle Executive 4 4 0 0 0 0

D Usasz Non-Executive 4 4 1 1 1 1

J Newitt Non-Executive 4 4 0 0 1 1

R Bhappu Non-Executive 3 4 0 1 0 0

DIvIDENDSthe directors declare that no amount has been paid or declared by way of a dividend since the start of the financial year. the directors do not recommend the payment of a dividend in respect of the financial year.

SHARE OPTIONS

share options granted to directors and executivesno options were granted to directors and executives over unissued ordinary shares in Ambre energy Limited during the period.

AMBRE ENERGY LIMITEDDIRECTORS’ AND FINANCIAL REPORT FOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012

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Meetings of directors


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UNISSUED SHARES UNDER OPTIONUnissued ordinary shares in Ambre Energy Limited under option at the date of this report are:

Date options grantedNumber of ordinaryshares under option

Exercise Priceof option

Expiry date of options

6 November 2008 200,000 0.48 31 December 2013

1 February 2009 450,000 0.48 31 December 2013




7 May 2009 100,000 0.48 31 May 2014

7 May 2009 200,000 0.48 31 December 2014

7 May 2009 1,000,000 0.48 31 May 2014

7 May 2009 100,000 0.48 31 May 2014

7 May 2009 200,000 0.48 31 May 2014

27 January 2010 400,000 0.48 31 December 2013


1 March 2010 500,000 0.48 31 December 2015

1 March 2010 600,000 0.48 31 December 2016

15 March 2010 200,000 0.48 31 December 2014

20 April 2010 1,000,000 0.60 31 December 2015

20 April 2010 1,000,000 0.60 31 December 2014

20 April 2010 600,000 0.60 31 December 2015

30 April 2010 200,000 0.60 31 December 2015

30 April 2010 500,000 0.60 31 December 2015

30 April 2010 50,000 0.48 31 December 2014

30 April 2010 200,000 0.48 31 December 2015

30 April 2010 50,000 0.48 31 December 2014

30 April 2010 100,000 0.48 31 December 2014

30 April 2010 100,000 0.48 31 December 2014

30 April 2010 600,000 0.48 31 December 2015

30 April 2010 500,000 0.60 31 December 2015

3 May 2010 1,000,000 0.48 31 December 2015

10 May 2010 500,000 0.48 31 December 2015

20 May 2010 1,000,000 0.60 31 December 2015

1 July 2010 100,000 0.48 31 December 2015

1 July 2010 1,000,000 0.48 31 December 2015

1 July 2010 100,000 0.48 31 December 2015

1 October 2010 1,000,000 0.48 31 December 2015

21 October 2010 100,000 0.60 31 December 2015



22 November 2010 600,000 0,60 31 December 2015

1 December 2010 300,000 0.60 31 December 2015

1 May 2011 250,000 1.00 31 Decemebr 2015

11 May 2011 500,000 1.25 31 December 2015

16 June 2011 50,000 1.00 31 December 2015

16 June 2011 500,000 1.00 31 December 2015

16 June 2011 200,000 1.25 31 December 2015

18 July 2011 100,000 1.25 31 December 2015

18 July 2011 200,000 1.25 31 December 2015

8 August 2011 400,000 1.10 31 December 2015

16 August 2011 100,000 1.10 31 December 2015






14 November 2011 6,250,000 1.00 14 November 2014


16 November 2011 1,000,000 1.25 31 December 2015


EvENTS ARISING AFTER BALANCE SHEET DATEDetails of events arising since the end of the financial period are disclosed in the significant changes in the state of affairs on page 14 of the annual report. otherwise, there has not been any matter or circumstance that has significantly affected, or may significantly affect, the operations of the group, the results of those operations, or the state of affairs of the group in future financial periods, other than those matters disclosed on pages xx of the financial report

LIkELy DEvELOPMENTSLikely developments include:

+ closing of the acquisition of Cloud Peak energy’s 50 % interest in the Decker mine

+ progress on permitting for the Morrow Pacific project and the environmental impact statement for Millennium Bulk terminals

+ expansion of Decker mine based on a revised geological model and mine plan

+ a demerger of the alternative fuels division from the group and restructuring resulting in a Us entity becoming the head entity of the fuels business. shareholder approval for the demerger will be sought at the next annual general meeting of the company. the restructure will allow the fuels business to focus on the development of projects to convert coal and oil shale to liquid fuels while the parent will concentrate on the development and operation of the coal mining, export and infrastructure businesses.

DIRECTORS’ MEETINGSthe number of meetings of the company’s board of directors held during the period 1 July 2012 to 31 December 2012, and the number of meetings attended by each director was as follows:

Meetings of committees

Full meetings of directors

Audit and Risk Management Committee

Nomination and Remuneration

Committee

Total – 4 Total – 1 Total – 1

Number Attended

Number eligible

to attend

Number Attended

Number eligible

to attend

Number Attended

Number eligible

to attend

T O’Reilly Non-Executive 4 4 1 1 1 1

E Choros Executive 3 4 0 0 0 0

M Mewing Executive 4 4 0 0 0 0

SMJ van Baarle Executive 4 4 0 0 0 0

D Usasz Non-Executive 4 4 1 1 1 1

J Newitt Non-Executive 4 4 0 0 1 1

R Bhappu Non-Executive 3 4 0 1 0 0

DIvIDENDSthe directors declare that no amount has been paid or declared by way of a dividend since the start of the financial year. the directors do not recommend the payment of a dividend in respect of the financial year.

SHARE OPTIONS

share options granted to directors and executivesno options were granted to directors and executives over unissued ordinary shares in Ambre energy Limited during the period.

AMBRE ENERGY LIMITEDDIRECTORS’ AND FINANCIAL REPORT FOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012

16


DIRECTORS’ REPORT

16

SHARES ISSUED DURING OR SINCE THE END OF THE PERIOD AS A RESULT OF EXERCISEDuring or since the end of the period, Ambre Energy Limited issued ordinary shares as a result of the exercise or net (cashless) exercise of options as follows:

Under the parent entity’s employee share option plan, option holders are entitled, as an alternative to exercising their options through payment of the exercise price, to exchange their options for a lesser number of shares based on the prevailing value of the company’s shares (commonly referred to as “cashless exercise”). During the period, 2,727,941 options were exchanged for 1,855,000 ordinary shares by way of cashless exercise. No consideration was paid to the company for these share issues.

Date options grantedNumber of ordinary shares under option

Price per shareNumber of ordinary shares

issued as a result of exercise

26 June 2008 100,000 0 68,000

26 June 2008 100,000 0 68,000

26 June 2008 100,000 0 68,000

26 June 2008 100,000 0 68,000

30 June 2008 136,765 0 93,000

1 September 2008 191,176 0 130,000

1 September 2008 225,000 0 153,000

4 September 2008 125,000 0 85,000

30 September 2008 800,000 0 544,000

1 October 2008 750,000 0 510,000

28 January 2009 100,000 0 68,000

26 June 2008 100,000 0.48 100,000

30 June 2008 100,000 0.48 100,000

30 June 2008 100,000 0.48 100,000

1 September 2008 275,000 0.48 275,000

Total 3,302,941 Total 2,430,000

Date options grantedNumber of ordinaryshares under option

Exercise Priceof option

Expiry date of options







5 December 2011 200,000 1.10 31 December 2015

31 December 2011 6,250,000 1.00 31 December 2014

23 January 2012 1,600,000 1.80 31 December 2016

7 March 2012 100,000 1.80 31 December 2015

1 April 2012 12,500,000 1.00 1 April 2015

27 April 2012 100,000 1.50 31 December 2016

27 April 2012 100,000 1.50 31 December 2016

27 April 2012 500,000 1.50 31 December 2016

27 April 2012 250,000 1.50 31 December 2016

30 April 2012 100,000 1.25 31 December 2015

14 May 2012 500,000 1.80 31 December 2016

28 May 2012 100,000 1.50 31 December 2016

28 May 2012 400,000 1.50 31 December 2016

28 May 2012 100,000 1.50 31 December 2016

28 May 2012 50,000 1.50 31 December 2016

28 May 2012 100,000 1.50 31 December 2016

28 May 2012 100,000 1.50 31 December 2016

5 June 2012 12,500 1.80 31 December 2016

6 June 2012 200,000 1.50 31 December 2016




Total 66,662,500


DIRECTORS’ REPORT

17

ENVIRONMENTAL LEGISLATIONThe group’s operations are subject to various environmental laws and regulations under the relevant government‘s legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non–compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities.

There have been no significant breaches by the group during the period.

INDEMNIFICATIONS OF OFFICERS AND AUDITORSDuring the period the company’s parent entity, Ambre Energy Limited, paid a premium in respect of a contract insuring the directors of the company (as named above), the company secretary, and all executive officers of the company and of any related body corporate against a liability incurred as a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

Directors’ DeedsAmbre Energy Limited entered into a Deed of Indemnity, Insurance and Access (Directors’ Deeds) with current directors of the parent. These Deeds formalise the arrangements between the company and the directors as to indemnities, insurance and access to board records. Under each Deed the company indemnifies the director to the extent permitted by law against any liability (including liability for legal defence costs) incurred by the director as an officer of the company or any operating company or while acting at the request of the company or any operating company as an officer of a non-controlled entity.

PROCEEDINGS ON BEHALF OF A COMPANYNo person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

AUDITOR’S INDEPENDENCE DECLARATIONThe auditor’s independence declaration for the period 1 July 2012 to 31 December 2012 has been received and can be found on page 19 of the annual report.

The report is made in accordance with a resolution of the directors.

________________________________

Edward (Edek) Choros Director 10 October 2013


DIRECTORS’ REPORT

18

DIRECTORS’ REPORT


DIRECTORS’ REPORT

19

AUDITOR’S INDEPENDENCE DECLARATION

20AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORTFOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012

FINANCIAL REPORT

Consolidated statement of comprehensive income ...................................21

Consolidated statement of financial position .............................................22

Consolidated statement of cash flows ......................................................23

Consolidated statement of changes in equity ............................................24

Notes to the financial statements ..............................................................25

Note 6 mth 12 mthDec 2012 Jun 2012

$'000 $'000

Revenue from operations 5 3,363 4,630

Other income 6 1,531 232 Share of gains/(losses) from joint ventures 4(a) (5,582) (10,105)Share of gains/(losses) from associates (5) (47)Gain on business combination 3 - 5,768 Depreciation and amortisation expense (766) (2,158)Employee benefits expense 23(a) (6,084) (10,908)Foreign exchange gains/(losses) (45) 29 Impairment expense 7 (163) (10,857)Finance costs 7 (8,135) (11,395)Consultants and professional expense (5,847) (10,940)Insurance expense (285) (559)Loss on disposal of fixed assets (23) (216)Lease expense (569) (1,009)Research and development expense (302) (1,167)Recruitment and relocation expense (311) (509)Repairs and maintenance expense (215) (1,218)Share based payments expense 20(c) (5,136) (8,992)Travel expense (630) (1,756)Other expenses (2,798) (4,189)

Profit/(loss) before income tax (32,002) (65,367)Income tax (benefit)/ expense 8(a) - 1 Profit/(loss) for the period (32,002) (65,367)

Attributable to members of the parent entity (30,741) (62,759)Loss attributable to non-controlling interest (1,261) (2,607)

Other comprehensive income:Items that will not be reclassified subsequently to profit or loss:

Actuarial gains (loss) on pension and retirement benefit schemes (1,917) (655)Share of other comprehensive income from equity accounted investees 119 (1,725)Items that may be reclassified subsequently to profit or loss:Exchange differences on translation of foreign controlled entities (635) (4,699)Other comprehensive income for the period, net of income tax (2,433) (7,079)Total comprehensive income for the period (34,435) (72,446)Attributable to members of the parent entity (33,169) (69,782)Attributable to non-controlling interest (1,266) (2,664)

Earning per share $ $Basic and diluted earnings per share attributable to members of the parent entity: 24 (0.08) (0.17)

AMBRE ENERGY LIMITED ACN 114 812 074

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 DECEMBER 2012

The accompanying notes form part of these financial statements 21AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORT

FOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012

Note Dec 2012 Jun 2012$'000 $'000

ASSETSCURRENT ASSETSCash and cash equivalents 9 2,887 20,300

Trade and other receivables 10 2,131 2,697 Other current assets 15 3,442 2,391 TOTAL CURRENT ASSETS 8,460 25,388

NON-CURRENT ASSETSInvestments in equity accounted investees 4 34,522 36,914 Other financial assets 11(a) 59,973 64,750 Property, plant and equipment 12 29,105 21,809 Intangible assets 13 25,021 20,566 Exploration and evaluation assets 14 19,588 19,163 Other non-current assets 15 535 541

TOTAL NON-CURRENT ASSETS 168,744 163,743 TOTAL ASSETS 177,204 189,131 CURRENT LIABILITIESTrade and other payables 16 5,969 5,847 Other financial liabilities 11 20,919 43,796 Employee entitlements 17 396 383 Provisions 18 460 1,296 TOTAL CURRENT LIABILITIES 27,744 51,322 NON-CURRENT LIABILITIESEmployee entitlements 17 197 155 Other financial liabilities 11 32,851 - Share of net liabilities of joint ventures 4 30,906 28,537 Provisions 18 11,543 10,125 TOTAL NON-CURRENT LIABILITIES 75,497 38,817 TOTAL LIABILITIES 103,241 90,139 NET ASSETS 73,963 98,992

EQUITYIssued capital 20 178,518 176,443 Reserves 22 17,627 17,550 Retained earnings (153,132) (124,016)Parent interest 43,013 69,977 Non-controlling interest 30,950 29,015 TOTAL EQUITY 73,963 98,992

AMBRE ENERGY LIMITEDACN 114 812 074

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2012

The accompanying notes form part of these financial statements22AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORTFOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012

Note 6 mth 12 mthDec 2012 Jun 2012

$'000 $'000CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers 3,023 3,976 Payments to suppliers and employees (20,183) (30,312)Income tax offset received - 571 Interest received 82 251 Interest paid (566) (852)Net cash provided by (used in) operating activities 33(a) (17,644) (26,366)

CASH FLOWS FROM INVESTING ACTIVITIESPayment for acquisition of subsidiary, net of cash acquired 3 (540) (4,047)Payments for investment in associate (75) (110)Joint venture partnership distributions received 1,454 4,171 Joint venture partnership contributions paid (1,926) (5,986)Proceeds from sale of non-current assets 892 (720)Purchase of property, plant and equipment (7,689) (8,099)Purchase of other intangible assets 13(a) (4,908) (9,226)Loans to related parties 52 (686)Purchase of exploration and evaluation assets 14 (72) (542)Purchase of financial assets 3,570 (66,008)Net cash provided by (used in) investing activities (9,242) (91,253)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 1,028 88,850 Share issue transaction costs - (3,350)Proceeds from borrowings 4,861 24,948 Proceeds from issue of redeemable convertible notes - 18,955 Repayment of redeemable convertible notes - (10,000)Finance lease payments (69) -Transactions with non-controlling interests 21(b) 3,810 7,529 Net cash provided by (used in) financing activities 9,630 126,932

Net movement in cash held (17,256) 9,313 Cash at beginning of financial period 20,300 10,980

Effect of exchange rates on cash holdings in foreign currencies (157) 7 Cash at end of financial period 9 2,887 20,300


CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE PERIOD ENDED 31 DECEMBER 2012

The accompanying notes form part of these financial statements. 23AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORT


Sharecapital

Retainedearnings

Foreigncurrency

translationreserve

Optionreserve

Otherreserves

Convertiblenotes

Non-controlling

interest Total$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 July 2011 89,497 (69,618) (4,866) 16,497 - 671 22,817 54,998 Profit/ (Loss) attributable to members of parent entity - (62,759) - - - - - (62,759)Profit/ (Loss) attributable to non-controlling interests - - - - - - (2,607) (2,607)Other comprehensive income for the year - - 167 - - - 1,276 1,443 Shares issued during the year 89,454 - - - - - - 89,454 Transaction costs (3,350) - - - - - - (3,350)Transactions with non-controlling interests - - - - - - 7,529 7,529 Options issued during the year - - - 8,992 - - - 8,992 Other finance costs - - - 7,672 - - - 7,672 Actuarial gains/(losses) on pension and retirement benefit schemes - - - - (655) - - (655)Share of other comprehensive income from equity accounted investees - - - - (1,725) - - (1,725)Transfers from option reserve 829 7,703 - (8,532) - - - - Transfer from equity convertible notes 13 658 - - - (671) - - Balance at 30 June 2012 176,443 (124,016) (4,699) 24,629 (2,380) - 29,015 98,992

Balance at 1 July 2012 176,443 (124,016) (4,699) 24,629 (2,380) - 29,015 98,992 Profit/ (Loss) attributable to members of parent entity - (30,741) - - - - - (30,741) Profit/ (Loss) attributable to non-controlling interests - - - - - - (1,261) (1,261) Other comprehensive income for the period - - (630) - 41 - (614) (1,203) Shares issued during the period 1,028 - - - - - - 1,028 Transaction costs - - - - - - - - Transactions with non-controlling interests - - - - - - 3,810 3,810 Options issued during the period - - - 5,136 - - - 5,136 Other finance costs - - - - - - - - Actuarial gains/(losses) on pension and retirement benefit schemes - - - - (1,917) - - (1,917) Share of other comprehensive income from equity accounted investees - - - - 119 - - 119 Transfers from option reserve 1,047 1,625 - (2,672) - - - - Transfer from equity convertible notes - - - - - - - - Balance at 31 December 2012 178,518 (153,132) (5,329) 27,093 (4,137) - 30,950 73,963


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 DECEMBER 2012

The accompanying notes form part of these financial statements24AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORTFOR THE PERIOD 1 JULY 2012 TO 31 DECEMBER 2012


NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2012

Note 1: Statement of significant accounting policies

The consolidated financial statements of Ambre Energy Limited and its controlled entities for the six month financial period ended 31 December 2012 comprises Ambre Energy Limited and its controlled entities (together referred to as the “group”). Ambre Energy Limited (the “parent”) is an unlisted public company incorporated in and domiciled in Australia.

The financial year end of the group was changed from 30 June to 31 December during the period to better align the reporting period with Ambre’s global business cycles. The comparative figures for the Statement of Comprehensive Income, Statement of Cashflows and Statement of Changes in Equity and related notes are for the 12 months to 30 June 2012. The results for the financial period ended 31 December 2012 are therefore not directly comparable with the results for 30 June 2012.

Basis of preparation

The consolidated financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The group is a for profit entity for financial reporting purposes under Australian Accounting Standards.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

The consolidated financial statements, except for cashflow information, have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

The parent entity has applied the relief available to it under Australian Securities and Investment Commission Class Order CO 98/100 and presents all monetary amounts in thousands of Australian dollars.

The group has early adopted AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 128 Investments in Associates and Joint Ventures, AASB 127 Separate Financial Statements and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidated and Joint Arrangements Standards from July 2011, because the new accounting policies provide more reliable and relevant information for users to assess the composition of the group and the amounts, timing and uncertainty of future cash flows. In accordance with the transition provisions, comparative figures have been restated where applicable.

The following is a summary of the material accounting policies adopted by the group in preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

Accounting policies

(a) Principles of consolidation

A controlled entity is any entity which Ambre Energy Limited has control over. Ambre Energy Limited has such control when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

25AMBRE ENERGY LIMITED | DIRECTORS’ AND FINANCIAL REPORT




Note 1: Statement of significant accounting policies (cont’d)

(a) Principles of consolidation (cont’d)

A list of controlled entities is contained in Note 21 to the financial statements. All controlled entities now have a 31 December financial year end.

As at the reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the period then ended. Where controlled entities have entered (left) the group during the period, their operating results have been included (excluded) from the date control was obtained (ceased).

Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the Equity section of the Statement of Financial Position and the Statement of Comprehensive Income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date.

All inter-company balances and transactions between entities in the group, including any unrealised profits and losses are eliminated in preparing the financial statements.

Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

(b) Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method unless it is a combination involving entities or businesses under common control, when assets and liabilities are transferred at book value. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer. The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise in the accounts and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed.

In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. All transaction costs incurred in relation to the business combination are expensed to the Statement of Comprehensive Income.

(c) Income tax

The income tax expense (revenue) for the period comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well unused tax losses.





(c) Income tax (cont’d)

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Tax consolidation

Ambre Energy Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax liability of each group entity is then subsequently assumed by the parent entity. The group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 20 October 2006.

There are no tax sharing arrangements in place between members of the income tax consolidated group at the date of this report.

(d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost less, where applicable, accumulated depreciation and impairment losses.






(d) Property, plant and equipment (cont’d)

Property

Freehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings.

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the Statement of Comprehensive Income. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the Statement of Comprehensive Income and depreciation based on the asset’s original cost is transferred from the revaluation reserve to retained earnings.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Plant and equipment

Plant and equipment are measured on the cost basis less accumulated depreciation and any accumulated impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. A formal assessment of recoverable amounts are made when impairment indicators are present (see Note 1(h)).

The cost of fixed assets constructed within the group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets, including buildings and capitalised lease assets but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of fixed asset Depreciation rate Buildings 2-100% Plant and equipment 2-100% Leasehold improvements 5-20%





(d) Property, plant and equipment (cont’d)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Comprehensive Income.

When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

(e) Exploration and development expenditure

Exploration, evaluation and development expenditure incurred is capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the period in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.






(f) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the group are classified as finance leases.

Finance leases are capitalised by recording an asset and liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight line basis over the life of the lease term.

(g) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

Amortised cost is calculated as:

a) the amount at which the financial asset or financial liability is measured at initial recognition; b) less principal repayments; c) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and d) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.





(g) Financial instruments (cont’d)

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

The group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

Financial assets at fair value through profit or loss

Financial assets are classified at ‘fair value through profit or loss’ when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost.

Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

They are subsequently measured at fair value with changes in fair value (with any remeasurements other than impairment losses and foreign exchange gains and losses) recognised in other comprehensive income. When the financial asset is derecognised the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive is reclassified into the profit and loss.

Available-for-sale financial assets are classified as noncurrent assets when they are expected to be sold after 12 months from the end of the reporting period. All other available -for-sale financial assets are classified as current assets.

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.







Derivative instruments

The group designates certain derivatives as either:

- hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or

- hedges of highly probable forecast transactions (cash flow hedges).

At the inception of the transaction the relationship between hedging instruments and hedged items, as well as the group’s risk management objective and strategy for undertaking various hedge transactions is documented.

Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items, are also documented.

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Statement of Comprehensive Income, together with any changes in the fair value of hedged assets or liabilities that are attributable to the hedged risk.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred to a hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Comprehensive Income.

Amounts accumulated in the hedge reserve in equity are transferred to the Statement of Comprehensive Income in the periods when the hedged item will affect profit or loss.

Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a ‘loss event’) having occurred, which has an impact on the estimated future cash flows of the financial asset(s).

In the case of available-for-sale financial assets, a prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit and loss at this point.

In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with the defaults.






For financial assets carried at amortised cost (including loans and receivables), a separate allowance is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account.

When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that occurred are duly considered.

Financial guarantees

Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition.

The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118.

The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

- the likelihood of the guaranteed party defaulting in a next reporting period; - the proportion of the exposure that is not expected to be recovered due to the

guaranteed party defaulting; and - the maximum loss exposed if the guaranteed party were to default.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

(h) Impairment of assets

At the end of each reporting period, the group assesses whether there is an indication that an asset may be impaired. This assessment includes the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less cost to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Comprehensive Income.






(h) Impairment of assets (cont’d)

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed at each reporting date for goodwill and intangible assets with indefinite lives.

(i) Intangible assets other than goodwill

Patents

Patents are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes being recognised as a change in accounting estimate.

Research and development costs

Expenditure on the research activities is recognised as an expense in the period in which it is incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.

Acquisition costs of operating lease

On 11 January 2011 the group acquired a ground lease on the site commonly known as the Former Reynolds Aluminium Smelter Facility in Longview, Washington, USA. Significant costs were incurred to obtain this lease. These costs have been capitalised as an intangible asset as they relate to payments made to a former tenant to buy out the lease agreement and will be amortised over the remaining term of the lease.

(j) Foreign currency transactions and balances

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of Ambre Energy Limited and the presentation currency for the consolidated financial statements.

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the Statement of Comprehensive Income, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the Statement of Comprehensive Income.





(j) Foreign currency transactions and balances (cont’d)

The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:

i. assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

ii. income and expenses are translated at average exchange rates for the period where this approximates the rate at the date of the transaction; and

iii. retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the Statement of Financial Position. These differences are recognised in the Statement of Comprehensive Income in the period in which the operation is disposed.

(k) Employee benefits

Provision is made for the group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

Equity settled compensation

The group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of options is ascertained using a Black–Scholes and or a binomial option pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Defined Benefit Plans

The group has assumed the retirement benefit obligations of two defined benefit plans on the acquisition of the coal assets of Level 3 on 14 November 2011 (see Note 19).

The liability or asset recognised on the Statement of Financial Position in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past service costs. The defined benefit obligation was calculated on 31 December 2012 (and 30 June 2012) using the unit credit method by independent actuaries.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates based on high quality corporate bonds that are denominated in the currency in which the benefit will be paid.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income.






(l) Provisions

Provisions are recognised in the Statement of Financial Position when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and that outflow can be reliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the period.

(m) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash (within 3 months) and are subject to an insignificant risk of changes in value.

(n) Revenue and other income

Revenue is measured at the fair value of consideration received or receivable, net of the amount of goods and services tax.

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

Revenues have been received for the unloading, handling, storage and trucking of bulk materials. Revenue is recognised when the unloading of alumina is complete at the site. Other revenue from the rendering of services is recognised upon the delivery of the service to the customers. The exception to this is income relating to storage and trucking of coal and rental of land which is invoiced monthly. The source of these revenues is the port facility at Longview, WA, USA.

All revenue is stated net of the amount of goods and services tax (“GST”) or appropriate USA taxes.

(o) Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the group that remain unpaid at the end of the financial period. The balance is recognised as current liability with the amounts normally paid within 30 days of recognition of the liability.

(p) Trade and other receivables Trade receivables are initially recognised at fair value less any provision for impairment. Collectability is reviewed on an ongoing basis. Debtors which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment for trade receivables is raised when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the impairment is the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial.





(q) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of GST, except where an amount of GST incurred is not recoverable from the Australian Taxation Office (“ATO”). In these circumstances the GST is recognised as part of the cost of acquisition of an asset or as part of an item of expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO, is included as a current asset or liability in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(r) Operating segments

In identifying its operating segments, management follows the group’s service lines, which represent the main products and services provided by the group.

The three segments identified by management are the three divisions of operation being the Coal, Alternative Fuels and Infrastructure.

The activities of each are as follows:

- Coal – operation and management of thermal coal mines, coal exploration and development of coal resources, development and acquisition of coal mines.

- Alternative fuels – the development and use of alternative fuel technologies including coal to liquids project development and other research and development.

- Infrastructure – the operation of a bulk materials terminal and the development and eventual operation of port facilities for the shipping of coal in the USA.

Note that not all inter-segment transfers are carried out at arm’s length prices. However, the inter-segment transfers are infrequent and insignificant.

Unless otherwise stated, all amounts reported to the Board being the chief decision makers with respect to operating segments are determined in accordance with accounting policies which are consistent with those reported in the annual financial statements of the group.

(s) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period. Where the group has retrospectively applied an accounting policy, made retrospective statement of items in the financial statements or reclassified items in the financial statements an additional statement of financial performance as at the beginning of the earliest comparative period will be disclosed.






(t) New accounting standards for application in future periods

The following standards, amendments to standards and interpretations have been identified as those which may impact the group in the period of initial application. They are available for early adoption at 31 December 2012, but have not been applied in preparing these financial statements:

- AASB 9: Financial Instruments and AASB 2010-7 (applicable for annual reporting periods commencing on or after 1 January 2015): these standards are applicable retrospectively and amend the classification and measurement of financial assets. The group has not yet determined the potential impact on the financial statements.

- AASB 13 Fair Value Measurement: does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The group’s management have yet to assess the impact of this new standard.

- AASB 124 Related Party Disclosure amendments: AASB 2011-4 makes amendments to AASB 124 to remove individual key management personnel disclosure requirements, to achieve consistency with the international equivalent (which includes requirements to disclose aggregate (rather than individual) amounts of KMP compensation), and remove duplication of the Corporations Act 2011. The amendments are applicable for annual periods beginning on or after 1 July 2013. The group’s management have yet to assess the impact of these amendments.

- AASB Interpretation 20 Stripping cost in the Production Phase of a Surface Mine:clarifies that the costs of removing waste materials (overburden) to gain access to mineral ore deposits during the production phase of a mine must be capitalised as inventories under AASB 102 Inventories if the benefits from stripping activity is realised in the form of inventory produced. Otherwise, if stripping activity provides improved access to the ore, stripping costs must be capitalised as a non-current, stripping activity asset if certain recognition criteria are met (as an addition to, or enhancement of, an existing asset). The interpretation is applicable for annual periods beginning on or after 1 January 2013. The group’s management are currently assessing the impact of these amendments.

(u) Critical accounting estimates and judgments

The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trend and economic data, obtained both externally and within the group.

Key judgements

i. Mineral leases and capitalised exploration costs Included in the financial statements are mineral leases and capitalised exploration costs (see Note 14). The initial value of these assets has been determined by the directors after assessing the value of similar assets and the expected value (discounted) upon successful commercialisation of these assets. The directors believe that the amounts are recoverable with no further impairment expense needed in this period.

ii. Impairment – Investment in Thermosolv, LLC. The directors have determined that the Group’s $163,000 investment in Thermosolv, LLC, an associate of the Group which is fully dedicated to the research and development of alternative fuel technology, be fully impaired for the period.





(u) Critical accounting estimates and judgments (cont’d)

iii. Impairment – Loans by the parent to other entities in the group. The directors of the parent have determined that $3,596,000 of loans to other entities in the group are unrecoverable and accordingly have resolved to reduce the carrying amounts of the pertinent assets for this impairment. While this adjustment has no effect on the consolidated financial statements of the Group it does affect the parent entity disclosures shown in Note 32.

iv. Reclamation liabilities. Included in the investment in equity accounted investees balance of $3,616,000 (see Note 4) are the majority of the group's reclamation obligations arising from its participation in the joint ventures of Decker Coal Company and Black Butte Coal Company. As the group equity accounts for its interests in these joint ventures in its financial statements its share of the estimated reclamation liabilities of $103.99 million ($USD107.98 million) are included in this amount. The provision for reclamation liabilities have been determined by the directors as the best estimates of the expenditure required to settle the present obligation at the end of the reporting period.

(v) Early adoption of standards

The group has elected to early adopt AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 128 Investments in Associates and Joint Ventures, AASB 127 Separate Financial Statements and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidated and Joint Arrangements Standards from July 2011, because the new accounting policies provide more reliable and relevant information for users to assess the composition of the group and the amounts, timing and uncertainty of future cash flows. In accordance with the transition provisions, comparative figures have been restated where applicable. The following is a brief summary of these standards.

- AASB 10: Consolidated Financial Statements: supersedes the consolidation requirements in AASB 127 Consolidated and Separate Financial Statements and Interpretation 112 Consolidation – Special Purpose Entities. It revised the definition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any non-controlling interests and changes in control remain the same.

- AASB 11 Joint Arrangements: supersedes AASB 131 Interests in Joint Ventures adopted. It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. It introduces two accounting categories (joint operations and joint ventures) whose applicability is determined based on the substance of the joint arrangement. In addition, AASB 131’s option of using proportionate consolidation for joint ventures has been eliminated. AASB 11 now requires the use of the equity accounting method of joint ventures, which is currently used for investments in associates. See Note 1(w) for accounting treatment for joint ventures.

- AASB 12 Disclosure of Interests in Other Entities: integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

- AASB 127 Separate Financial Statements replaces AASB 127 Consolidated and Separate Statements and now deals only with separate financial statements. AASB 128 Investments in Associates and Joint Ventures replaces AASB 128 Investments in Associates and brings investments in joint ventures into its scope. However, AASB 128’s equity accounting methodology remains unchanged.






(v) Early adoption of standards (cont’d)

The group has also adopted the following standards, amendment to standards and interpretations.

- Amendments to AASB 119 Employee Benefits (IAS 19) has been early adopted the effect of which is that for employee defined benefit plans: o Eliminating the ‘corridor method’, requiring entities to recognise all gains and

losses arising in the reporting period in other comprehensive income. o Streamline the presentation of changes in plan assets and liabilities. o Enhance the disclosure requirements, including information about the

characteristics.

See Note 1(k) for details on the group’s treatment of defined benefit plans.

(w) Investments in joint ventures

The group acquired interests in joint ventures in the prior period ending 30 June 2012 (see Note 4) and decided to early adopt AASB 11 Joint Arrangements which classifies the newly acquired interests in coal mining assets (amongst other interests) as interests in joint venture entities and are therefore required to be treated as equity accounted investments.

The interest in an investee is accounted for using the equity method after initially being recognised at cost. Under the equity method the group’s share of the investees’ post-acquisition profits or losses is recognised in the profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Drawings or dividends from investees are recognised as a reduction in the carrying amount of the investment.

Unrealised gains on transactions between the group and its investees are eliminated to the extent of the group’s interest in the investees. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

(x) Investments in associates

Associates are companies over which the Group has significant influence through holding directly or indirectly 20% or more of the voting power of the company. The group has a significant but non-controlling interest in an associated entity and is therefore required to treat such an interest as an equity accounted investee.

The group has acquired a significant but non-controlling interest in an associated entity in the period ended 30 June 2012 (see Note 4) and is therefore required to be treated as an equity accounted investee.

The interest in an investee is accounted for using the equity method after initially being recognised at cost. Under the equity method the group’s share of the investees’ post-acquisition profits or losses is recognised in the profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income.

The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Drawings or dividends from investees are recognised as a reduction in the carrying amount of the investment.

Unrealised gains on transactions between the group and its investees are eliminated to the extent of the group’s interest in the investees. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.





(y) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in the profit or loss in the period in which they are incurred.

(z) Going concern

Notwithstanding the current and prior year period losses, the financial statements have been prepared on a going concern basis. The Board acknowledges that without further funding the group will deplete its cash reserves within 12 months of the date of this report.

The group successfully secured funding in the year ending 30 June 2012 totalling $132.8 million after acquiring interests in revenue and cash producing assets (see Note 3). During the period an additional $USD25 million loan facility was arranged (see Note 11(b)(i)). At the end of the reporting period the group had $USD20 million remaining for draw down under this facility. At the date of this report the group has drawn down the remaining $USD20 million available under this facility.

Subsequent to period end the group obtained further financing of up to $USD20 million as described under Note 11(b)(ii). Further the group has agreed to the repayment of 25% of the outstanding principal and interest accrued under existing convertible notes with the repayment date for the remaining 75% extended until 31 December 2015 (see Note 11(b)(iii),(iv)).

The Board has assessed the resources available to the group and, subject to raising further funds, believes that the company will be able to pay its debts as and when they fall due. Consequently, these financial statements are prepared on a going concern basis.



Note 2: Segment information

The operating segments and their respective type of products and services are as follows:Coal operations, exploration, development and acquisition (Coal)- Operational management of jointly owned coal mines in the USA.- Coal exploration and development of coal resources.- Development and operation of coal mines.- Acquisition of coal mines.

Infrastructure

Alternative fuelsThe development and use of alternative fuel technologies including:- The development of coal to liquids fuel projects.- The development of oil shale resources.- Research and development activities.

Segment earnings are described as Earnings before interest, tax, depreciation and amortisation (EBITDA).

Coal Infrastructure Alternative fuels TotalSegment result Dec Dec Dec Dec

2012 2012 2012 2012$'000 $'000 $'000 $'000

EBITDA (loss) (12,735) (7,632) (1,799) (22,166)Depreciation and amortisation (170) (461) (78) (709)Head office expense (2,481)Other finance costs (2,889)Interest expense (3,757)Profit/(loss) after income taxation (32,002)

Assets and liabilities

Segment assets 103,067 50,265 22,495 175,827 Unsegmented assets 1,377 Total assets of the group 177,204

Segment liabilities 60,335 20,929 179 81,443 Unsegmented liabilities 21,798 Total liabilities of the group 103,241

Revenues from external customers 2,547 718 17 3,281 Interest revenue - - 3 3 Unsegmented interest revenue 79 Total interest revenue 82 Total revenue 3,363



Management has chosen to organise the group by division around three different activities and are the operating segments used for the purposes of this note.

Infrastructure entails the acquisition, development and eventual operation of port facilities primarily for the exporting of coal from the United States of America.


Note 2: Segment information (cont'd)

Coal Infrastructure Alternative Fuels TotalJun Jun Jun Jun

Segment result 2012 2012 2012 2012$'000 $'000 $'000 $'000

EBITDA (loss) (14,868) (12,336) (4,350) (31,554)

Impairment expense (10,857) (10,857)

Depreciation and amortisation (148) (780) (1,118) (2,046)

Head office expense (11,341)

Other finance costs (7,672)

Interest expense (1,896)

Taxation expense/ (benefit) (1)Profit/(loss) after income taxation (65,367)

Assets and liabilitiesSegment assets 107,291 42,493 22,428 172,212

Unsegmented assets 16,919 Total assets of the group 189,131

Segment liabilities 65,003 4,221 254 69,478

Unsegmented liabilities 20,661 Total liabilities of the group 90,139

Revenues from external customers 2,899 1,624 88 4,611

Interest revenue 3 4 5 12

Unsegmented interest revenue 239

Total interest revenue 251

Total revenue 4,862

$'000 $'000 $'000 $'000 Revenue Non-current

assets Revenue Non-current

assetsUnited States of America 3,350 71,316 4,542 59,022

Australia 13 2,933 88 3,057

Total 3,363 74,249 4,630 62,079

ACN 114 812 074AMBRE ENERGY LIMITED


The Group's revenues from external customers and its non-current assets (other than financial instruments, investments accounted for using the equity method, deferred tax assets and post-employment benefits assets) are divided into the following geographical areas:

Dec 2012 Jun 2012

The group has provided port facilities in the infrastructure segment to two customers who accounted for 47% and 44% (Jun 2012: 51% and 42%) of external revenue for this segment.



Note 3: Business combinations

a.

Dec 2012 Jun 2012$'000 $'000

ASSETSCash and cash equivalents - 294Trade and other receivables - 444Interests in joint ventures - 18,093Property, plant and equipment - 1,577Other assets - 88Total assets - 20,496

LIABILITIESTrade and other payables - 20Provisions - 9,827Total liabilities - 9,847

Identifiable net assets acquired - 10,649Gain from bargain purchase - (5,768)Net consideration paid 4,881Working capital adjustment paid 3(i) 540 (540)Cash and cash equivalents acquired - (294)Net cash consideration paid in the period 540 4,047

(i) Working capital adjustment



Eldorado coal was purchased for a provisional consideration of $4,341,000. There was an element of consideration payable relating to an adjustment to final working capital calculations at the date of transaction close. The amount of this working capital adjustment was agreed upon in the prior period by the parties to the transaction as $540,000 (US$550,000). This additional consideration was paid in the current period.

On 10 November 2011, the Parent, through a newly created controlled entity, AE Wind River, LLC entered into an agreement with Level 3 Holdings, Inc. ("Level 3") to purchase all of the common stock of Level 3's coal mining operations holding company, Eldorado Coal Inc., a Delaware corporation ("Eldorado Coal"). The transaction closed on 14 November 2011 and post-closing conditions were satisfied on 28 November 2011.Details of this business combination were disclosed in note 3 of the prior year financial report (June 2012) and note 25 of the 2011 financial report, 'Events after the reporting period'.


Note 4: Joint arrangements and associates NoteDec 2012 Jun 2012

$'000 $'000Equity accounted investeesInterests in joint ventures 4(a) 34,522 36,805

Investments in associates 4(e) - 109 34,522 36,914

Share of net liabilities of joint ventures 4(a,d(i)) (30,906) (28,537)

Interests in joint ventures

Dec2012

Jun2012

Black Butte Coal Company (& R-K Leasing Company) USA 50 50 Equity methodDecker Coal Company USA 50 50 Equity methodMontana Royalty Company, Ltd USA 50 50 Equity method

(i) Black Butte Coal Company operates the Black Butte Coal mine in Wyoming, USA.(ii) Decker Coal Company operates the Decker coal mine in Montana, USA.(iii) Montana Royalty Company, Ltd holds property located near the Decker coal mine.

Commitments and contingent liabilities - joint venturesDec 2012 Jun 2012

$'000 $'000b.

Not later than one year - 3,243

c.



Set out below are the joint ventures of the group as at 31 December 2012 which, in the opinion of the directors, are material to the group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.

Name of Entity

Place of business/country of

registration

% of ownership interest

Nature of relationshipMeasurement

method

Joint Venture (i)Joint Venture (ii)Joint Venture (iii)

The group's share of loss from its joint ventures for the period was $5,582,000 (Jun 2012:$10,105,000). During the period ended 31 December 2012 the group has received $USD1,000,000 in distributions from the Black Butte Coal Company and made contributions of $USD2,000,000 to the Decker Coal Company in respect of its interests. The joint ventures were acquired on 14 November 2011 (see Note 3).

Commitments- joint venturesShare of approved capital expenditure commitments of joint ventures payable, if called:

Contingent liabilities - joint venturesThe share of the groups contingent liabilities in respect of reclamation obligations of the joint ventures is disclosed under Note 29.

On 5 December 2012 a conditional agreement was reached between Western Minerals, LLC, and the Ambre Energy group for Ambre to purchase Western Minerals' 50 per cent interest in the Decker Coal Company and related interests. However, the group has not been able to complete this purchase (see Note 34a).



Note 4: Joint arrangements and associates (cont'd)

d. Summarised financial information for joint ventures and associates

Summarised balance sheet NoteDec 2012 Jun 2012 Dec 2012 Jun 2012 Dec 2012 Jun 2012

$'000 $'000 $'000 $'000 $'000 $'000

Current assetsCash and cash equivalents 3,980 1,809 4,793 4,562 247 254Other current assets 12,347 16,771 11,257 11,619 - -

Total current assets 16,327 18,580 16,050 16,181 247 254

Non-current assets 152,726 156,737 79,228 80,654 636 669

Current liabilities

Financial liabilities (excluding trade payables) - - - - 43 111Other current liabilities 18,006 17,623 7,636 17,909 1 -

Total current liabilities 18,006 17,623 7,636 17,909 44 111

Non-current liabilities

Financial liabilities (excluding trade payables) - - - - 1,861 1,896Other non-current liabilities 81,983 83,096 148,431 134,916 - -

Total non-current liabilities 81,983 83,096 148,431 134,916 1,861 1,896

Net assets 69,064 74,598 (60,790) (55,990) (1,022) (1,084)

Reconciliation to carrying amounts:Opening net assets: 74,598 85,959 (55,990) (52,755) (1,084) (1,021) Profit/(loss) for the period (1,332) 293 (9,836) (17,410) 42 (63)

Other comprehensive income/ (loss) 97 (1,287) 141 (2,184) - -

Contributions/ (distributions) (2,908) (10,367) 3,852 16,359 - - Net exchange difference on translation into the presentation currency (1,391) - 1,043 - 20 -

Closing net assets 69,064 74,598 (60,790) (55,990) (1,022) (1,084)

Group's share in % 49.99% 49% 50% 50% 50% 50%Group's share in $ 34,522 36,805 (30,395) (27,995) (511) (542)

Goodwill - - - - - -

Carrying amount 34,522 36,805 (30,395) (27,995) (511) (542)

Black Butte Coal Company Decker Coal Company

Montana Royalty Company, Ltd



The tables below provide summary financial information for those joint ventures that are material to the group. The information disclosed reflects the amounts presented in the Australian Accounting Standards financial statements of the relevant joint ventures and not Ambre Energy Limited's share of those amounts. They have been amended to reflect adjustments made by the entity on acquisition and when using the equity method, including fair value adjustments and modifications for differences in accounting policy.


Note 4: Joint arrangements and associates (cont'd)

i

Note

Dec 2012 Jun 2012 Dec 2012 Jun 2012 Dec 2012 Jun 2012

$'000 $'000 $'000 $'000 $'000 $'000

Revenue 42,175 63,677 25,345 24,760 115 15Interest income - 1 - - - -

Depreciation and amortisation (8,652) (5,912) (1,479) (6,225) (21) (21)

Interest expense (1) (24) (1) (8) (47) (56)

Income tax expense - - - - - -

Profit/(loss) for the period (1,332) 293 (9,836) (17,410) 42 (63)

Other comprehensive income/(loss) 97 (1,287) 141 (2,184) - - Total comprehensive income/(loss) (1,235) (994) (9,695) (19,594) 42 (63)

e. Individually immaterial associatesIn addition to the interests in joint ventures discussed above, the group also has an interest in an individualimmaterial associate that is accounted for using the equity method.

Dec 2012 Jun 2012$'000 $'000

Investment in associate 163 109

Less provision for impairment (163) -

Carrying amount of individually immaterial associate - 109

Amount of the group's share of:Profit/(loss) from continuing operations (5) (47)

Other comprehensive income/(loss) - - Total comprehensive income/(loss) (5) (47)

Summarised statement of comprehensive income

ACN 114 812 074

Black Butte Coal Company Decker Coal Company

Montana Royalty Company, Ltd

The group's share in net assets for the Decker Coal Company and Montana Royalty Company, Ltd represents obligations to contribute funds for future mine reclamation and other commitments. Accordingly $30,906,000 has been disclosed as a non-current liability named share of net liabilities of joint ventures on the Statement of Financial Position.

AMBRE ENERGY LIMITED




Note Dec 2012 Jun 2012$'000 $'000

Sales revenueServices 906 1,583 Management fee income - related party 2,335 2,888

Other revenueInterest 82 251 Rent and sub-lease rentals 40 (92)

3,363 4,630

Government grants 6(a) 86 84

Fair value gains (losses) on:Embedded derivative liability 1,407 -

Other income 38 148 1,531 232

(a) Government grantsResearch and development grants of $86,000 (Jun 2012: $84,000) were recognised as other income during the financial period. There are no unfulfilled conditions or other contingencies attaching to these grants.

Note 7: Expenses 6 mth 12 mthDec 2012 Jun 2012

$'000 $'000Profit/(loss) before income tax includes the following specific expenses:

Net loss on expiry of held to maturity financial assets - 109

Finance costsInterest and finance charges paid/payable for financialliabilities 4,592 1,303 Provisions - unwinding of discount 2,054 593 Share based payment expense for financial liabilities - 7,672

1,489 1,827 Finance costs expensed 8,135 11,395

Impairment lossesInvestment in associate 4(e) 163 -

Impairment of other assetsOther assets - 80

Land and buildings - 1,112

Capitalised exploration costs - 7,639

Patents - 2,026 163 10,857

Premiums paid for the provision of surety bonds to the States of Montana & Wyoming, USA for coal mine reclamation obligations

AMBRE ENERGY LIMITED

Note 6: Other income

Note 5: Revenue

ACN 114 812 074NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2012


Dec 2012 Jun 2012$'000 $'000

a.

- - - 1 - - - 1

(32,002) (65,366)

(9,601) (19,609)

- Entertainment 21 9 - Gifts and donations 6 1 - Gain on business combination - (1,729)- Finance costs - 2,301 - Share option expense 1,541 2,698 - Travel - 6 - Other non deductible expenses 42 556

(7,991) (15,767)Effect of different tax rates of subsidiaries operating in other taxation jurisdictions. (1,869) (2,700)(Under)/over provision in prior period 163 1

- Deferred tax assets not brought to account 9,697 18,467

- Tax concessions (research and development) - - - 1

Weighted average effective tax rates 0.0% 0.0%

Where applicable, grants and tax concessions are accrued in the year in which they are receivable.

45,542 35,845

The unused restricted losses of this USA tax group are as follows:- group headed by AE Oil Shale, Inc. 4,729 4,819

- group headed by AE Oil Shale, Inc. 1,764 1,798



Note 8: Income tax expense

The components of tax expense/(benefit) comprise:Current tax

Deferred tax

The unused losses of each subsidiary within this USA tax group may only be utilised against taxable profits of the same subsidiary. The potential tax benefit of restricted unused tax losses of the USA tax group are as follows:

Over provision for income tax benefit from prior year

Tax effect of:

Income tax expense/ (benefit) attributable to entity

Potential deferred tax assets attributable to unused tax losses and unrecognized temporary differences carried forward:

Unused tax losses and unrecognised temporary differences relate to the Australian tax consolidated group and three USA tax groups.

Of the three USA tax groups, the tax group headed by AE Oil Shale, Inc. has restrictions on the utilisation of losses within the group.

Less:

The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows:Profit from continuing operations before income tax expenseTax at the Australian tax rate of 30% (Jun 2012: 30%)

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:



Note Dec 2012 Jun 2012$'000 $'000

Cash at bank and in hand 2,887 20,300

(a)

Current assetsTrade receivables 10(a) 1,050 1,330GST receivable 90 173Other receivables - 805Corporate relocation program 10(b) 329 389Amounts receivable from related parties 662 -

2,131 2,697

(a) Trade receivablesAll amounts are short-term. The net carrying value of trade receivables is considered a reasonableapproximation of fair value.

The group's trade and other receivables have been reviewed for indicators of impairment. No trade receivables were found to be impaired and no allowance for credit losses has been recorded.Trade receivables are non-interest bearing and generally paid within 14 days.

(b) Corporate relocation programA controlled entity provides assistance with the relocation expenses of USA based senior employees through an external residential brokerage relocation service provider. Amounts totalling $329,000


Note 9: Cash and cash equivalents


The group's exposure to interest rate risk is discussed in Note 31. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.

Note 10: Trade and other receivables

are recoverable from the relocation service provider for advances and relocation expenses paid by the controlled entity (see Note 30(b)).


The carrying amounts presented in the Statement of Financial Position relate to the followingcategories of assets and liabilities:

Note Dec 2012 Jun 2012$'000 $'000

Financial assets

Current:Loans and receivables

- Cash and cash equivalents 2,887 20,300 - Trade and other receivables 2,131 2,697

5,018 22,997 Non-current:

- Other assets 472 477 - Restricted cash 11(a) 59,973 64,750

60,445 65,227 Financial liabilitiesMeasured at amortised cost:Current:

- Borrowings 11(b) 18,282 39,983 - Trade and other payables 5,969 5,847 - Lease liabilities 25 184 - - Share application funds 46 -

Measured at fair value through profit or loss:Current:

- Borrowings 11(b) 2,407 3,813 26,888 49,643

Measured at amortised cost:Non-current:

- Borrowings 11(b) 32,130 -- Lease liabilities 25 721 -

32,851 -

11a. Restricted cash- Deposits not at call:

Opening collateral provided 64,750 69,370 Additions (reductions) during the period (3,570) (4,555)

(1,207) (65) 59,973 64,750

As at reporting date the group has outstanding collateral of $59.97m (USD $62.28m) to Zurich of North America (“Zurich”) via a restricted cash holding with the Bank of New York Mellon. Zurich has provided surety bonds required by the States of Wyoming and Montana (the "States") for the groups share of financial assurance in relation to the mining operations acquired in the States (see Note 3). Additionally the parent and certain controlled entities have unconditionally indemnified Zurich against alllosses in connection with the issued bonds, excluding any amount paid or payable to a reinsurer or co-surety provider. During the period the restricted cash holding was reduced by USD $3.71 million due to surety bonding refunds received.



Note 11: Financial assets and liabilities

Net exchange difference arising on translation of a foreign subsidiary into the presentation currency



11b. Note Dec 2012 Jun 2012$'000 $'000

SecuredFinancial liabilities measured at amortised cost (unless otherwise indicated)

Current- Short term loan (i) - 24,534 - Unsecured redeemable convertible notes (iii,iv) 18,282 15,449

- embedded derivative liability (at fair value through profit or loss) (iii,iv) 2,407 3,813 Non- current- Secured loan (i,ii) 32,130 -

52,819 43,796

- The term of the Loan, originally 12 months, was extended by 60 days.

- The term of the Loan was extended for a further 4 years, and now matures on 8 January 2017.- The amount of the Loan was increased to $USD50 million, to be drawn down in tranches.

(ii) After the reporting period, the following advances were made to AENA under the Loan:- $USD5 million on 8 January 2013- $USD5 million on 5 March 2013and thereafter RCF provided additional funding to the group as recorded in the following further amendments to the Loan:

Amendment dated 4 April 2013

- In exchange, RCF was granted 250,000 new ordinary shares in the parent.

Amendment dated 20 August 2013 (entitled Second Amended and Restated Loan Agreement)

- provide a letter of credit facility for up to $USD20 million for the purpose of releasing restricted cash held by Zurich as collateral for reclamation bonds; and - extend the Morrow Deadline from 31 July 2013 to 31 December 2015, subject to shareholder approval.

- RCF will allow the convertible noteholders, KOSEP and KOSPO, to take security over the assets of subsidiary Ambre Energy North America Inc. ranking pari passu with the security held by RCF over those assets. That concession was instrumental in obtaining the agreement of the convertible noteholders to extend the repayment date of the convertible notes (see notes 34(f) and 34(g)).

- An additional obligation was imposed on the group to obtain by 31 July 2013 all permits necessary to commence development and operation of the Morrow Pacific Project (the "Morrow Deadline”), unless this deadline was extended by RCF.

- RCF may now convert the Loan at any time to the greater of 220 million shares in the parent or 32.4% of the fully diluted capital of the parent at the conversion date, adjusted to exclude shares issued or issuable after 1 July 2013 for $0.50 or more

h

- In exchange for receiving 50 million new ordinary shares in the parent (the "Establishment Fee"), RCF will:

- Certain conditions of the Loan were relaxed to allow the final draw down under the Loan of $USD10 million to be advanced to AENA on 4 April 2013.

- The amount of the Loan, originally $USD25 million and fully drawn, was increased by a further $USD5 million advanced to AENA on 1 November 2012.

Borrowings

(i) Ambre Energy shareholder and financier, Resource Capital Fund V L.P. (“RCF”) provided ongoing funding to the group during the reporting period as recorded in the following amendments to the original short-term bridge loan agreement (the “Loan”) between RCF and Ambre Energy North America, Inc. (“AENA”) dated 14 November 2011:

Amendment dated 26 October 2012



Note 11: Financial assets and liabilities (cont'd)

- The interest rate for the Loan was increased from 5% to 12% per annum, with interest to be capitalised monthly rather than paid during the course of the Loan.- An establishment fee of $USD3 million was capitalised as part of the principal of the Loan and is included under finance costsin the Statement of Comprehensive Income.- A Makewhole Amount was added to the principal and interest, so that the total amount of the Loan repayable on maturity or on default is $USD110 million, regardless of the outstanding principal and interest accrued at time of repayment.- The Loan was made convertible to ordinary shares in the parent on or after a liquidity event, subject to shareholder approval

Amendment dated 10 December 2012 (entitled First Amended and Restated Loan Agreement)


- The parent has issued 12.5 million new ordinary shares to RCF as part payment of the Establishment Fee, with the balance of 37.5 million ordinary shares to be issued to RCF subject to the Shareholder Approval.- RCF has provided an initial letter of credit for $USD10 million but is not obliged to provide letters of credit totalling morethan $USD15 million before the Shareholder Approval.- The Morrow Deadline is extended until 10 business days after the shareholder meeting, and will not be further extended to 31 December 2015 unless RCF is given the Shareholder Approval.



Note 11: Financial assets and liabilities (cont'd)

- The parent must seek shareholder approval to allow RCF to increase its voting power up to 55% ("the Shareholder Approval"). Furthermore:

The KOSPO convertible notes are considered to be a hybrid financial instrument with an amortised financial liability component and an embedded derivative liability component that are disclosed separately. The value of the embedded derivative liability atreporting date was $850,000 (initial recognition was $1,267,000 with the balance of $5,033,000 recognised as a financial liability). The amortised cost of the financial liability at reporting date was $5,991,000.

(iii) 12.655 million redeemable convertible notes at $1 per note were issued to the Korea South East Power Co., Limited (KOSEP) on 31 May 2012 with an initial repayment date of 31 May 2013. The interest on the notes was 5% per annum until 15 July 2012 and 10% per annum thereafter. Note that the interest rate was changed after the end of the reporting period to 14% per annum, to take effect from 10 December 2012 (see Note 34(e)). Conversion of the notes to issued shares is at the discretion of the holder. The parent provides security (to the effect of a fixed and floating charge) over all its assets in relation to the above arrangement.

The KOSEP convertible notes are considered to be a hybrid financial instrument with an amortised financial liability component and an embedded derivative liability component that are disclosed separately. The value of the embedded derivative liability atreporting date was $1,557,000 (initial recognition was $2,546,000 with the balance of $10,108,000 recognised as a financial liability). The amortised cost of the financial liability at reporting date was $12,291,000.

Subsequent to reporting date and further to the interest rate amendment (see Note 34(e)) the terms of the convertible notes including repayment date, conversion rights and security provided were renegotiated with 25% of the notes to be repaid following the satisfaction of certain conditions to the agreement (see note 34(g)) and the balance to be repaid by 31 December 2015.

(iv) 4.2 million redeemable convertible notes at $1.50 per note were issued to the Korea Southern Power Co., Limited (KOSPO) on 28 June 2012 with an initial repayment date of 28 June 2013. The interest on the notes was 5% per annum until the 15 July 2012 and 10% per annum thereafter. Note that the interest rate was changed after the end of the reporting period to 14% per annum, to take effect from 10 December 2012 (see Note 34(e)). Conversion of the notes to issued shares is at the discretion of the holder. The parent provides security (to the effect of a fixed and floating charge) over all its assets in relation to the abovearrangement.

Subsequent to reporting date and further to the interest rate amendment (see Note 34(e)) the terms of the convertible notes including the repayment date, conversion rights and security provided were renegotiated with 25% of the notes to be repaid following the satisfaction of certain conditions to the agreement (see note 34(f)) and the balance to be repaid by 31 December 2015.



Note 12: Property, plant and equipmentDec 2012 Jun 2012

$'000 $'000Land and buildingsFreehold landAt cost 5,092 5,190Accumulated depreciation (16) (9)Less impairment (1,112) (1,112)Total land 3,964 4,069

BuildingsAt cost 873 870Accumulated depreciation (460) (408)Total buildings 413 462 Total land and buildings 4,377 4,531

Plant and equipmentAt cost 31,199 23,280Accumulated depreciation (6,526) (6,065)

24,673 17,215 Leasehold improvementsAt cost 114 110Accumulated amortisation (59) (47)Total leasehold improvements 55 63Total plant and equipment 24,728 17,278 Total property, plant and equipment 29,105 21,809

a.

Freeholdland Buildings

Leaseholdimprovements

Plant and equipment Total

$'000 $'000 $'000 $'000 $'000Balance at 1 July 2011 3,141 405 47 12,269 15,862Additions 877 24 34 7,164 8,099Acquisition of subsidiary 1,159 155 - 263 1,577Disposals 0 0 - (1,464) (1,464)Impairment (1,112) - - - (1,112)

13 2 2 614 631 (9) (124) (20) (1,631) (1,784)

Balance at 30 June 2012 4,069 462 63 17,215 21,809

Balance at 1 July 2012 4,069 462 63 17,215 21,809Additions 12(b) 0 0 6 8,452 8,458Disposals (61) - - (48) (109)

(37) 2 (2) (320) (357)(7) (51) (12) (626) (696)

Balance at 31 December 2012 3,964 413 55 24,673 29,105

b. Leased assetsPlant and equipment includes the following amounts where the group is a lessee under a finance lease:

Dec 2012 Jun 2012$'000 $'000

Leasehold equipmentAt cost 965 - Accumulated depreciation (80) - Net book value 885 -



Net exchange difference arising on translation of a foreign subsidiary into the presentation currencyDepreciation and amortisation expense

Net exchange difference arising on translation of a foreign subsidiary into the presentation currencyDepreciation and amortisation expense

Movements in carrying amountsMovement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current period.


Note 12: Property, plant and equipment (cont'd)

b. Leased assets (cont'd)

Note 13: Intangible assetsDec 2012 Jun 2012

$'000 $'000PatentsAt cost 2,956 2,956Accumulated amortisation (930) (930)Less provision for impairment (2,026) (2,026)Net carrying value - -

Capitalised development costs - coal terminal 16,878 12,197

Accumulated amortisation - - Net carrying value 16,878 12,197

Acquisition costs for long-term operating lease At cost 8,419 8,579Accumulated amortisation (276) (210)Net carrying value 8,143 8,369

Total intangible assets 25,021 20,566

a.

Patents

Capitaliseddevelopment

costs

Acquisition cost for operating

lease TotalNote $'000 $'000 $'000 $'000

Balance at 1 July 2011 2,076 2,841 8,078 12,995Development costs capitalised 13(b) - 9,226 - 9,226

Amortisation charge (164) - (210) (374)Impairment (2,026) - - (2,026)

114 130 501 745 - 12,197 8,369 20,566

Balance at 1 July 2012 - 12,197 8,369 20,566Development costs capitalised 13(b) - 4,908 - 4,908

Amortisation charge - - (70) (70)Impairment - - - -

- (227) (156) (383) - 16,878 8,143 25,021

b.

Balance at 31 December 2012


Net exchange difference arising on translation of a foreign subsidiary into

Net exchange difference arising on translation of a foreign subsidiary into Balance at 30 June 2012

At cost

Movements in carrying amountsMovement in the carrying amounts for each class of intangible between the beginning and the end of the current period.


During the period the group acquired leased assets of $965,000 through a financial lease. This amount less an amount of $196,000 for a non-cash item adjustment are not included in the purchase of property plant and equipment amount of $7,689,000 per the Statement of Cashflows.

$4,908,000 (Jun 2012: $9,226,000) has been spent on the development of coal terminal facilities in the USA in the period.



Note 14: Exploration and evaluation assetsNote Dec 2012 Jun 2012

$'000 $'000

- 14(a) - - -

14(b) 19,531 19,039 -

14(c) 57 124 19,588 19,163

a.

Opening balance - 7,310 - 329

Less impairment - (7,639)Closing balance - -

b.

Opening balance 19,039 17,936Exploration expenditure capitalised 72 89

420 1,014 19,531 19,039

c

Opening balance 124 - Exploration expensed (67) - Exploration expenditure capitalised - 124

57 124

Exploration and evaluation phases - Felton, Queensland, AustraliaExploration and evaluation phases - Utah, United States of AmericaCoal exploration and evaluation phases - United States of America


Exploration expenditure capitalised

Movements in carrying amounts

Closing balance

Closing balance




Total exploration expenditure


Mineral leases & exploration expenditure capitalised


Note 15: Other assetsDec 2012 Jun 2012

$'000 $'000Deposits paid 170 124 Escrowed funds 15(b) 362 409 Prepayments 2,853 1,821 Other 57 37

3,442 2,391

NON-CURRENTDeposits paid 63 64Note receivable 30(b) 299 304Cash backed bank guarantees 15(a) 173 173

535 541 a.b.

Note 16: Trade and other payables

The carrying amounts may be analysed as follows: Dec 2012 Jun 2012$'000 $'000

3,964 3,344 Amounts payable to related parties - 108

2,005 2,3955,969 5,847

$'000 $'000Opening balance at 1 July 2012 383 155 Additional provisions 286 42 Amounts used (269) -

(4) - Balance at 31 December 2012 396 197 Analysis of total employee entitlements

Dec 2012 Jun 2012$'000 $'000

Current 396 383 Non-current 197 155

593 538



CURRENTUnsecured liabilities

CURRENT

Restricted cash deposited with a bank as security under an office lease.Escrowed funds is in relation to potential liabilities arising under an asset purchase agreement.


Short-termemployeebenefits

Long-termemployeebenefits

Trade payables

Sundry payables and accrued expenses

Note 17: Employee entitlements

Provision for short-term employee benefitsA provision has been recognised for employee entitlements relating to annual leave. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report.Provision for long-term employee benefits A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report.



Note 18: Provisions

The carrying amounts may be analysed as follows:

NoteCarrying

amount at 1 July 2012

Additionalprovisions

Amountsused

Foreignexchangemovem't

Carryingamount at 31

Dec 2012$'000 $'000 $'000 $'000 $'000

Provision for asset retirement obligations 18(a) 1,001 - (369) 100 732 Asset purchase adjustments - Chinook 200 - (200) - - Asset purchase adjustments - Eldorado 540 - (540) - - Repairs and claims 18(c) 409 (39) (8) 362

18(b) 8,967 2,266 (463) (227) 10,543 Black lung reserves 74 2 (7) (2) 67 Other 230 84 (11) (4) 299 Total 11,421 2,352 (1,629) (141) 12,003

Dec 2012 Jun 2012$'000 $'000

Current 460 1,296 Non-current 11,543 10,125

12,003 11,421

a.

b.

c.



Provision for pension and retirement benefits

Provisions for asset retirement obligations relate to final amounts required to reclaim land and buildings at a former 100% owned coal mining operation, Big Horn Coal Mine which is in the final stages of reclamation.

The provisions for repair and claims arises from the 2011 asset purchase agreement with Chinook Ventures, Inc. The group's management expects to settle the remaining claims in the 2013 financial year.

Provisions for pension and retirement benefits liabilities refer to post-employment defined benefit pension plans as well as a plan for other post employment benefits at Big Horn Coal Company. The plans for Big Horn contain only inactive participants (see Note 19).


Note 19: Accrued pension and retirement benefits liability

Big Horn Coal Company Pension Plan

The defined benefit obligation for Pension Plan for the period ending 31 December 2012: Dec 2012 Jun 2012

$'000 $'000Opening defined benefit obligation 2,485 2,381 Current service cost 30 38 Interest cost 44 62 Change in actuarial assumptions 34 141 Experience adjustments on plan liabilities 53 (17) Benefits paid (169) (112) Foreign exchange movement (46) (8) Closing defined benefit obligation 2,431 2,485

Dec 2012 Jun 2012Discount rate 3.65% 3.80%Expected long term rate of return on plan assets 8.00% 8.00%

Dec 2012 Jun 2012$'000 $'000

Opening fair value of plan assets 1,633 1,650 Actual return on plan assets 100 101 Plan contributions 164 - Benefits paid out of plan assets (169) (112) Foreign exchange movement (30) (6) Closing fair value of plan assets 1,698 1,633

Dec 2012 Jun 2012$'000 $'000

Defined benefit obligations (2,431) (2,485) Fair value of planned assets 1,698 1,633 Shortfall / pension cost (733) (852)

Two plans being the Big Horn Coal Company Pension Plan (Pension Plan) and Big Horn Coal Company Retiree Medical and Life (Medical and Life) are the sole responsibility of the group and are disclosed as follows.

The Big Horn Coal Company is no longer active and consequently has no employees. Accordingly all members are former employees, surviving spouses or qualified dependants of former employees.


For determination of the Pension Plan obligation and expense, the following actuarial assumptions were used.

The mortality table used is ' Fully Generational RP-2000 Combined Healthy Blue Collar - using Projection Scale AA'.

The assets held for this Pension Plan's defined benefit obligations can be reconciled for the period as follows:

The Pension Plan's defined benefit obligation and its assets may be reconciled to the amounts presented on the face of the statement of financial position for the reporting period under review as follows:




Note 19: Accrued pension and retirement benefits liability (cont'd)

Total expenses resulting from the Pension Plan can be analysed as follows:Dec 2012 Jun 2012

$'000 $'000Service cost (30) (39) Interest cost (44) (63) Expected return on plan assets 65 78

(9) (24)

The expected employer contribution for next year is $193,000 (June 2012 $270,000)

Big Horn Coal Company Retiree Medical and LifeThe defined benefit obligation for Medical and Life for the period ending 31 December 2012:

Dec 2012 Jun 2012$'000 $'000

Opening defined benefit obligation 8,115 7,721 Current service cost - - Interest cost 238 213 Actuarial loss or (gain) 1,866 552 Benefits paid (276) (361) Retiree drug subsidy received 18 16 Foreign exchange movement (151) (26) Closing defined benefit obligation 9,810 8,115

For determination of the defined benefit obligation, the following actuarial assumptions were used:Dec 2012 Jun 2012

Discount rate 3.75% 3.85%Health care cost trend: Initial 9.50% 7.50%Health care cost trend: Ultimate 5.00% 5.00%Year ultimate reached 2022 2020

Dec 2012 Jun 2012$'000 $'000

Opening fair value of plan assets - - Employer contribution 276 361 Benefits paid (276) (361) Closing fair value of plan assets - -

Dec 2012 Jun 2012$'000 $'000

Defined benefit obligations (9,810) (8,115)Fair value of planned assets - -

Shortfall / pension cost (9,810) (8,115)

Total expenses resulting from this defined benefit plan can be analysed as follows:Dec 2012 Jun 2012

$'000 $'000Service cost - - Interest cost (238) (213) Expected return on plan assets - -

(238) (213) The expected contribution for next year is $539,000 (June 2012: $534,000).



The assets held for Medical and Life's defined benefit obligations can be reconciled from the date of assumption to the reporting date as follows:

Medical and Life's defined benefit obligation and its assets may be reconciled to the amounts presented on the face of the statement of financial position for the reporting period under review as follows:


Note 20: Issued capital

Note Dec 2012 Jun 2012No. No.

Ordinary shares - issued 20(a) 408,793,740 405,835,907

$'000 $'000 Ordinary shares - fully paid 182,967 180,892 Issue costs (4,449) (4,449)Issued capital 178,518 176,443

a. Ordinary shares No. No.At the beginning of the reporting period 405,835,907 318,216,983 Shares issued on equity settled transactions - 21,997,757 Shares issued on exercise of options 20(c) 2,062,000 5,000,000 Shares issued on conversion of convertible notes and interest 20(b) - 60,142,000 Shares issued in lieu of interest payments on loans outstanding 895,833 479,167 At the end of the reporting period 408,793,740 405,835,907

Dec 2012 Jun 2012b. Redeemable convertible notes No. No.At the beginning of the reporting period 16,855,000 12,642,000 Notes issued - 76,855,000 Notes redeemed - (12,500,000)Conversion into ordinary shares - (60,142,000)At the end of the reporting period 16,855,000 16,855,000

c. Options

Share options and weighted average exercise prices are as follows for the reporting period presented:

Note

Number of options

Weightedaverage

exercise priceNumber of

options

Weightedaverage

exercise price$ $

Outstanding at the beginning of the period 106,070,000 1.36 83,420,000 0.32Granted 500,000 1.50 78,850,000 1.64Forfeited (350,000) 1.20 (20,800,000) 0.21Exercised 20c(i) (3,302,941) 0.48 (5,000,000) 0.26Expired (5,967,059) 0.48 (30,400,000) 0.20Outstanding at the end of the period 96,950,000 1.45 106,070,000 1.36Exercisable at reporting period end 59,909,999 1.13 59,992,500 1.02

The options outstanding at 31 December 2012 had a weighted average exercise price of $1.45 and a weighted average remaining contractual life of 3.03 years. Exercise prices range from $0.48 to $2.47 in respect of options outstanding at 31 December 2012.



Effective 1 July 1998 the Corporations Law abolished the concepts of authorised share capital and par value. Accordingly the parent entity has no authorised capital and its shares have no par value.

At the shareholders meetings, each ordinary share is entitled to one vote if a poll is called, otherwise each shareholder has one vote on a show of hands.

Dec 2012 Jun 2012



Note 20: Issued capital (cont'd)

c. Options (cont'd)

The following principal assumptions were used in the valuations of options issued this period:Exercise price $1.50 Life of the option 4 yearsUnderlying share price $1.50 Expected share price volatility 44.2%Risk free interest rate 2.68%Due to the company's low trading volumes over recent times, it is the view of the company's management that the future expected volatility is better represented by an average volatility of similar companies listed on the Australian Securities Exchange. An analysis of similar listed companies provided a volatility of 44.2%.

The share based expense that relates to the subsidiary employee share scheme is $629 for the period. Note that the only shareholder of this subsidiary is Ambre Energy Limited.

(ii) Subsequent to the reporting period, on 20 March 2013, the CEO & Managing Director Mr E Choros elected to cancel 30.0 million options granted in May 2012 to Mr Choros's related entities. Following the cancellation of these options total options outstanding at the date of this report are 67,450,000.

The fair values of options granted were determined using a variation of the binomial option pricing model that takes into account factors specific to the share option incentive plans, such as the vesting period.

Share based employee remuneration of $5,068,000 has been included in share based payments expense of $5,136,000. The group employee share option plans (Australian & USA) are the basis for the share based employee remuneration as well as a employee share option scheme in a subsidiary, Ambre Fuels Limited.

(i) Under the parent entity's employee share option plan, option holders are entitled, as an alternative to exercising their options through payment of the exercise price, to exchange their options for a lesser number of shares based on the prevailing value of the company's shares (commonly referred to as "cashless exercise"). During the period, 2,727,941 options were exchanged for 1,855,000 ordinary shares by way of cashless exercise. No consideration was paid to the company for these share issues.




a. Interest in subsidiaries

Name of entity

Note

Place of business/country of incorporation Principal activities

Dec 2012 Jun 2012

Ambre Energy (Felton) Pty Ltd Aust 100 100 Coal explorationAmbre Energy Exploration Pty Ltd Aust 100 100 Coal exploration

Aust 100 100 CTL project developmentAmbre EOR Pty Ltd Aust 100 100 CTL project developmentAmbre Pipelines Pty Ltd Aust 100 100 CTL project development

Aust 100 100 AUS corporateUSA 100 100 Oil shale resource development

Ambre Energy Partners, Inc. USA 100 100 Oil shale developmentAmbre Energy Technology, LLC USA 100 100 Oil shale developmentAE Alternative Fuels, LLC USA 100 100 R & D activitiesAE Fuels North America, LLC USA 100 100 CTL project development

USA 100 100 USA corporateUSA 100 100 Coal operations managementUSA 100 100 Coal terminal development

21(b) USA 62 62Bulk materials terminal operation and development

AE Coal Marketing, LLC USA 100 100 MarketingCoyote Island Terminal, LLC USA 100 100 Coal terminal developmentGulf States Bulk Terminal, LLC USA 100 100 Coal terminal developmentBarlow Point Land Company, LLC USA 62 62 Bulk materials terminal operationPacific Transloading, LLC USA 100 100 Coal terminal developmentAE Wind River, LLC USA 100 100 USA corporateEldorado Coal, Inc. USA 100 100 USA corporateKCP, Inc. USA 100 100 Coal operations managementKCP Properties, Inc. USA 100 100 Coal operations assets holdingsBig Horn Coal Company USA 100 100 Reclaimed coal propertyRosebud Coal Sales Company USA 100 100 Reclaimed coal property

b. During the period the non-controlling interest in Millennium Bulk Terminals-Longview, LLC contributed $3,810,000 (USD$3,956,000) being its ownership interests (38%) share of capital contributions required to fund operational and capital expenditure for the period (Jun 2012: $7,529,000).

AE Infrastructure, LLC

Ambre Fuels Limited (formerly Ambre CTL Limited)

AE Minerals Pty Ltd

Millennium Bulk Terminals-Longview, LLC

AE Coal, LLC

AE Oil Shale, Inc.

Ambre Energy North America, Inc.



Note 21: Subsidiaries and transactions with non-controlling interests

Ownership interest held by the group(%)

Set out below are the group's principal subsidiaries at 31 December 2012. Unless otherwise stated, the subsidiaries as listed below have share capital consisting solely of ordinary shares, which are held directly by the group, and the proportion of ownership interests held equals to the voting rights held by the group. The country of incorporation or registration is also theirprincipal place of business.



a. Foreign currency translation reserve

b. Option reserveThe option reserve records items recognised as expenses on valuation of share options.c. Other reserves

Dec 2012 Jun 2012a. Employee benefits expense $'000 $'000

Wages and salaries 5,262 9,651 Annual leave 230 279 Long service leave 7 56 Personal leave 34 28 Superannuation contribution 197 294 Workers compensation - 40

Other employee expenses 354 5606,084 10,908

b. Share based payments

See Note 20(c) for detail on share based payments to employees.

Note 24: Earnings per share

Dec 2012 Jun 2012Amounts in shares: No. No.

406,286,881 366,060,350 Effect of share options and convertible notes on issue - -

406,286,881 366,060,350

Other reserves includes share of other comprehensive income from equity accounted investees and actuarial gains or losses from defined employee pension and retirement schemes.

Note that issued convertible notes and issued company share options are considered to be antidilutive and therefore were excluded from the diluted weighted average number of ordinary shares calculation.

Note 23: Employee remuneration

Both basic and diluted earnings per share have been calculated using the total income attributable to members of the parent entity (after tax) as the numerator.

Weighted average number of ordinary shares used in basic earnings per share

Weighted average number of ordinary shares used in diluted earnings per share

The weighted average number of shares used in the calculation of basic earnings per share and diluted earnings per share is as follows:



Note 22: Reserves

The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary.


Dec 2012 Jun 2012$'000 $'000

a.Non-cancellable operating leases contracted for but not recognised in the financial statements:

- 1,118 1,140

- 3,770 3,151

- Later than five years - -

4,888 4,291

b. Ground lease

Millennium Bulk Terminals-Longview, LLC (MBTL), a controlled entity entered into a ground lease on the site commonly known as the Former Reynolds Aluminium Smelter Facility in Longview, Washington, USA, on 11 January 2011 for an initial term of sixty years with Northwest Alloys, Inc. (Lessor). Annual rental commitments do not commence until 1 January 2014 and will equate to the provision of alumina and other bulk material handling and/or offloading services provided to the lessor not exceeding set limits. Due to the contingent nature of the rent, there are no minimum lease payments relating to the ground lease included in the minimum lease payments due shown above. The rent free period ending on 31 December, 2013 recognises the expenditure requirements of MBTL relating to specified work obligations include the demolition, removal and disposal of substantial existing structures on the leased site to be completed by 31 December 2013.

The ground lease agreement provides an option for the group to purchase the leased site within 12 months of specified environmental remediation and other specified work being completed. As consideration for this option the group has agreed to perform certain work obligations under the lease. The most notable obligation is the performance of environmental remediation work up to a maximum expenditure of $USD20 million over a 4 year period commencing no later than 31 December 2013. In the prior period MBTL commenced remediation work and at current period end expenditure since commencement totalled $USD1,888,000 (Jun 2012: $USD1,094,000).

In addition a letter of credit was provided by the non controlling interest in MBTL to the Lessor for $USD10 million. There is no obligation to MBTL by the group unless the group defaults on the ground lease obligations.



Note 25: Leasing commitments

Operating lease commitments

Minimum lease payments due

Not later than 12 months

One year or later and not later than five years

The operating lease commitments include two significant non-cancellable office property leases in Australia and the United States of America. All leases allow for subletting. Also included in operating lease commitments is a non-cancellable lease for land in Corpus Christi Texas that was entered into during the last period that is a subject site for the development of a coal port facility. The lease has 5 end on end options with each option providing a renewal at the discretion of the group for a further term of 5 years.



c. Finance leases

Dec 2012 Jun 2012$'000 $'000

- 208 -

- 761 -

- Later than five years - -

Minimum lease payments 969

Future finance charges 64 -

Recognised as a liability 905 -

Representing lease liabilities

Current 184 -Non-current 721 -

905 -

The present value of finance lease liabilities is as follows:- 205 -- 700 -- Later than five years - -

Minimum lease payments 905 -



Commitments in relation to the finance leases are payable as follows:





Note 25: Leasing commitments (cont'd)

The group leases information technology hardware and software with a carrying amount of $885,000 under finance lease that will expire 4 years and 8 months from period end. Under the terms of the lease the group has the option to purchase this equipment for $1 at the expiry of the lease.


a. Financial guaranteesRelated party guarantees provided by the parent entity:

Dec 2012 Jun 2012$'000 $'000

- Not later than 12 months 170 170

- One year or later and not later than five years 240 240

Tenement & Mineral Lease rental payable:

- Not later than 12 months 67 63

- One year or later and not later than five years 170 189

- Later than five years 154 173

801 835

c. Pilot plant site commitmentsFees payable on pilot plant site, Utah, United States:- Not later than 12 months 3 4- One year or later and not later than five years 14 14- Later than five years 53 56

70 74

d. Research and development commitmentsDec 2012 Jun 2012

$'000 $'000

Research and development expense commitments payable:- Not later than 12 months 229 364- One year or later and not later than five years - 93

229 457

The group has committed to pay the salaries and share of overhead of two research staff and half the full time equivalent of a key person for Jantra Fuels and Chemicals, LLC as part of a commercial arrangement for research and development activities The group has further committed to provide for the expense of basic utility, equipment, consumables, analysis and insurance for the laboratory. The commitments end 31 October 2013.

Exploration commitments payable:



Note 26: Capital commitments

The parent entity has provided a guarantee to a third party in relation to the performance and obligations of the controlled entity, Ambre Energy North America, Inc., in respect to a property lease rental. The guarantee is for the term of the lease and represents a financial commitment of $USD1,110,000 as at 31 December 2012 (see note 25a).

The parent entity provided another guarantee to a third party in relation to the performance and obligations of the controlled entity, Ambre Energy North America, Inc., in respect of information and technology hardware and software lease. The guarantee is for the full amount of lease payments and represents a financial commitment of $USD988,000 (see note 25c).

In addition, a cash backed guarantee of $173,000 (see Note 15) is held as security for performance and obligations of the parent entity in respect to a property lease rental.

The group has certain statutory obligations to undertake a minimum level of exploration activity in order to maintain rights of tenure to its exploration licenses. These obligations may vary from time to time in accordance with the type of tenements held and are expected to be fulfilled in the normal course of operations of the group to avoid forfeiture of any tenement.

Exploration expenditure commitments



d. Research and development commitments (cont'd)

e.

f. Millennium Bulk Terminals-Longview, LLC (MBTL) capital calls

No dividends were paid or declared during the current or prior period.

Franking creditsDec 2012 Jun 2012

$'000 $'000

- Balance at the end of the reporting period (Parent) 3 3

Remuneration of the auditor of the parent for:Dec 2012 Jun 2012

$'000 $'000

- 92 109 - - 150

92 259

- Taxation compliance - 24 - Corporate advice services - 40

- 64

Assurance services provided by overseas network firm:

- - 42 - 87 -

87 42

Review of half year financial statements

Review of half year financial statementsAudit of the financial report

The amount of the franking credits available for subsequent reporting periods are:

Note 28: Auditors’ remuneration

Audit of the financial report

Note 27: Dividends



Note 26: Capital commitments (cont'd)

On 16 August 2011, the group entered into an agreement with the Western Research Institute (a body affiliated with the University of Wyoming) to develop a dimethyl ether reactor. Costs are to be shared with the group's contribution predominantly being in-kind. The project is expected to be completed before 1 February 2014. At period end the group's remaining commitment is estimated to be $587,000. As the group's commitment is predominantly the provision of in-kind contributions, its financial commitment has not been included in the amounts disclosed above in this note.

Commitments to associatesThe group has an associate company, Thermosolv LLC which is dedicated to a specific research and development activity. USD$250,000 in cash and in kind has been committed by a subsidiary of the group in the event that certain government grant money becomes available to Thermosolv, LLC. At period end $236,000 of cash and in kind contributions have been applied to this commitment.

To meet the future capital and operational needs of MBTL, a controlled entity, its board of directors may from time to time require by written notice that the members make additional capital contributions. Capital calls shall be made to the members in proportion to their respective percentage membership interests at the date of notification. At period end the group had a 62% membership interest in MBTL and made $USD6,454,000 of capital contributions during the period (Jun 2012:$USD12,643,000).


Note 29: Contingent liability

a. Reclamation liabilities

Claims



The group is required to provide financial assurance for reclamation obligations in relation to its coal mining operations to the States of Montana and Wyoming (the States).The group has arrangements with Zurich of North America (Zurich), in which Zurich provided surety bonds to the States as financial assurance for the mine reclamation liabilities acquired. The surety bonds given to these States on the group's behalf collectively amount to approximately $138.9 million ($USD144.2 million).

The group has provided collateral of $USD66.75 million to Zurich in the form of a restricted cash holding of $USD62.28m (see Note 11) and an irrevocable letter of credit of $USD4.47m provided by U.S. Bank in favour of Zurich. Additionally the parent and certain controlled entities have unconditionally indemnified Zurich against all losses in connection with the issued bonds, excluding any amount paid or payable to a re-insurer or co-surety provider.

The majority of the group's reclamation obligations arise from its participation in the joint ventures of Decker Coal Company and Black Butte Coal Company. As the group equity accounts for its interests in these joint ventures in its financial statements (see Note 4), its share of the estimated reclamation liabilities are $103.99 million ($USD107.98 million) and are reflected in the investment in equity accounted investees balance of $3,616,000 (see Note 4).

If the group were to default on it's reclamation obligations at reporting date, the group will have under provided for this outcome by some $34.9 million in its financial statements being $138.9 million ($USD144.2 million) less $103.99 million ($USD107.98 million) currently provided for the reclamation liability. As, it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the group discloses the $34.9 million under provision as a contingent liability.

i) As disclosed in Note 22 of the 2011 annual financial statements, various legal claims were brought against the parent and controlled entities, Ambre Energy North America, Inc. and Millennium Bulk Logistics, Inc. by M.M. Dillon & Co. Group, LLC (M.M. Dillon) during that year. These claims arise out of M.M. Dillon's non-exclusive agency relationship with Millennium Bulk Logistics, Inc. pursuant to a letter agreement dated 28 September 2010. M.M. Dillon's complaint was filed in the Supreme Court of New York, Kings County.

M.M Dillon are alleging damages of over USD$4.0 million in breach of the agreement. The parties attempted to resolve the case through mediation in July 2012 but were not successful. Management do not believe that the parent and controlled entities have any liability and are vigorously defending the claims. Further detailed information on these contingencies is omitted so as not to seriously prejudice the group's position in the related disputes.

ii) On 9 July 2012 an action was filed by Western Minerals LLC in the United States District Court of Montana. The action names KCP, Inc. ("KCP"), Ambre Energy North America, Inc. and Ambre Energy Limited as defendants. The complaint alleged breaches of contract and fiduciary duty by KCP and sought unspecified damages and to remove KCP as manager of the Decker Coal Company. KCP and Ambre Energy North America filed an answer to the complaint denying any breach by KCP or wrong-doing by Ambre Energy North America which included a counterclaim against Western Minerals LLC and Cloud Peak Energy, Inc. (“CPE”). Subsequent to reporting period, on 27 August 2013 the parties jointly dismissed the litigation without prejudice (see Note 34(a)).



Note 30: Related party transactions

Details of transactions between the group and its related parties are as follows:a. Loans with wholly owned subsidiaries

b. Loans with senior employees

c. Interest of key management personnel (KMP)The total remuneration paid to KMP of the group during the period is as follows:

Dec 2012 Jun 2012$'000 $'000

- Short-term employee benefits 1,333 2,953- Share-based payment - 18,003

1,333 20,956

d. Management of joint venture minesDec 2012 Jun 2012

$'000 $'000

- Management fee income 2,335 2,888



Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Loans made between the parent entity and wholly owned subsidiaries are non interest bearing with no set repayment terms and conditions.

A controlled entity provides assistance with the relocation expenses of USA based senior employees through an external residential brokerage relocation service provider. Amounts totalling $329,000 are recoverable for advances and relocation expenses paid by the controlled entity (see Note 10(b)).

Further assistance was provided to two senior employees for the cost of relocation. An advance of USD$300,000 by way of promissory note was provided to one senior employee. No interest is payable on the note with 500,000 options to purchase shares in the group provided as security by the employee. The loan is repayable on the earlier of the exercise of the options or 31 December 2014. The other employee was provided with a no interest loan of $USD20,000. At period end $USD10,000 was outstanding (see Note 15).


Dec 2012 Jun 2012 Dec 2012 Jun 2012$'000 $'000 $'000 $'000

- 2,887 20,300 - - - - - 1,140 2,308 - - - 991 389 - 173 173 299 304 - - - 59,973 64,750

3,060 20,473 62,403 67,751

Dec 2012 Jun 2012 Dec 2012 Jun 2012$'000 $'000 $'000 $'000

Financial liabilities at amortised cost

- Trade and other payables - - 5,969 5,739 - 18,282 15,449 - - - - 24,534 - - - 32,130 - - - - 905 - - - - - - - 108

51,317 39,983 5,969 5,847

Financial risk management policies

Specific financial risk exposures and management

a. Interest rate risk



Note 31: Financial risk management

The group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable and redeemable convertible notes.

Non-interest bearingFloating interest rateFinancial assets:

Cash and cash equivalentsReceivablesAmounts receivable from related

tiOther assetsFinancial assets

Redeemable convertible notes

Total financial assets

Fixed interest rateFinancial liabilities:

Non-interest bearing

The ARC’s overall risk management strategy seeks to assist the group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of the use of hedging derivative instruments, and future cash flow requirements.

Secured loanFinance leaseAmounts payable to related

ti

Term loan

The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk.

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The group is also exposed to earnings volatility on floating rate instruments.

Total financial liabilities

The Audit and Risk Committee (ARC) has been delegated responsibility by the Board of Directors for, amongst other issues, monitoring and managing financial risk exposures of the group. The ARC reviews the effectiveness of internal controls relating to currency risk, financing risk and interest rate risk. Minutes of the ARC are reviewed by the Board.



b. Liquidity risk

-

- obtaining funding from a variety of sources- maintaining a reputable credit profile- managing credit risk related to financial assets- investing only in surplus cash with major financial institutions

Financial assets pledged as collateral:

Within 6 months

6 to 12months

1 to 5years

Later than5 years

- Trade and other payables 5,969 - - - - Redeemable convertible 18,282 - - - - Finance lease 92 92 721 - - Secured loan - - 32,130 -

24,343 92 32,851 -

Within 6 months

6 to 12months

1 to 5years

Later than5 years

- Trade and other payables 5,739 - - - - Redeemable convertible - 15,449 - - - Term loan 24,534 - - - - Secured loan - - - - - Amounts payable to related 100 8 - -

30,373 15,457 - -

Liquidity risk arises from the possibility that the group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The group manages this risk through the following mechanisms:

preparing forward looking cash flow analysis in relation to its operational, investing and financing activities

An amount of $173,000 has been pledged as security for contract guarantees and their realisation into cash may be restricted subject to the terms and conditions of the contract. See Note 15(a) for further details.

As at 31 December 2012, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

Current

This compares to the maturity of the Group's non-derivative financial liabilities in the previous reporting period as follows:

Current

Non-current

The group has provided $59,973,000 in collateral to Zurich by way of restricted cash holding with the Bank of New York Mellon (see Note 11(a)) and $USD4,470,000 to U.S. Bank as collateral for a letter of credit in favour of Zurich.

Total



Note 31: Financial risk management (cont'd)

Non-current

Total


c.

Net financial assets/(liabilities) in AUDDec 2012 Jun 2012

Functional currency of the group $'000 $'000AUD (17,758) (2,771)USD 26,840 45,165Total 9,082 42,394

d.

There are no material amounts of collateral held as security at balance date.

Dec 2012 Jun 2012$'000 $'000

- A-1+ rated 841 16,006- A-1 rated 2,044 4,292

2,885 20,298

- AA- rated (see Note 15(a)) 173 173

Restricted cash holding- AA- rated 59,973 64,750

e. Net fair valuesThe net fair values of assets and liabilities are carried at their approximate carrying value. No financialassets and financial liabilities are readily traded on organised markets in standardised form

f. Sensitivity analysis

Profit Equity$'000 $'000

Period ended 31 Dec 2012- +/- 10% in $AUD/$USD +/-2,551 +/-2,551Period ended 30 June 2012- +/- 10% in $AUD/$USD +/-3,322 +/-3,322

Foreign exchange risk

Credit risk

Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the group holds financial instruments which are other than the AUD functional currency of the group. With instruments being held by overseas operations, fluctuations in US Dollar may impact on the group’s financial results unless those exposures are appropriately hedged.



Note 31: Financial risk management (cont'd)

The following table illustrates sensitivities to the group’s exposures to changes in exchange rates. The table indicates the impact on how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables.

The group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the group. Credit risk related to balances with banks and other financial institutions is managed by the ARC. The following table provides information regarding credit risk relating to cash and money market securities based on Standard & Poor’s counter party credit ratings.

The maximum exposure to credit risk, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements.

The following table shows the foreign currency risk on financial assets and liabilities of the group's operations denominated in currencies other than the functional currency of the operations.

Cash and cash equivalents excluding cash on hand



Note 32: Parent entity disclosures

Dec 2012 Jun 2012$'000 $'000

Financial position of parent entity at reporting dateCurrent assets 111,784 113,532 Total assets 131,455 133,153

Current liabilities 21,505 20,510 Total liabilities 21,702 20,665

Total equity of the parent entity comprising of:Share capital 178,519 176,443 Share-based payment reserve 27,090 24,627 Retained earnings (95,856) (88,582)Total equity 109,753 112,488

Result of the parent entityProfit/(loss) for the period (8,899) (60,154)Total comprehensive income (8,899) (60,154)

Parent entity commitments for operating leases

- 386 461 - One year or later and not later than five years 671 867

1,057 1,328 Impairments

Guarantees

Refer to Note 26(a) for details of other guarantees provided by the company.

Contingent liabilities and contingent assets

Research and development commitmentsOn 16 August 2011, the parent entered into an agreement with the Western Research Institute (a body affiliated with the University of Wyoming) to develop a dimethyl ether reactor. Costs are to be shared with the parent's contribution predominantly being in-kind. The project is expected to be completed before 1 February 2014. At year end the group's remaining commitment is estimated to $587,000. Additionally the parent has agreed to commit to expenditure of $229,000 to support research and development activities to be undertaken by Jantra Fuels and Chemicals, LLC refer to Note 26(d)).

Payable - minimum lease payments Not later than 12 months

The directors of the parent have determined that $3,596,000 of loans to other entities in the group are unrecoverable and accordingly have resolved to reduce the carrying amounts of the pertinent assets for this impairment.

The company has provided bank guarantees totalling $172,920 (Jun 2012: $172,920) in respect of the company's Brisbane head office. These amounts are secured by bank deposits to the value of $172,920 (Jun 2012: $172,920)

The company does not believe it has any material contingent liabilities or contingent assets other than those disclosed under note 29.



The following information has been extracted from the books and records of the parent and has been prepared in accordance with accounting standards.

Non-cancellable operating leases contracted for but not capitalised in the financial statements


6 mth 12 mthDec 2012 Jun 2012

$'000 $'000a.

Profit/(loss) after income tax (32,002) (65,367)

Cash flows excluded from profit attributable to operating activities

Non-cash flows in profitAmortisation 70 394

Depreciation 696 1,764

Impairment 163 10,857

Share based payments 5,136 16,664

Non-cash retirement benefits expense 143 312

Gain on business combination - (5,768)

5,587 10,152

Net loss on disposal of property, plant & equipment 23 216

Net loss/(gain) on disposal of other assets 67 109

Finance costs capitalised 2,889 -

Exchange differences (358) 425

Provision accretion (250) -

Fair value adjustment of embedded derivative liability (1,407) -

Amortisation of lease incentive 84

Other equity settled transactions - 504

(Increase)/decrease in trade and other receivables (383) (634)(Increase)/decrease in other assets (1,053) (1,315)Increase/(decrease) in trade and other payables 223 4,251 Increase/(decrease) in current tax assets - 571 Increase/(decrease) in financial liabilities 3,192 565 Increase/(decrease) in provisions (464) (66)Cashflow from operations (17,644) (26,366)

b. Credit facilities

c. Non-cash financing and investing activitiesi) Share issues:

Non cash equity movement represented by:-

-



Note 33: Cash flow information

Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries

Reconciliation of cash flow from operations with profit after income tax

Share of loss/(gain) of joint venture partnerships and associates

The group has no unused credit facilities other than the facility disclosed in note 11b(i) and a $20,000 overdraft all available at period end.

During the period 895,833 shares (Jun 2012: 479,167) were issued at $1.00 per share for total consideration of $895,833 (Jun 2012: $479,167) in payment for interest expense under the bridge loan facility (see Note 11(b)(i)).During the period 1,855,000 ordinary shares were issued in exchange for 2,727,941 options. No cash consideration was paid in the exchange (See note 20c(i)).



Note 34: Events occurring after the reporting perioda. Ongoing discussions regarding purchase of 50% joint venture share in Decker Coal Company

b. Financing

c. Option cancellations

d. Demerger of Ambre Fuels Limited and its subsidiaries

e. Convertible notes initial amendment

Subsequent to reporting date the group requested and received drawdowns under the secured loan facility provided by major shareholder and financier Resource Capital Fund V L.P. (“RCF”) totaling USD $20 million (see Note 11) to fund project development and other costs and expenses of the group. The total available funds under this facility have been drawn down at the date of this report. The final tranche of USD $10 million was advanced on the basis of an amendment to the RCF facility which relaxed certain conditions precedent to the advance of this final tranche, but also imposed some additional obligations on the group (see Note 11(b)(i)).

Following an application by the parent entity to KOSEP and KOSPO for their approval for Ambre Energy North America, Inc. to increase the loan amount under the RCF facility (see Note 11(b)(i)), the parent entity agreed with KOSEP and KOSPO in March 2013 to increase the interest payable under their convertible notes from 10% per annum to 14% per annum to take effect on and from 10 December 2012.

Further to this a second amended and restated loan agreement was executed on 20 August 2013 resulting in RCF providing a USD$20 million letter of credit facility and an extension of the Morrow Pacific permit deadline to the 31 December 2015 in exchange for the issue of 50 million new shares. See Note 11(b)(ii) for further detail of the significant changes in the terms to the original RCF agreement.

On 20 March 2013, the CEO & Managing Director Mr E Choros elected to cancel 30.0 million options granted in May 2012 to Mr Choros' related entities. Following the cancellation of these options total options outstanding at the date of this report are 66,662,500.

This potential transaction has not been completed and is not expected to be completed in the foreseeable future and is dependent on the group's ability to replace CPE's outstanding reclamation and lease bonds for the Decker mine. The group and CPE continue to be in discussions and have jointly dismissed the previously disclosed Decker litigation without prejudice to allow time for their ongoing discussions and evaluations (see Note 29(b)(ii)).

(iii) the granting of an option to CPE to take up to 5 million tonnes per year of Ambre’s throughput capacity at the proposed new coal export facility at Millennium Bulk Terminals-Longview, at commercial terminal handling rates;



As reported under Note 34 in the June 2012 Annual Report, on 5 December 2012, Cloud Peak Energy, Inc. (“CPE”), Ambre Energy and the relevant subsidiaries entered into a series of agreements including:(i) the sale to Ambre subsidiaries of CPE's indirect 50% joint venture share in the Decker Coal Company and CPE’s right to certain production royalties payable by Decker Coal Company;(ii) the assumption by Ambre subsidiaries of all liabilities of Decker Coal Company and replacement of CPE’s reclamation bonds for Decker being $70.7 million;

The directors will be seeking shareholder approval to demerge Ambre Fuels Limited and its subsidiaries from the remainder of group. Ambre Fuels Limited conducts an Alternative Fuels business which looks to develop projects to produce liquid fuels and chemicals from coal. Subsequent to period end the directors have formed the view that it is not in the best interests of the group to try to develop the Alternative Fuels business in conjunction with the development and operation of the coal export infrastructure and mining businesses. The outcome of the demerger will be that the shareholders in Ambre Energy Limited will be allotted the shares in the demerged Ambre Fuels Limited in proportion to their shareholding in Ambre Energy Limited.


Note 34: Events occurring after the reporting period (cont'd)

f.

g.Further to note 34(e) the terms of the KOSPO convertible notes referred to in note 11(b)(iv) were renegotiated on 27 September 2013 so that 25% of the principal and interest accrued on the convertible notes are to be repaid following the satisfaction of certain conditions to the agreement. The redemption date for the 75%remaining convertible notes has been extended to 31 December 2015. Note that the original redemption date for all KOSPO issued convertible notes was 28 June 2013.The interest rate was increased to 16% from 28 June 2013 to the date of repayment for the convertible notes, with interest calculated on the outstanding principal and interest accrued as at 28 June 2013. From 28 September 2013 interest will compound quarterly on the 75% remaining convertible notes with the interest rate continuing to be 16% until the agreed changes to the security interests provided by the group to KOSPO are in place. From thereon the interest rate will become 12%. Furthermore 50% of the interest accruing from any quarter will be payable on the last day of that quarter.The security interests provided by the group to KOSPO will further extend to be the same as those provided to RCF for their loan with respect to AE Minerals Pty Ltd, Ambre Energy North America, Inc. and its subsidiaries. KOSPO as well as KOSEP will rank equally with RCF with respect to these security interests.The remaining convertible notes now have a conversion price being the lower of $0.50 per share, the conversion price applicable to RCF's loan (see note 11(b)(ii)) or 90% of the market price per share upon an initial public offering. The RCF conversion price will only be applicable where KOSPO converts its convertible notes within 30 days after RCF has converted its loan to shares.The group may redeem the remaining convertible notes without KOSPO's consent prior to 31 December 2013 without penalty but thereafter must have KOSPO's consent to redeem. KOSPO may request redemption prior to the 31 December 2015 in the case that project financing is secured for the Morrow Pacific project.

Repayment of and further changes to KOSPO convertible notes

The financial report was authorised for issue on 10 October 2013 by the board of directors.

The remaining convertible notes now have a conversion price being the lower of $0.50 per share, the conversion price applicable to RCF's loan (see note 11(b)(ii)) or 90% of the market price per share upon an initial public offering. The RCF conversion price will only be applicable where KOSEP converts its convertible notes within 30 days after RCF has converted its loan to shares.The group may redeem the remaining convertible notes without KOSEP's consent prior to 31 December 2013 without penalty but thereafter must have KOSEP's consent to redeem. KOSEP may request redemption prior to the 31 December 2015 in the case that project financing is secured for the Morrow Pacific project.

Further to note 34(e) the terms of the KOSEP convertible notes referred to in note 11(b)(iii) were renegotiated on 31 July 2013 so that 25% of the principal and interest accrued on the convertible notes are to be repaid following the satisfaction of certain conditions to the agreement. The redemption date for the 75% remaining convertible notes has been extended to 31 December 2015. Note that the original redemption date for all KOSEP issued convertible notes was 31 May 2013.

Repayment of and further changes to KOSEP convertible notes

The interest rate was increased to 16% from 1 June 2013 to the date of repayment for the convertible notes, with the interest calculated on the outstanding principal and interest accrued as at 31 May 2013 on a compounding basis. From 1 August 2013 interest is to compound quarterly on the 75% remaining convertible notes with the interest rate continuing to be 16% until the agreed changes to the security interests provided by the group to KOSEP are in place. From thereon the interest rate will become 12%. Furthermore 50% of the interest accruing from any quarter will be repayable on the last day of that quarter.The security interests provided by the group to KOSEP will further extend to include those provided to RCF for their loan with respect to AE Minerals Pty Ltd, Ambre Energy North America, Inc. and its subsidiaries. KOSEP will rank equally with RCF with respect to these security interests.



Other than the above matters, no other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.



DIRECTORS’ DECLARATION for the period 1 July 2012 to 31 December 2012

The directors of the Company declare that:

1. the consolidated financial statements and notes of Ambre Energy Limited are in accordance with the Corporations Act 2001 and

a) comply with the Australian Accounting Standards which as stated in note 1 to the financial statements, constitutes compliance with the international financial reporting standards (IFRS); and

b) give a true and fair view of the financial position as at 31 December 2012 and of the performance for the period ended on that date of the company and consolidated group; and

2. in the directors’ opinion there are reasonable grounds to believe that Ambre Energy Limited will be able to pay its debts as and when they become due and payable, having regard to the disclosure made in note 1 (z).

This declaration is made in accordance with a resolution of the board of directors.

________________________________

Edward (Edek) Choros Director Brisbane, 10 October 2013


DIRECTORS’ REPORT

78

INDEPENDENT AUDITOR’S REPORT



www.ambreenergy.com

CORPORATE DIRECTORYAmbre Energy Limited ACN 114 812 074

Directors

Terry O’Reilly David Usasz Edek Choros Michael Mewing Michael van Baarle Jayson Newitt Ross Bhappu

Company Secretary

Neil McGregor

Principal registered office of Australia

Level 27 AMP Place, 10 Eagle Street Brisbane QLD 4000, Australia

tel +61 (0)7 3009 9180 fax +61 (0)7 3009 9181 email [email protected] web www.ambreenergy.com

Principal registered office in the United States

Ambre Energy North America, Inc. 170 South Main Street, Suite 700 Salt Lake City, UT 84101

tel +1 801 539 3788 fax +1 801 539 3789

Share registry

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne Victoria 3001

tel (within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000 fax +61 3 9473 2500 web www.computershare.com.au

Auditor

Grant Thornton Audit Pty Ltd

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