REGISTERED & PRINCIPAL OFFICE  SYDNEY OFFICELevel 12   Suite 2, Level 1410 Queen Street  80 Mount StreetBRISBANE, QLD 4000  NORTH SYDNEY, NSW 2060T: 61 7 3041 4400  T: 61 2 9923 1520F: 61 7 3041 4444  F: 61 2 9923 1528

www.bandannaenergy.com.au

 

ABN 34 009 356 665

 17 June 2009   ASX RELEASE   General Manager, The Company Announcements Office Australian Stock Exchange Limited Electronic Lodgement System   Dear Sir,  

Alpha Project – Exploration Target, Northern Area of EPC 1049  Bandanna  Energy  Limited  (Bandanna  –  ASX  Code  BND)  is  pleased  to  provide  the attached Report on  the Exploration Target  for  the Northern Area of EPC 1049. This report  identifies,  in  accordance with  the  JORC  Code,  a  significant  coal  exploration target of 570 Mt to 960 Mt (average 830 Mt) within an area of approximately 100 km2 of EPC 1049 (Refer Figure 3 of Report). This target relates only to the daughter seams of the D1 and D2 seams.  Delineation of this Exploration Target follows, and is in addition to, the release to the ASX on 1 June 2009 of a  JORC compliant Inferred Resource of 982 Mt for the D1 and D2 seams – also identified within EPC 1049 to the east of the Exploration Target area.  EPC  1049  is  one  of  four  tenements  comprising  the  Alpha  Project,  located  in  the eastern Galilee Basin of Queensland. Under  the  terms  a  Farm‐in  and  Joint Venture Agreement with Bandanna, AMCI  can earn up to 50% interest in the Alpha Project by spending  up  to  $25 million  over  three  years.  Bandanna,  through  its wholly  owned subsidiary,  Alpha  Coal  Pty  Ltd,  will  retain  the  remaining  50%  interest.  Further exploration drilling and conceptual development studies will be undertaken during the coming 12 months.   EPC1049  lies  immediately  to  the  south of Waratah Coal Limited’s  tenements, which have been  in  the press recently  following Waratah Coal’s announcement  that  it had entered  into an MOU with China Metallurgical Group Corporation for a  joint venture to develop a US $5.15 billion, 40 million tonnes per annum mine.     

     

The attached Exploration Target Report has been prepared by Gordon Saul*, Principal Geologist of Resolve Geo Pty Ltd.    

Yours faithfully, BANDANNA ENERGY LIMITED      Dr Ray Shaw Managing Director   

Resolve Geo Pty Ltd ABN 39 100 586 534

16 June 2009 Our Reference Number: ALPHA1049/04 Bandanna Energy Ltd Level 12, 410 Queen Street Brisbane QLD 4000 Australia Attention: Ray Shaw Dear Ray, ALPHA EPC 1049 – EXPLORATION TARGET – NORTHERN AREA Please find attached our review of the Exploration Target for the Alpha EPC 1049 project. If you have any questions regarding the review, please contact the undersigned. Yours faithfully Resolve Geo Pty Ltd

Gordon Saul Principal Consultant

P.O. Box 234 Moranbah Qld 4744 Australia Tel +61 7 4941 9537, fax +61 7 54497977 Email gordonsaul@resolve-geo.com

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Resolve Geo Pty Ltd ABN 39 100 586 534

Alpha Coal Northern Target EPC 1049 Project commissioned by Bandanna Gordon Saul BSc (Hons) MAIG Principal Geologist Resolve Geo Pty Ltd

P.O. Box 234 Moranbah Qld 4744 Australia Tel +61 7 4941 9537, fax +61 7 54497977 Email gordonsaul@resolve-geo.com

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Table of Contents

Disclaimer ................................................................................ 2

Introduction .............................................................................. 3

Table 1: Alpha EPC1049 Exploration Target ................................... 3

Methodology ............................................................................. 4

Table 2: Average Seam Thicknesses in Northern Target Area ........... 6

Figure 1: Location map ............................................................... 7

Figure 2: Drill hole locations plan ................................................. 8

Figure 3: Northern Target Estimation Area, EPC 1049 ..................... 9

Figure 4: Cross section, BH39 – BH91, Alpha EPC 1049 ................. 10

Disclaimer

Whilst every effort has been made to ensure the accuracy of this report, Resolve Geo Pty Ltd accepts no liability for any errors or omissions. The opinions expressed in this report have been based on the information supplied to Resolve Geo Pty Ltd, and information available through the Department of Mines and Energy online QDEX system. The estimates presented in this report have been provided in response to a specific request from Bandanna Energy Ltd. Resolve Geo Pty Ltd has exercised all due care in reviewing the data supplied, however, Resolve Geo Pty Ltd does not accept responsibility for any errors or omissions within this report as the accuracy of the results and the conclusions are based on data not derived from Resolve Geo Pty Ltd. Resolve Geo Pty Ltd does not accept any consequential liability arising from commercial decisions or actions resulting from this report. Resolve Geo Pty Ltd has not established or verified the legal ownership of the lease reported on herein. Instead, Resolve Geo has relied upon information provided by Bandanna Energy Ltd. Resolve has prepared this statement on the understanding that the lease herein is in good standing, and the legal status of the lease with respect to Native Title or potential environmental or access restrictions has been fully disclosed by Bandanna Energy Ltd. Resolve Geo is a shareholder of Bandanna Energy Ltd.

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Introduction

Resolve Geo Pty Ltd has been commissioned by Bandanna Energy Ltd to carry out an estimation of the exploration coal target in accordance with the JORC code for the northern portion of the Alpha Project which lies within the exploration permit for coal EPC1049.

Table 1: Alpha EPC1049 Exploration Target

Northern Target Area

Area (Ha) 9969.0

RD g/cc 1.48

Minimum Target Thickness (m) 3.9

Minimum Target Tonnes (mt) 570

Maximum Target Thickness (m) 6.5

Maximum Target Tonnes (mt) 960

Average Target Thickness (m) 5.6

Average Target Tonnes (mt) 830

Abbreviations: RD Relative Density g/cc grams per cubic centimeter Ha Hectare(s) M metre(s) Mt million tonnes The potential coal quantity range of 570 Mt to 960 Mt (average 830 Mt) as presented above is conceptual in nature and there has been insufficient exploration to define a coal resource. It is unknown if further exploration will allow a coal resource determination to be made. The coal quantity is proximate only, though data, including drill hole data from within the lease and seismic data proximal to the target area, points to the presence of coal seams within the estimation area. No fatal flaws to the methology presented here have been identified.

Resolve Geo Pty Ltd and Collective Experience Pty Ltd have previously issued a coal resource statement for EPC 1049 (Resolve Geo/Collective Experience May 2009).

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EPC1049 adjoins EPCs 1048, 1179 and 1180 which collectively form the Alpha Project.

Bandanna Energy Ltd’s wholly owned subsidiary Alpha Coal Pty Ltd has a Joint Venture with AMCI, involving the Alpha Project which covers part of the Permian Galilee Basin. This Report relates to the northern portion of EPC 1049 which is located 166 km west of Emerald, and ca. 2 Km south of the Emerald – Longreach rail line and Capricorn Highway (Figure 1). The lease lies immediately north of EPC 1048, and adjacent to EPCA’s 1179 and 1180, the other constituent tenements forming the Bandanna/AMCI Alpha Project (Figure 1). Regional geology is shown in Figure 1.

Geologically, coal deposits within the Alpha Project lie within the eastern, shallowing flank of the north-south trending Galilee Basin. Bituminous coal seams occur within both the Bandanna Formation and Colinlea Sandstone, subcropping to the east, and dipping gently to the west across the eastern flank of the Galilee Basin. These coals are suitable for use in power generation, coal to liquids applications and as a petrochemical feedstock.

The Upper Permian Bandanna Formation is a direct correlative to the Rangal Coal Measures, situated in the Bowen Basin to the east. Conformably overlain by the Triassic Rewan Formation, the Bandanna Formation contains up to 4 coal seams within the area. The Colinlea Sandstone, a correlative to the Fort Cooper Coal Measures and the Moranbah Coal Measures in the Bowen Basin, contains up to five seams, two of which (D1 and D2 + daughter seams) comprise the principal exploration target presented in this report.

The overlying Rewan Formation, which is generally characterized by an average thickness of 20m of Tertiary unconsolidated sands and clays in the reported resource domain, is absent over much of the eastern portion of EPC1049,. Weathered overlying strata averages 46m in depth.

As mentioned the geological strata dip gently to the west (0.50 – 2.20), and contains ca. 60 km of Bandanna Formation and Colinlea Sandstone subcrop within the ca. 980 Km2 area of EPC1049. The target area contains coals at depths that may be amenable to both underground and open cast mining methods.

Methodology

A detailed and comprehensive literature search was carried out over EPC 1049.

The various data sources include:

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• Petroleum company reports • Coal exploration company reports • Oil shale and torbanite exploration associated with MDL 330 • Department of Minerals and Energy records • Department of Primary Industries - Water Resource records

Additional drilling was completed by various petroleum and coal companies over the lease area resulting in a total number of 15 historical exploration holes, including 2 cored or partly cored holes have been completed within the northern portion of EPC1049.

A single seismic line is found immediately to the north of the tenement, acquired by the Bureau of Mineral Resources in the 1970’s. Strong reflectors in the upper part of the Permian section are almost certainly coincident with coal seams of the Bandanna Formation and the Colinlea Sandstone.

Hole spacing of the historical holes is irregular, with the majority of the core holes and chip holes concentrated in the northern area within EPC 1049. The target estimate presented here identifies a target within this northern area.

Figure 2 shows all holes drilled within the northern area of the lease including that the subject of the exploration target calculation . It is to be noted that whilst there is additional drilling extending the southern boundary of the lease this has not been included in the calculations due to a lack of continuity within coal seam intersections.

Comprising 99.69 Km2 (9969 Ha) Figure 3 shows the coal target estimation area.

On behalf of the Alpha Joint Venture AMCI has recently completed drilling programs entailing 92 chip holes and 58 core holes (including 11 redrills). Raw coal quality data for all of the 58 core holes has been received. Figure 2 shows the locations recent AMCI holes. Only four drill holes occur within the reported target area, however, a further 6 are within 2 kilometers of the target area’s eastern boundary. The four drill holes do not intersect the D seams or daughter seams within the target area, having been drilled to the overlying B Seam. The six holes proximal to the east all intersect the D Seams.

Initial exploration has focused on the D1/D2 Seam extent and subcrop. Due to the paucity of data, and the lack of consistency in seam thickness, the A, B or C Seams have not been included in the target estimates presented here.

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The target estimates presented here comprise the daughter seams of the D1 and D2 Seams and utilizes an average raw coal density derived from core holes within the lease of 1.48 g/cc.

The deposit has been previously structurally modeled using all available data, with the exception of those holes that were excluded due to lack of geophysical logging or replaced with more recent holes. Modeling was completed using Maptek’s “Vulcan” software, and Mapinfo “Encom Discover”. The target area comprises that northern portion of EPC 1049, outside of the inferred resource area previously reported, and north of grid line 370,000N where seam splitting may preclude a viable resource (Figure 3). The area of this target has been determined by reconciling the digital string data within Mapinfo.

A 0.5m coal thickness limit has been applied, where seams are less than 0.5m in thickness they have not been not included in cumulative coal thicknesses. Average coal thicknesses projected from proximal holes to the east of the target area have been calculated off high resolution down hole geophysical logs, reported as 1 cm data, and allow the calculation of an indicative average thickness. The cumulative coal thickness utilized in this estimate have been averaged across the target area, from data points proximal to the target area, within EPC 1049.

Table 2: Average Seam Thicknesses in Northern Target Area

Seam Code

Seam Name Average

Thickness (m)

A A Seam 0.70 B1 B 1 Seam 0.80 B2 B 2 Seam 0.50

D1L D 1 Lower

Seam 1.6

D1U D 1 Upper

Seam 0.7

D1L1 D 1 Lower 1

Seam 1.70

D1L2 D 1 Lower 2

Seam 1.30

D2U D 2 Upper

Seam 0.3

D2M D 2 Middle

Seam 1.70

D2L D 2 Lower

Seam 0.50

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Figure 1: Location map

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Figure 2: Drill hole locations plan

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Figure 3: Northern Target Estimation Area, EPC 1049

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BH08C

BH95C

7370000

440000 445000 450000

BH50

BH48 BH49

s

Figure 4: Cross section, BH39 – BH91, Alpha EPC 1049

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Signed Date: 16th June, 2009 Gordon Saul JORC Statement The information compiled in this report and the accompanying cover letter dated on or about 16 June 2009 relating to exploration targets is based on information compiled by Gordon Saul. Gordon Saul is a member of the Australian Institute of Geoscientists and who is employed by Resolve Geo Pty Ltd. Gordon has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity 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”. Gordon Saul consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.