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ASX / MEDIA RELEASE 25 September 2008

ELIMATTA THERMAL COAL PROJECT UPDATE MEASURED RESOURCE UP 368% TO 129Mt

HIGHLIGHTS

• Measured Resource increased by 94 Mt (368%) to 129Mt • Total Resource now at 244Mt (including 40Mt Inferred) • Sound geological model for mine planning • Additional Exploration Target1 of 30-50Mt

DISCUSSION Northern Energy Corporation Limited (NEC) is pleased to announce a substantial increase in Measured Resources for its Elimatta Project in the Surat Basin in south east Queensland. In-fill drilling undertaken in the first half of the year has led to a significant conversion of previously indicated and inferred resources to a measured resource of 129 million tonnes providing scope for a major thermal coal project Northern Energy Managing Director Keith Barker said this resource represents a milestone for the deposit indicating there is potential to develop an open cut mine producing 4-5 million tonnes per annum (Mtpa). “The recent drilling programme has achieved a key objective - a substantial increase in Measured Resources,” Mr Baker said. “It has also improved the understanding of the coal seams and provides a sound geological base for mine planning and project development. Mine planning is currently underway to establish a marketable reserve at Elimatta which expected to be released by November. “The higher level of confidence in the resource will encourage NEC to make commitments to rail and port infrastructure for the northern Surat Basin, which is due for completion by mid 2012.” A summary of the change from the previously announced resource is as follows: Elimatta Resource Feb 2008 Sept 2008 Measured 35 Mt 129 Mt Indicated 135 Mt 75 Mt Inferred 80 Mt 40 Mt Total 250Mt 244Mt The Elimatta Project is just one of a suite of projects under the management of NEC. The Company has a portfolio of coking and thermal coal projects each of which are being progressed towards development. These projects represent a diversified suite of potential coal projects with risk spread geographically, and by coal quality and mining method.

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Attached to this announcement is a 17-page Summary Report of the Elimatta Resource The following tables briefly summarise the new Resource quantities: Table 1: Summary of Elimatta by Seam September 2008 Horizon Total

Resource Area (ha)

In situ Density (g/cc)

Thickness Range

(m)

Measured Tonnage (x 106)

Indicated Tonnage (x 106)

Inferred Tonnage (x 106)

UG 1800 1.47 1.2-2.2 11 20 5 Y 2090 1.43 0.5-2.0 15 15 5 A 2535 1.41 1.0-3.0 55 20 5 B 2550 1.38 1.8-2.9 48 20 10 C 490 1.42 2.5-3.5 0 0 20

Sub total 129 75 45 Grand Total (rounded) 129 75 40

In addition to the Resource an Exploration Target1 of 30-50Mt has been identified within EPC 650. Table 2. Coal resources within EPC650 by vertical overburden ratio February 2008

Cumulative Tonnes (x 106) Horizon <3:1 <5:1 <7:1 <10:1 >10:1

UG 0 8 26 33 ~2 Y <1 11 24 34 <1 A 9 41 64 80 <1 B 8 40 60 73 <4 C 0 1 11 20 0 Total 17 101 185 240 ~5

Table 3 shows raw ash quality and float sink results. An export quality thermal coal with low ash and high volatiles is predicted. Table 3. Coal Quality of September 2008 Resources Quality

UG Seam

Y Seam

A Seam

B Seam

C Seam

Raw Ash % 29.69 25.08 22.8 17.9 25.92 SE mj/kg 19.59 21.43 22.1 23.97 21.31 VM% 32.77 35.04 36.2 38.64 35.86 TS% 0.3 0.33 0.3 0.31 0.29

Raw Quality (8% adm basis)

HGI 41 42 40 38 40 Coal Prep Simulation Yield*

Yield Dry basis [@16% moisture]

65.15

[55]

71.1

[60]

75.9

[64]

80.3

[67]

70.6

[60]

Ash % 9.21 8.01 9.21 8.6 9.39 SE mj/kg 26.5 27.35 27.03 27.27 27.26 VM% 41.58 42.6 42.35 42.73 42.83 TS % 0.40 0.35 0.34 0.33 0.35

Product Quality (8% adm basis)

HGI 32 31 32 32 33 Raw ash levels are lower than those previously announced as correlation of coal and partings has improved in the latest modelling.

1 The potential quality and quantity shown within is conceptual in nature and there has been insufficient work done at present to define a Mineral Resource in this area under the JORC (2004) Code. The nature of an Exploration Target is such that is uncertain if further exploration will result in the determination of a Mineral Resource in this area.

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Washing will produce a high volatile low sulphur export quality coal product with ash content of 9-10% and good combustion characteristics. The simulated yields in the table incorporate assumed dilution from partings not included in the coal resource tonnage quoted. For further details please contact

For further information: Mr Keith Barker Managing Director Northern Energy Corporation Ltd www.northernenergy.com.au Tel: 07 3303 0695

Media: Anna O’Gorman Principal Consultant - Three Plus Tel: 07 3503 5700

Statement of Compliance The estimate of coal resources contained herein has been prepared in accordance with the Guidelines of the JORC Code (2004). The information in this report that relates to Mineral Resources at Elimatta is based on information compiled by Mr Andrew McLaughlin, who is a Member of the Australian Institute of Mining and Metallurgy. Mr McLaughlin is a qualified geologist (B.Sc. (Hons) University of Newcastle, 1994) and is an employee of Northern Energy Corporation. Mr McLaughlin has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr McLaughlin consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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EPC650 ELIMATTA

TAROOM COAL ACN 079 251 442

SUMMARY REPORT ON COAL GEOLOGY

AND RESOURCES OF THE JUANDAH COAL MEASURES IN EPC650 ELIMATTA

SEPTEMBER 2008

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Elimatta Project 5

1. Location & Tenure EPC650 is located in the Taroom Shire, about 35 km west of Wandoan and 55km south of Taroom, on the Western Downs of Queensland. These townships are accessed via Leichhardt Highway. Topographically, EPC650 consists of low, rolling hills, some with rubbly Jurassic sandstone outcrops, creek flats, and deeply incised creeks. Horse Creek is the largest drainage, effectively bisecting the EPC, draining from SSW to the NNE. Access to the EPC is via tarred and graded, dirt shire roads. The EPC is bisected by the graded, dirt-surfaced Bundi-Ryalls Rd. Taroom Coal lodged MDL application MDL373 over the entire EPC650 area in February 2007. This application is still with the Queensland Department of Mines and Energy. 2. Geology EPC650 is in the Surat Basin and the target sequence is the Juandah Coal Measures, part of the Injune Creek Group. The Juandah coal measures in EPC650 are comprised of 5 main seam groups. The main seam groups are named UG, Y, A, B, BC and C. The alphabetical name series is based primarily on old Brigalow Mines (former tenure holders) nomenclature. The seams are separated by interbedded to massive sandstones, siltstones and mudstones. The non-coal units are only moderately well lithified and tend to be reasonably soft. The coal typically has a vitreous lustre. The coal occurrence in EPC650 is being assessed as an open cut mining development. 3. Current Exploration Since the previous announcement in February 2008, Taroom Coal has completed drilling, sampling and analysis of 118 new holes. Table 1 shows a summary of this drilling. This drilling campaign commenced in March 2008 and was completed July 2008. Two contract drill Rigs were deployed during the programme. Fifty two of the holes were 4” 4C core, drilled for coal quality analysis. The balance of 66 holes were 125mm open holes. Total drilling for core was 2,950m with 3,960m of open hole. This drilling was designed to expand existing measured and indicated resources, ultimately to support a reserve statement over a potential mine area defined in prefeasibility mining studies early in 2008. Holes

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Elimatta Project 6

were drilled to achieve 250 x 250m grid pattern, utilising pre existing holes to supplement the pattern if possible. Down hole geophysical logging has been completed on 100% of the open holes, 2 core holes were unable to be logged due to unfavourable ground conditions. On the cores, ply by ply and stone intervals were tested for raw quality including proximate analysis, total sulphur, specific energy, relative density. Seam composites were formed and float sunk at CF1.55 with product analysis on the CF fraction including proximate analysis, ultimate analysis, specific energy, total sulphur, ash chemistry, ash fusion and hard grove index. A cluster of 4 of the cored holes (C8046-49) were drilled centrally in the tenure and subjected to detailed pre treatment and sizing analysis to add to coal washability study data. Plan 1 EPC650 Elimatta new drilling 2008

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Elimatta Project 7

4. Data & Modelling The new drilling was added to the previous dataset for the Elimatta model. Minescape 4.116 Stratmodel stratigraphic modelling system been used to construct the model. This model has been used to generate volumes for the resource estimate. Coal quality has been composited against seam intervals into Minescape Tables and queried during volume calculation. 4.1 Quality The new coal quality data has been added to the dataset and remodelled. Quality is composited and reported at a common moisture basis of 8% (the average air dried moisture of the samples) with a Preston and Sanders density correction being applied from the as reported data. Three quality sub models are contained within the Elimatta model – Raw, Wash and Product. The raw model values include Ash, CV, FC, SE, moisture, VM, hardgrove and CSN. The Wash sub model includes bore core yield and ash for F1.35 to F1.55 and F2.7 density washes. The product sub model is based on data derived from testing CF1.55 product and contains Ash, VM, FC, TS, SE, hardgrove, ash fusion, ash chemistry and ultimate analysis. Wash plant pre feasibility design, with input from pre-treated and extensively washability tested 4” core (2007 drilling) has been used to generate a wash plant simulation of the Elimatta deposit. A relationship between raw ash and predicted wash plant yield has been derived on a suite of LIMN simulations at 1.60 DMC cut point producing an export thermal coal. This simulated yield is modelled in addition to the bore core mass yield and product ash. In situ density has been estimated using the Secondary Model 1 from Meyers et al, 2004 (ACARP project C10042). In-situ moisture has also been estimated using the in situ moisture model from the same study (ACARP project C10042, Meyers et al, 2004). 5. Extrapolation, Points of Observation Density & Resource Categorisation Measured resources have been estimated using cored coal quality data (minimum prox, density and moisture analysis) with a maximum point of observation spacing of 250m with extrapolation radius of 250m on the quality point plus intervening structural points of observation at 125m radius. A structural point of observation is a borehole fully corrected to its downhole geophysical log. This density of data gives

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Elimatta Project 8

the confidence to report measured resources where the seams split and wedge as is well known in the Surat type coal measures. Indicated resources have been estimated using cored coal quality data (minimum prox, density and moisture analysis) with a maximum point of observation spacing of 500m with extrapolation radius of 500m on the quality point plus intervening structural points of observation at 250m radius Inferred resources have been estimated using cored coal quality data (minimum prox, density and moisture analysis) with a maximum point of observation spacing of 1000m with extrapolation radius of 1000m. These data requirements are conservative but deemed prudent given the nature of the Juandah Coal Measures reported. 6. Restrictions applied to resources Only coal units within seams have been reported as resources. Non-coal units within seams are not included in the resource quantities. Plies less than 100mm thick have not been included in the resource estimate. The EPC boundary is applied as the absolute limit to resource calculations. The upper seams individual seam sub crop and splitting limits restrict their resource areas. Because the UG and Y are close to the surface, the undulatory topography causes many weathering ‘windows’ in these seams and they have complex limit geometry. The C seam resource is limited to an area defined by the 10:1 incremental overburden ratio (bcm waste: coal tonnes) to the C from the B seam floor. Only the C Seam has a ratio limit to resources. Both the variable separation from the B and dispersive character of the C mean a large portion of the C occurrence sits at very high incremental ratio. Application of the 10:1 limit restrains the resource to the area deemed at present to have the greatest mining potential. There is future potential to expand this resource area as C seam data is increased and the relationship to the B is better defined.

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Elimatta Project 9

7. Resources Based on the current work, 129Mt of Measured Resources, 75Mt of Indicated Resources plus 40Mt of Inferred Resources are estimated to occur in EPC650. The following Tables show the break down of these resources. Table 1. Coal Resources within EPC650 September 2008 Horizon Total

Resource Area (ha)

In situ Density (g/cc)

Thickness Range (m)

Measured Tonnage (x 106)

Indicated Tonnage (x 106)

Inferred Tonnage (x 106)

UG 1800 1.47 1.2-2.2 11 20 5 Y 2090 1.43 0.5-2.0 15 15 5 A 2535 1.41 1.0-3.0 55 20 5 B 2550 1.38 1.8-2.9 48 20 10 C 490 1.42 2.5-3.5 0 0 20

Sub total 129 75 45 Grand Total (rounded) 129 75 40

Table 2 shows the total resources by overburden ratio to the B seam. The C seam resource area is additionally limited by a 10:1 incremental ratio cut-off from the base of the B. Table 2. Coal resources within EPC650 by vertical overburden ratio February 2008

Cumulative Tonnes (x 106) Horizon

<3:1 <5:1 <7:1 <10:1 >10:1 UG 0 8 26 33 ~2 Y <1 11 24 34 <1 A 9 41 64 80 <1 B 8 40 60 73 <4 C 0 1 11 20 0 17 101 185 240 ~5

Totals within resource categories have been rounded down reflecting the confidence of the respective resource type. Density is estimated in situ based on bore core quality data inputted to the Secondary Model 1 from Meyers et al, 2004 (ACARP project C10042). The BC seam has density of coal quality and geophysically logged points of observation to support indicated and inferred resources. Due to the thin total coal in the 3 BC plies (BC1, BC2 and BC3) resource total for the BC do not exceed the rounding threshold therefore it reports no tonnage. See Section 8 below for BC tonnages.

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Elimatta Project 10

Category based rounding cuts around 5Mt out of the UG seam resources. This quantity added to the reported tonnage above gives a total quantity only 1Mt different from the February 2008 total. Table 3 shows average coal quality values, by seam, for the measured resources in seams UG-B and for the C seam inferred resource. Raw ash ranges from 18 to 30% adb with high volatile matter (33-39%) refecting the rank of the Jurassic coal present. Taroom Coal previously announced a Vitrinite reflectance R

0max of 0.42 for the Elimatta

deposit. Raw total sulphur is low with a maximum of 0.33% adb. This level remains low even when considered on a sulphur per unit of energy basis. Again, related to rank and coal type, in situ moisture of the coal is estimated at high levels of 13-15%; this level is expected from Surat/Moreton coal of this rank. Resources have been made with densities of in situ coal based on the methodology of Meyers et al, 2004 (ACARP project C10042). Float sink on Taroom’s 4” Elimatta bore core dating back to 2004 show 60-80% mass yield with a low ash product in the 9-11% range. The simulation yield based on the LIMN simulation of the 1.60 cut point DMC plant returns predicted plant yields (including a factor for organic efficiency) of 55-70% assuming a 16% moisture product. The simulation provides a product with 9.6% ash, 26.5 mj/kg (ad) energy (est 24.4 mj/kg gar at 16% mar). The Elimatta coal has a Hardgrove Index of 31-33. Ash fusion temperatures are good with spherical temperatures all >1350ºC. Empirical slagging indices (e.g. 0.8*IT+0.2*HT >1340) show low potential for slagging. Fouling is not anticipated with good ash chemistry base/acid ratios and low Na

20 in ash.

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Elimatta Project 11

Table 3. Coal Quality of September 2008 Resources Quality

UG Seam

Y Seam

A Seam

B Seam

C Seam

Raw Ash % 29.69 25.08 22.8 17.9 25.92SE mj/kg 19.59 21.43 22.1 23.97 21.31VM% 32.77 35.04 36.2 38.64 35.86TS% 0.3 0.33 0.3 0.31 0.29

Raw Quality (8% adm basis)

HGI 41 42 40 38 40Moisture % 14.81 13.89 12.8 13.27 13.2In Situ

estimate RD g/cc 1.47 1.44 1.41 1.37 1.42F1.55 Mass Yield % 76.2 60.1 72.8 73.8 81

Float/Sink

F1.55 Ash% 11.40 9.41 8.82 9.12 9.41

Coal Prep Simulation Yield*

Yield Dry basis [@16% moisture]

65.15 [55]

71.1 [60]

75.9 [64]

80.3 [67]

70.6 [60]

Ash % 9.21 8.01 9.21 8.6 9.39SE mj/kg 26.5 27.35 27.03 27.27 27.26VM% 41.58 42.6 42.35 42.73 42.83VM Daf% 50.24 50.74 51.16 51.24 51.88TS % 0.40 0.35 0.34 0.33 0.35FC % 41.2 41.38 40.4 40.67 39.76

Product Quality (8% adm basis)

HGI 32 31 32 32 33Initial 1352 1348 1380 1344 1344Spherical 1392 1366 1422 1372 1383Hemi 1400 1379 1433 1385 1390

Ash Fusion ºC (reducing) Flow 1462 1444 1467 1433 1444

C 77.25 77.67 77.94 77.95 78.40H 5.92 5.95 6.05 6.06 6.01N 1.14 1.09 1.03 1.15 1.16O 15.21 14.8 14.55 14.42 13.99

Product Ultimate Analysis (Daf)

S 0.48 0.49 0.43 0.42 0.44

* corrected to an assumed product moisture of 16%

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Elimatta Project 12

8. EPC650 Exploration Target Exploration targets outside the current coal resource limits are identified in each of the UG, Y, BC, B and C seams. Table 6 below provides a summary of the Target tonnages. Table 6. Exploration Target1 tonnes EPC650 September 2008 Horizon Area (ha) In situ

Density (g/cc)

Average Coal Thickness (m)

Tonnage Range (x 106)

UG 25 1.47 0.75 0-1 Y 60 1.42 0.75 1-5 BC 430 1.40 0.75 1-5 B 200 1.40 1.25 1-5 C 1400 1.42 1.75 30-40 These targets are continuous with the resource area and it is reasonable to expect similar quality to that of the resources. 1Note that coal quantity and quality within the exploration target areas is conceptual only as there has been insufficient exploration to define any coal resources. It is uncertain whether future exploration in any of these exploration target areas will result in quantification of coal resources. 9. Statement of Compliance The information in this report that relates to Mineral Resources at Elimatta (EPC650) is based on information compiled by Mr Andrew McLaughlin, who is a Member of the Australian Institute of Mining and Metallurgy. Mr McLaughlin is a qualified geologist (B.Sc. (Hons) University of Newcastle, 1994) and is an employee of Northern Energy Corporation.

Mr McLaughlin has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr McLaughlin consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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Elimatta Project 13

Plan 2 – UG Seam resource area

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Elimatta Project 14

Plan 3 – Y Seam resource area

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Elimatta Project 15

Plan 4 – A Seam resource area

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Elimatta Project 16

Plan 5- B Seam resource area

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Elimatta Project 17

Plan 6 – C Seam Resource area

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