LINC ENERGY BEGINS GTL COMMISSIONING...

ABN: 60 076 157 045 ACN: 076 157 045

Smellie & Co Building 32 Edward Street (GPO Box 1315)

BRISBANE QLD 4001 Telephone: (07) 3229 0800 Facsimile: (07) 3229 6800

Quarterly Report

June 2009

Quarterly Report | June 2009 Linc Energy Ltd | ABN: 60 076 157 045

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Corporate Details

Quarterly Report For the period ended 30 June 2009

DIRECTORS:

Brian Johnson – Chairman (Non‐Executive) Peter Bond – Managing Director Ken Dark – Director (Non‐Executive)

SECRETARY:

Craig Ricato

MANAGEMENT TEAM:

Peter Bond – Managing Director Matthew Buchanan – Manager, Environmental Affairs Nick Cox – Drilling & Exploration Manager Stephen Dumble – Chief Operating Officer Kim Franks – Human Resources Manager Mariano Minotti – Project Manager, Linc Carbon Solutions Justyn Peters – General Manager, Government and Business Development Craig Ricato – Company Secretary and General Counsel Don Schofield – General Manager, New Projects David Smith – Commercial Manager Rob Stratford – Chief Financial Officer Kobus Terblanche – General Manager, Gas to Liquids Janelle van de Velde – Manager Investor Relations & Corporate Communications

REGISTERED & PRINCIPAL OFFICE: POSTAL ADDRESS:

Smellie & Co Building GPO Box 1315 32 Edward Street BRISBANE QLD 4001 BRISBANE QLD 4000


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SHARE REGISTRY:

Link Market Services Level 12 300 Queen Street BRISBANE QLD 4000

AUDITORS:

KPMG Riparian Plaza Level 16, 71 Eagle Street Brisbane QLD 4000


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Contents Corporate activities................................................................................................................................ 5

Acquisition of USA coal tenements ................................................................................................... 5

Appointment of UBS Investment Bank for the divestment of coal assets – Emerald, Galilee and Pentland............................................................................................................................................. 5

Appointment of Chief Financial Officer ............................................................................................. 6

Commencement of Stage 1 of the UCG Project in Vietnam.............................................................. 6

Coal to Liquids Demonstration Plant Official Opening ...................................................................... 6

Exploration activities.............................................................................................................................. 7

Queensland........................................................................................................................................ 7

Emerald update............................................................................................................................. 7

Galilee update ............................................................................................................................... 7

Pentland update............................................................................................................................ 8

South Australia .................................................................................................................................. 8

Arckaringa Basin update ............................................................................................................... 8

Walloway Basin update................................................................................................................. 8

Operational activities ............................................................................................................................. 8

GTL update – Chinchilla Demonstration Facility................................................................................ 8

Tenure management ......................................................................................................................... 9


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Corporate activities

Acquisition of USA coal tenements Over the past quarter, Linc Energy signed a purchase agreement with Wyoming‐based GasTech Inc to acquire 92,059 acres of Powder River Basin coal tenements. Based on existing drilling data the tenements are expected to have a total coal deposit exploration target range of 7 to 8 billion metric tonnes (non‐JORC Code standard). Entry into the Powder River Basin is an important step for Linc Energy’s international expansion program. The Powder River Basin currently represents over 45 per cent of surface mine production in the United States.

The coal tenements acquired by Linc Energy contain multiple sub‐bituminous seams, ranging from 6 to 15 metres thick and at depths in excess of 150 metres making them excellent targets for Underground Coal Gasification (UCG).

Linc Energy agreed to pay US$5 million for the purchase of the GasTech Inc coal tenements. This purchase agreement is the first stage of the GasTech Inc acquisition, following the Letter of Intent between GasTech and Linc Energy dated 3 December 2008. The remaining tenements to be purchased are subject to further transaction pending pre‐emptive rights held by a major petroleum company.

A UCG pilot program to produce synthesis gas is scheduled for completion 24 months from the completed acquisition.

Appointment of UBS Investment Bank for the divestment of coal assets – Emerald, Galilee and Pentland On 24th June 2009, Linc Energy appointed global investment bank UBS to manage and advise on the strategic divestment of Linc Energy’s non‐core coal assets, known as high potential coal mining areas Emerald (Teresa), Galilee and Pentland, with a total area in excess of 650km2 and containing significant coking and thermal coal deposits.

Although negotiations with the Chinese coal group Yanzhou Coal had been ongoing, continued exclusive discussion were assessed as no longer in the best interests of Linc Energy.

With interest from potential bidders and increasing overall confidence in the coal sector improving significantly, Linc Energy entered into a competitive sales process to deliver shareholder value. The appointment of UBS to manage this divestment process will not delay or impact Linc Energy’s UCG to GTL domestic or international commercialisation process.


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Commencement of Stage 1 of the UCG Project in Vietnam The company announced the successful completion of negotiations with its project partners, Marubeni Corporation, the Vietnam National Coal – Mineral Industries Group (VINACOMIN) and Song Hong Energy of the Civil Works Contract and Works Contract to undertake Stage 1 of the UCG Tonkin project in the Red River Delta region of Vietnam. The main aim of this project is to deliver power to over six million households in Vietnam using the Company’s UCG technology. Stage 1 of the project will involve the development and operation of a trial UCG field in the Red River Delta region over the next 12 months.

The project is now underway with the main focus being on finalising investment licence applications and engineering.

Coal to Liquids Demonstration Plant Official Opening Linc Energy officially opened its Chinchilla Demonstration Facility on Wednesday, 22nd April with strong support from international project partners and Government representatives. The official opening of the Company’s Demonstration Facility followed the day after the signing of the agreements to commence Stage 1 of the Red River Delta UCG Project in Vietnam as outlined above.

Appointment of Chief Financial Officer Mr Rob Stratford was appointed to the role of Chief Financial Officer on 20th April 2009. Prior to joining Linc Energy, Mr Stratford was Alinta/AGL’s Chief Financial Officer where he was responsible for the financial operations of that business which had a current annual turnover of approximately $1.5 billion.

Appointment of UCG General Manager Mr Daryl Rattai was appointed to the role of General Manager, Underground Coal Gasification Division shortly after the end of the quarter on 14 July 2009. Mr Rattai commences with the Company on Monday 3 August 2009. Prior to joining Linc Energy, Mr Rattai was Vice President Operations at SunOcean Energy Limited. Mr Rattai holds a Bachelor of Science in Petroleum Engineering as well as a Petroleum Technology Diploma and is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta. He has over 20 years experience across a range of companies in the oil and gas industries throughout Canada, USA, Australia and other locations. His experience includes the management of capital projects and production operations producing natural gas, light oil and associated liquids rich gas from wells ranging in depth from 400 to 3,500 metres.


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Exploration activities

Queensland

Emerald Coal quality analysis relating to previous drilling activity within the Emerald tenements was finalised in the previous quarter. Data processing work has continued along with the validation of all necessary information to facilitate the ongoing sale process.

Biloela Following completion of a 4 chip hole drilling program surrounding Departmental Stratigraphic Hole GSQ Monto 5, analysis and review of data has been completed during the quarter. Whilst the drilling did encounter several coal intersections, they were found to be of insufficient thickness and continuity to be considered suitable for the UCG process. As such a Basin wide review is being conducted to appraise the area for other potentially suitable drilling targets.

Dalby Following the conclusion of drilling within the company’s Dalby tenements during the previous quarter, Xenith Consulting Pty Ltd were commissioned to produce a coal resource estimate for Linc Energy. The report identified a 146Mt Inferred coal resource* in accordance with the JORC code. This report has been lodged with the Department of Mines & Energy as part of the Linc Energy application for Mineral Development Licence Application (MDL371a). The relevant JORC report is attached to this update.

Galilee The company announced that it had commenced exploration and appraisal drilling on its Galilee Basin tenement area on 12th June 2009. Linc Energy has a total coal mineralization exploration target1 in accordance with the JORC Code of 3.0 ‐ 3.4 billion tonnes* within its Galilee basin tenement area. Of this total, the Company has an open cut coal mineralization exploration target1 in accordance with the JORC Code of 1.6 ‐ 1.9 billion tonnes* with an initial cut off depth of 120 metres. The Company's extensive drilling program within the tenement area is ongoing and is continuing to progress extremely well.

1 In accordance with the requirements of clause 18 of the JORC Code regarding exploration, the following compulsory statement

concerning exploration targets is included: "[T]he potential quantity and [quality] is conceptual in nature, that there has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will result in the determination of a Mineral Resource."


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Pentland Linc Energy is the holder of EPC 526 and applicant for MDL 361a, covering an area of approximately 27km2, 13km South‐West of Pentland, in the Galilee Basin. The application is progressing well and Linc Energy will shortly lodge the relevant Native Title Public Notices via the Department of Mines & Energy, in accordance with the Native Title Act 1993.

South Australia

Arckaringa Basin During the quarter, following confirmation of drilling locations, Linc Energy has conducted Landowner Notifications, Cultural Heritage Clearances and Environmental Approvals relating to drilling within its seven Arckaringa Basin Petroleum Exploration Licences (PELs). Final documentation and notices have been lodged with Primary Industries and Resources (PIRSA), in order to facilitate commencement of drilling activities over the coming months. A total of 9 exploration holes are planned for Linc Energy’s Arckaringa Basin Petroleum Licences, which will initially focus on the potential for UCG. The evaluation process will require extensive testing and gathering of relevant geological data including coal characteristics, geotechnical and hydrogeological information.

Walloway Basin Linc Energy intends to commence field exploration in the Walloway Basin where it holds EL 4148 and PEL 120 tenements. Relevant clearances and documentation have recently been completed and lodged in preparation for field work. Six drill holes are currently planned, which will allow a geological assessment of the Tertiary age Walloway Basin sediments in the vicinity of Orroroo. The lateral extent of a previously noted coal occurrence will be investigated and the area’s geological characteristics assessed, in order to evaluate its suitability for Linc Energy’s UCG process.

Operational activities

GTL update – Chinchilla Demonstration Facility Progress at the Chinchilla Demonstration Facility has been excellent over the past quarter. The plant has been able to demonstrate expected levels of operational reliability with high quality hydrocarbon liquids and wax products produced from UCG synthesis gas (syngas).

Four production campaigns (February, March, April and May) have been undertaken year to date. A successful May campaign resulted in the production of high quality synthetic hydrocarbon products over a 150 hour period of continuous operation.


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Importantly, the plant has also demonstrated that it can effectively clean UCG synthesis gas to the high levels of purity required for Fischer Tropsch (FT) synthesis. The quality parameters include sulphur concentrations that are consistently below 50 parts per billion. Gas quality is validated by reliable on‐line sulphur and oxygen analysis, the latter confirming effective control over residual oxygen levels down to parts per million levels.

Fischer‐Tropsch catalyst reduction has also been enhanced over the quarter, resulting in increased carbon monoxide (CO) and hydrogen (H2) conversions.

The facility’s onsite research laboratory has provided significant assistance in the development of Linc Energy’s UCG to GTL technologies. Laboratory scale FT reactors, running on real time with identical gas to the main reactor, confirm excellent CO and H2 conversions over extended periods. The laboratory conversions are very encouraging and provide an indication that further CO and H2 conversion improvements will be made with further catalyst activity enhancement.

Increased catalyst activity will be achieved through work currently in progress to further improve the catalyst reduction process and to improve reactor temperature management.

Tenure Management Queensland Within Queensland, Linc Energy currently holds 17 tenements under Exploration Permits for Coal (EPC's), with a further 12 under application (EPCa). The Company also holds 1 Mineral Development Licence (MDL) with a further 4 under application (MDLa), 4 Mining Lease Applications (MLa) and 4 Petroleum Lease Applications (PLa). Granted EPCs and those areas under EPC application, combine to a total of 2897 sub‐blocks, covering an area of approximately 9850 square kilometres. Total area covered under granted Mineral Development Licences (MDL) and applications (MDLa) is 693 sq km. Total area covered under Mining Lease Application (MLa) is 205 sq km and total area covered by Petroleum Lease Applications (PLa) is 205 sq km. Details of Linc Energy Queensland tenements are contained in Table 1, below.

Actions during this quarter:

• EPC 526 Pentland: Yearly rent paid, annual report lodged

• EPC 909 Jambin: Relinquishment of 37 sub‐blocks, yearly rent paid, annual and partial relinquishment reports lodged

• EPC 938 Tipton South: Relinquishment of 13 sub‐blocks, yearly rent paid, annual and partial relinquishment reports lodged


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• EPC 1770a Tipton: Application lodged with DME on 5th June 2009, covering an area of 111 sub‐blocks. Application underlies Linc MDL371a.

Table 1: Linc Energy Queensland Tenements and Applications at 30th June 2009

Tenement Name Tenement # Location Sub-blocks Area (sq

km) Queensland:

Rathdowney EPC 910 40km S Ipswich - Clarence Moreton Basin 81 275 Wowam EPC 908 40km N Biloela - Biloela Basin 153 520 Pentland EPC 526 220km SW Townsville - Galilee Basin 12 41 Jambin EPC 909 25km N Biloela - Biloela/Callide Basins 148 503 Tipton Sth EPC 938 60km SW Dalby - Surat Basin 51 173 Teresa/Lucknow EPC 1226 30km N Emerald - SW Bowen Basin 58 197 Biloela EPC1248 40km N Biloela - Biloela Basin 112 381 Wilkie EPC 897 40km SE Chinchilla - Surat Basin 50 170 Wilkie EPC 898 30km SE Chinchilla - Surat Basin 62 211 Wilkie EPC 899 20km NW Dalby - Surat Basin 59 201 Teresa EPC 980 20km N Emerald - SW Bowen Basin 37 126 Chinchilla West EPC 1046 20km S Chinchilla - Surat Basin 25 85 Tipton 2 EPC 902 30km S Dalby - Surat Basin 64 218 Teresa North EPC 1267 20km N Emerald - SW Bowen Basin 10 34 Wowam West EPC 1323 20km NW Wowam - Biloela Basin 48 163 Chinchilla EPC1247 15km SW Chinchilla - Surat Basin 8 27 Chinchilla EPC 635 15km S Chinchilla - Surat Basin 32 109 Gallilee South EPCa 1227 60km W Clermont - Galilee Basin 148 503 Gallilee North EPCa 1228 75km NW Clermont - Galilee Basin 299 1017 Dingo EPCa 1536 15km NW Biloela - Biloela/Callide Basins 46 156 Dunmore EPCa 1537 50km SW Dalby - Surat Basin 36 122 Cloncurry Nth EPCa 1525 120km NW Hughenden - Eromanga Basin 150 510 Cloncurry Sth EPCa 1526 85km NW Hughenden - Galilee/Eromanga Basins 243 826 Cloncurry Central EPCa 1527 100km NW Hughenden - Eromaga Basin 162 551 Saxby EPCa 1549 150km NW Hughenden - Eromanga Basin 300 1020 Lily Pond EPCa 1550 130km NE Cloncurry - Eromanga Basin 300 1020 Teresa South EPCa 1683 10km N Emerald - SW Bowen Basin 10 34 Galilee EPCa 1690 140km NW Clermont - Galilee Basin 82 279 Tipton EPCa 1770 30km SW Dalby - Surat Basin 111 377 TOTAL: 2,897 9850 Chinchilla MDL 309 15km S Chinchilla - Surat Basin 2 Tipton MDLa 371 30km SW Dalby - Surat Basin 293 Galilee MDLa 372 140km NW Clermont - Galilee Basin 261 Pentland MDLa 361 220km SW Townsville- Galilee Basin 27 Chinchilla Extended MDLa 407 15km S Chinchilla - Surat Basin 110 TOTAL: 693 Hopeland 1 MLa 50242 15km S Chinchilla - Surat Basin 82 Hopeland 2 MLa 50243 20km S Chinchilla - Surat Basin 8 Hopeland 3 MLa 50244 25km S Chinchilla - Surat Basin 11 Lucknow MLa 70405 30km N Emerald - SW Bowen Basin 104 TOTAL: 205 Hopeland 1 PLa 283 15km S Chinchilla - Surat Basin 82 Hopeland 2 PLa 284 20km S Chinchilla - Surat Basin 8 Hopeland 3 PLa 285 25km S Chinchilla - Surat Basin 11 Lucknow PLa 286 30km N Emerald - SW Bowen Basin 104 TOTAL: 205 Note: Some tenures/applications may overlap in part or full. 1 sub-block = approximately 3.4 sq km


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Tenure Management South Australia Within South Australia, Linc Energy currently holds 8 Petroleum Exploration Licences (PELs) & 5 current Exploration Licences (ELs). Total area held under PELs is 74,027 square kilometres and total area held under ELs is 2495 square kilometres. Details of Linc Energy South Australian tenements are contained in Table 2, below.

Actions during this quarter:

• EL 4147 Inkerman: Surrender of tenure, final annual report and surrender report lodged

• EL 4272 Cadaree Hill: Tenement granted on 24th June 2009

• EL 4273 Mount Andrews: Tenement granted on 25th June 2009

Table 2: Linc Energy South Australian Tenements at 30th June 2009

Tenement Name Tenement # Location Area (sq km)

South Australia

PEL117 Arckaringa Basin 9515



PEL120 Begins N Adelaide, extends N 257km ~50km W Port Augusta - St Vincent/Walloway Basins 9601





TOTAL: 74027

Arckaringa EL 3325 130 NE Coober Pedy - Arckaringa Basin 185

Williams Bore EL 3326 90 NE Coober Pedy - Arckaringa Basin 304

Walloway EL 4148 90km SE Port Augusta - Walloway Basin 173

Cadaree Hill EL 4272 80km NE Coober Pedy 885

Mt Andrews EL 4273 70km SW Oodnadatta 948

TOTAL: 2495

Note: Some tenures may overlap in part.


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Peter Bond Chief Executive Officer

Information for Media: Mr Peter Bond Chief Executive Officer Phone: +61 7 3229 0800 E‐mail: [email protected]

ASX Contact: Mr Craig Ricato Company Secretary Phone: +61 7 3229 0800 E‐mail: [email protected]

Information for Investors: Ms Janelle van de Velde Manager, Investor Relations & Corporate Communications Phone: +61 7 3229 0800 E‐mail: [email protected]

* Competent Person’s Statement ‐ The information in this announcement relating to resources is based on information compiled by Troy Turner, who is a member of the Australian Institute of Mining and Metallurgy and who is employed by Xenith Consulting Pty Ltd. Troy Turner has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a competent person as defined in the 2004 Edition of the “Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves”. Troy Turner consents to the inclusion in the announcement of the matters based on their information in the form and context in which it appears.

mailto:[email protected]�




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Company Profile

Linc Energy is an innovative, forward‐thinking company developing a significant energy business based on the production of cleaner energy solutions.

Linc Energy has successfully combined two known technologies and demonstrated its vision of being a leading supplier of a new source of clean liquid transport fuels for the future.

The technologies are Underground Coal Gasification (UCG) and Gas to Liquids (GTL). UCG technology provides access to coal, deep underground and by in‐situ gasification produces a high quality synthesis gas (syngas) containing carbon (CO) and hydrogen (H2). Aboveground, in the GTL process, syngas is processed via Fischer‐Tropsch technology to produce high quality, sulphur free synthetic hydrocarbons.

Linc Energy plans to combine its UCG and GTL technologies commercially at sites in Australia and around the globe as it realises its vision of becoming the world’s leader in providing clean synthetic diesel and jet fuels from stranded coal resources.

UCG produced syngas can also be used as a feedstock to generate gas turbine combined cycle power, resulting in reduced greenhouse gas emissions.

With significant coal deposits suitable for UCG technology, Linc Energy can provide alternative sources of liquid fuels and power generation well into the foreseeable future.

Linc Energy represents a new future for liquid fuels production and high efficiency energy generation.

Linc Energy Ltd

Dalby Project Resource Statement Executive Summary

MAY 2009

Document Issue Approval

Project & Document No: Date:

Linc Energy Ltd 20/5/09

Title: Revision No:

Dalby Project - Resource Statement Executive Summary 1

Client:

Linc Energy Ltd

Name Position Signature Date

Prepared by: Troy Turner Mining Consultant 20/5/09

Reviewed by: John Thrift Mining Consultant 20/5/09

Approved by: Ken Hill Managing Director 20/5/09

Distribution

Organisation Attention No of hard copies No of electronic

copies Actioned1

Linc Energy Ltd Nick Cox 1 1

1 – To be initialed and dated by the person who actions the issue of the documents.

Linc Energy Dalby Project

Xenith Consulting Pty Ltd / May 2009 i

Table of Contents 1. Executive Summary ............................................................................................................ 1 2. Jorc Statement .................................................................................................................... 4


Xenith Consulting Pty Ltd / May 2009 ii

LIST OF TABLES

Table 1.1 – Dalby Project JORC Estimate Summary...................................................................... 5

LIST OF FIGURES

Figure 1.1 - Dalby Tenement Location ............................................................................................ 6 Figure 1.2 - MAU Seam Resource Area.......................................................................................... 7 Figure 1.3 - MAU Seam Thickness Contour.................................................................................... 8 Figure 1.4 - MAU Seam Overburden Thickness Contour............................................................... 9


Xenith Consulting Pty Ltd/May 2009 Page 1

1. EXECUTIVE SUMMARY

Xenith Consulting Pty Ltd has been commissioned by Linc Energy Ltd to report an initial JORC compliant coal resource estimate for the Dalby coal project, which is located within MDLa 371.

This report summarises the methodology and results of the coal resource estimate, as at 20th May 2009, and incorporates all exploration undertaken up to 31st December 2008.

The Linc Energy Ltd permits cover approximately 1,700 Sq.Km in total of the Jurassic age coal bearing Surat and Moreton basins. The Surat basin extends from the Moreton Basin east of the Kumbarilla ridge, to Roma in the west and as far north as Taroom.

The Linc Energy Dalby and surrounding tenement areas are shown in Figure 1.1 MDLa 371 is located approximately 20 kilometres south west of the Dalby township, on the Moonie highway.

The Dalby area lies within the Moreton basin, which is continuous with the Surat basin across the Kumbarilla ridge, which is interpreted to be located just to the west of the lease area. The stratigraphic units in the Dalby area are found within the Walloon coal measures which are equivalent to the coal units in the company’s Chinchilla deposit, being the upper portion of the Middle Jurassic Juandah Coal Measures. Some poorly sorted Cainozoic sediments overly the Jurassic strata on the floodplain areas of the Condamine River and Wilkie Creek.

The Walloon coal measures are interpreted to subcrop to the north east of the permit area, with the main coal seams within the drilled out area of the MDLa occurring at depths of between 100 and 210 metres. The seams dip towards the west at < 2 degrees. Within the Dalby area the coal seams have been identified by previous exploration by Marathon Petroleum Australia which held the area during the early 1980’s. The coal seams are interpreted as being the Kogan seam, the main Macalister seam and its splits, as well as the underlying Wambo seam.

The coal seams which have been targeted during the previous and current exploration in the Dalby area have been named into 4 major seams, in descending order Kogan (KOG), Macalister Upper (MAU), Macalister Middle (MAM) and the Macalister Lower (MAL). The KOG seam has an average thickness of 2.20 metres, the MAU seam an average of 6.10 metres, the MAM seam an average of 3.20 metres, and the MAL seam an average of 1.20 metres.

10 exploration drillholes were drilled by Linc Energy at the Dalby project area during October and November 2008. These holes are now included in the geological model with a total of nine (9) historical holes, which were sourced from



open file reports. Of the total 19 holes in the model, 10 holes are HMLC or HQ size partially cored drillholes with remaining 9 holes being rotary open holes.

All of the 19 holes have been geophysically logged. Nine of the ten core holes have intersected the MAU seam which is considered the primary coal resource target seam. Two core holes have intersected the KOG seam, two have intersected the MAM seam and one has intersected the MAL seam.

Drill hole spacing varies across the deposit depending on the location of the historical holes, however the holes drilled by Linc Energy are generally at less than 1000 metres between holes.

All of the recently drilled core holes have been ply sampled and analysed for proximate analysis, specific energy and relative density. The historical data used consists of inherent moisture, ash and relative density values. The Preston Sanders formula has been applied to the relative densities to convert them to an insitu basis.

Xenith Consulting Pty Ltd has created the Dalby geological and coal quality models in the Mincom “Minescape” software package. The model was created in May 2009, and is based on all relevant drillholes as discussed previously. The exploration drillhole data has been audited and correlated by geophysical logs.

A 1.50 metre seam thickness limit has been applied to the model to determine which seams can be included in the resource. Any areas where the coal seams are less than 1.50 metre in thickness have not been included. A maximum in seam parting thickness of 0.5 metres has been used in the geological model, with any stone bands greater than 0.5 metre excluded from the resource. A maximum ash limit has also been applied, with any seams greater than a raw ash of 50 %adb excluded from the resource. All seams are truncated at the Base of Weathering surface as the upper limit, which ranges in depth from 35 to 70 metres.

Drill holes which were classified as valid points of observation for determining resource status can be summarised as follows –

1. The entire seam was cored.

2. Core recovery for the particular seam was greater than 95%.

3. The holes were geophysically logged, and

4. Ash and relative density analysis as a minimum was completed.

Resource polygons were then drawn around the observation points based on the categories, and then resources were calculated from the geological model.

The coal resources are stated as measured status where points of observation were no more than 500 metres apart. Measured resources were extrapolated a maximum of 250 metres beyond a point of observation. A minimum of three adjacent points of observation were required to define any measured resources.



The zones of influence around each point were based on 250 metre radii and these zones had to touch or overlap to be included.

The coal resources are stated as indicated status where points of observation were no more than 1000 metres apart. Indicated resources were extrapolated a maximum of 500 metres beyond a point of observation. A minimum of three adjacent points of observation were required to define any indicated resources.

The coal resources stated as inferred status where points of observation were no more than 2000 metres apart. Inferred resources are only extrapolated at a maximum of 1000 metres beyond a point of observation to achieve sufficient confidence based on our experience in Walloon Coal Measures deposits and operations, which indicate that the depositional environment can show rapid lateral changes and variation in thickness.

The only seam that has been included in the resource estimate is the MAU seam. The other seams do not have sufficient distances between points of observation to be classified at this time. The MAU seam resource category area is shown in Figure 1.2.

All coal quality data has been modeled on an air dried basis. Relative density and tonnages have been converted to an insitu basis, using the Preston Sanders formula. The total moisture value used for this conversion was 12.4%.

The raw ash of the MAU seam averages 30.8 %adb across the deposit. The volatile matter averages 32.3 %adb, and the specific energy averages 19.1 Mj/Kg adb.

The Dalby deposit is estimated to contain a total coal resource of 146 Million tonnes, in accordance with the JORC code and guidelines.

All of the resource is in the Inferred category, and contained in the MAU seam.

The MAU seam thickness is shown in Figure 1.3.

The overburden thickness of the MAU seam is shown in Figure 1.4.



2. JORC STATEMENT

The information in this report relating to coal resources is based on information compiled by Mr Troy Turner who is a member of the Australasian Institute of Mining and Metallurgy and is a full time employee of Xenith Consulting Pty Ltd.

Mr Turner is a qualified geologist and 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 Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.”

Mr Turner consents to the inclusion in the report of the matters based on the information, in the form and context in which it appears.

Troy Turner

M AusIMM

227689.



Table 1.1 – Dalby Project JORC Estimate Summary

SEAM

Av. Coal

Thickness (m)

Coal Volume

Cu.m (x 106) Coal Area (Ha)

Coal Mass Tonnes

Insitu (x 106)

Coal RD

Insitu

Raw Ash

(%ad)

Inherent

Moisture

(%ad)

Volatile

Matter

(%ad)

Specific

Energy

Mj/Kg (ad)

Ma Upper SeamMeasured - - - - - - - - -

Indicated - - - - - - - - -

Inferred 6.13 98.2 1,601 146 1.49 30.8 7.6 32.3 19.1

Sub Total 98 146

Summaries

Total Measured - -

Total Indicated - -

Total Inferred 98 146

TOTAL (All Seams) 98 146



Figure 1.1 - Dalby Tenement Location



Figure 1.2 - MAU Seam Resource Area



Figure 1.3 - MAU Seam Thickness Contour



Figure 1.4 - MAU Seam Overburden Thickness Contour

Appendix 5B Mining exploration entity quarterly report

+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 1

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

Linc Energy Ltd

ABN Quarter ended (“current quarter”)

60 076 157 045 30 June 2009

Consolidated statement of cash flows

Cash flows related to operating activities

Current quarter $A’000

Year to date (12 months) $A’000

1.1 Receipts from product sales and related debtors

9 206

1.2 Payments for (a) exploration and evaluation

(b) development (c) production (d) administration

(2,667)

(2,889) -

(2,532)

(11,326)

(30,108) -

(8,479)1.3 Dividends received - -1.4 Interest and other items of a similar nature

received 24 1,879

1.5 Interest and other costs of finance paid (70) (2,160)1.6 Income taxes paid - -1.7 Other (provide details if material) - -

Net Operating Cash Flows (8,125) (49,988)

Cash flows related to investing activities

1.8 Payment for purchases of: (a)prospects (b)equity investments (c) other fixed assets

- -

(83)

- (86,822)

(1,735)

1.9 Proceeds from sale of: (a)prospects (b)equity investments (c)other fixed assets

- -

20

- -

22

1.10 Loans to other entities - -1.11 Loans repaid by other entities - -1.12 Other (provide details if material) - -

Net investing cash flows

(63)

(88,535)1.13 Total operating and investing cash flows

(carried forward)

(8,188)

(138,523)


+ See chapter 19 for defined terms. Appendix 5B Page 2 30/9/2001

1.13 Total operating and investing cash flows

(brought forward)

(8,188)

(138,523)

Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1,121 121,8941.15 Proceeds from sale of forfeited shares - -1.16 Proceeds from borrowings 9,000 22,0001.17 Repayment of borrowings (112) (419)1.18 Dividends paid - -1.19 Other (costs of share issue) - (3,679) Net financing cash flows 10,009 139,796

Net increase (decrease) in cash held

1,821 1,273

1.20 Cash at beginning of quarter/year to date 2,751 3,2991.21 Exchange rate adjustments to item 1.20

1.22 Cash at end of quarter 4,572 4,572

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

Current quarter $A'000

1.23

Aggregate amount of payments to the parties included in item 1.2

86

1.24

Aggregate amount of loans to the parties included in item 1.10

-

1.25

Explanation necessary for an understanding of the transactions

Executive Directors Salary 63 Non Executive Directors Fees 23

Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated

assets and liabilities but did not involve cash flows

NIL

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the

reporting entity has an interest

NIL



Financing facilities available Add notes as necessary for an understanding of the position.

Amount available $A’000

Amount used $A’000

3.1 Loan facilities

40,800 26,410

3.2 Credit standby arrangements

1,500 793

Estimated cash outflows for next quarter

$A’000 4.1 Exploration and evaluation

1,786

4.2 Development

5,200

Total

6,986

Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

Current quarter $A’000

Previous quarter $A’000

5.1 Cash on hand and at bank 3,024 575

5.2 Deposits at call 1,549 2,176

5.3 Bank overdraft - -

5.4 Other (provide details) - -

Total: cash at end of quarter (item 1.22) 4,572 2,751

Changes in interests in mining tenements Tenement

reference Nature of interest (note (2))

Interest at beginning of quarter

Interest at end of quarter

6.1 Interests in mining tenements relinquished, reduced or lapsed

EPC 909 EPC 938 EL 4147 PEL 124

REL 37 sub-blocks REL 13-sub-blocks SUR tenure SUSP Licence 12 mths

100 100 100 100

100 100 0 100

6.2 Interests in mining tenements acquired or increased

EL 4272 EL 4273

ACQ Tenure ACQ Tenure

0 0

100 100



Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates.

Total number Number quoted Issue price per security (see note 3) (cents)

Amount paid up per security (see note 3) (cents)

7.1 Preference +securities (description)

7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions

7.3 +Ordinary securities

417,823,415

417,823,415

7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs

3,384,543

3,384,543

7.5 +Convertible debt securities (description)

13 Nil

7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted

(a) 9 convertible notes issued

(b) 3 convertible notes converted

Nil

7.7 Options (description and conversion factor)

36,635,999

Nil

10,107,999 @ $0.25 Options issued under the Employee Option Plan

Exercise price $0.25

Expiry date One third on 31.12.2009 One third on 31.12.2010 One third on 31.12.2011






381,456 @ $0.66 Non-Employee Options


Expiry date 30.06.2010




366,666 @ $0.75 Options issued under the Employee Option Plan








745,000 @

$0.79 Options issued under the Employee Option Plan






3,000,000 @ $2.90 Non-Employee Options


Expiry date 25/06/2012

2,000,000 @ $0.25 Non-Employee Options



2,483,348 Options vesting 31/12/09, issued under the Employee Option Plan

Exercise price Ranging from $0.59 to $3.16



Exercise Price Ranging from $0.59 to $3.16






+ See chapter 19 for defined terms.

935,331 Options vesting 31/12/12, issued under the Employee Option Plan



7.8 Issued during quarter

10,803,000 Nil

7.9 Exercised during quarter

1,491,500 Nil

7.10 Expired during quarter

0 Nil

7.11 Debentures (totals only)

7.12 Unsecured notes (totals only)

Compliance statement 1 This statement has been prepared under accounting policies which comply with

accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

2 This statement does give a true and fair view of the matters disclosed.

30/9/2001 Appendix 5B Page 7

Sign here: Date: 27 July 2009 (Company Secretary)

Print name: Craig Ricato Notes 1 The quarterly report provides a basis for informing the market how the entity’s

activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in

mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not required in

items 7.1 and 7.3 for fully paid securities.



4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive

Industries and AASB 1026: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of International

Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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