During the June 2012 quarter, the Company s overall JORC Resources increased by 28% to 498.5Mt.

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1 QUARTERLY REPORT ASX Release 31 July 2012 Quarter Ending 30 June 2012 QUARTER HIGHLIGHTS Overall JORC Resources increased 28% to 498.5Mt; 13.0Mt of JORC Marketable Reserves confirmed at the Meteor Downs South Project; Rockwood JORC Resource increased by 33% to 447.1Mt, with 47.1Mt at Indicated status; Continuity of geological structures and seam stratigraphy confirmed at Rockwood in the southern area drilled during the period; Further drilling at the Stockyard Creek tenement confirmed coking coal properties in coal plies intersected; Scout drilling commenced at Talwood; Meteor Downs South Project Evaluation outcomes announced, identifying low mine operating and capital set-up costs; Environmental Management Plan for MDS baseline studies underway; and Corporate advisor Macquarie Capital in active dialogue with a number of parties regarding potential merger and acquisition transactions. 1. EXPLORATION ACTIVITIES During the June 2012 quarter, the Company s overall JORC Resources increased by 28% to 498.5Mt. Also, Marketable Reserves of 13.0Mt were established for the Meteor Downs South (MDS) Project. The Company s overall JORC Reserve and Resources situation is summarised in the following table: Tenement JORC Measured JORC Indicated JORC Inferred Total JORC Resources (Mt) JORC Marketable Reserves Orion Downs (EPC 1517) (MDS) Rockwood (EPC 1514) TOTAL (Mt) The Company s current tenement areas, as well as tenement areas under application are shown in Fig 1: Endocoal Current Tenure Areas (see attached).

2 1.1 ROCKWOOD EXPLORATION OPERATIONS During the June 2012 quarter, 22 drill holes were completed. This included 3 core holes (462m) and 19 open holes (6,827m) for total drilling of 7,289m. Up to two drilling rigs were operational on the Rockwood site during finalisation of infill drilling undertaken, leading to the upgraded Rockwood JORC Resource announced today. Earlier today, Endocoal announced a 33% increase in the total Rockwood JORC Resource from 337.3Mt to 447.1Mt. This was based on the drilling program completed at 30 June This lifted the total resources for the Company to 498.5Mt, combining the Orion Downs Project (51.4Mt) and the Rockwood Project. Further, drilling during 2012 has confirmed the continuity of the Rockwood seam stratigraphy from the northern resource area through to the south-eastern boundary of the Rockwood tenement. Recent geological analysis of the data obtained to date has also confirmed the extension and continuity of geological structures from the northern resource extent to the southern boundary of the resource area described in the July 2012 JORC update announcement. Future exploration will now focus on identifying and then further defining areas within the Rockwood resource that are most likely to support initial mining operations. Drilling will then be aimed at upgrading the status of JORC resources within these areas to Indicated or Measured status to facilitate mine planning and development activities. 1.2 ORION DOWNS EXPLORATION ACTIVITIES Field exploration work at the Orion Downs project consisted of cleaning out remaining drill holes for geophysical logging, as well as drillhole cementing and site rehabilitation required following previous drilling activities. One drill rig was also operational during the quarter on the MDS Project, drilling and developing ground water monitoring bores as part of the Environmental Management Plan (EMP) requirements. Several ground water monitoring bores are required to be constructed in order to complete ground water studies for the submission of the EMP as part of the MDS Mining Lease Application process. All previous drilling and exploration activities involving ground disturbance on the Meteor Downs property were rehabilitated, including the cementing of drillholes completed as part of the Inderi resource delineation. Cementing and rehabilitation activities continued on the Inderi property during the quarter. 1.3 STOCKYARD CREEK EXPLORATION ACTIVITIES Six drill holes were completed at the Stockyard Creek Project during the quarter as part of a scout drilling program planned for the area. 194m of diamond core and 255m of open hole drilling were completed in the program for a total of 449m drilled during the quarter. Two coal seams, each approximately 3m thick (including minor bands), separated by approximately 0.3m, were intersected in five out of the six holes drilled. The shallowest intersection was at a depth of 42.7m. The sixth hole drilled confirmed the general location of the coal sub crop zone. During the quarter preliminary washability and coal quality analysis on the drill core extracted from the Stockyard Creek Project confirmed the presence of coal plies with strong coking properties. The results indicate that the two seams intersected contain plies with attractive coking coal properties at a likely product ash in the range of 12% to 16%. As washability characteristics are still indicative only at this stage, further coal quality analysis, planned as part of future drilling activities, will involve more detailed sizing and analysis pre-treatment programs. Other coal preparation options for treating these coal seams will also be considered, including the evaluation of two-product stream washing. Stockyard Creek adjoins Endocoal s Cedars (EPC1516) and Barfield (EPC1620) tenements. In excess of 100km of the sedimentary basin/ volcanic basement contact zone is available for future 2

3 exploration within these combined tenements. Future exploration activities will focus on two aims; resource definition drilling at the initial discovery area, as well as exploration/scout drilling activities at regional target areas that have been identified elsewhere along the contact zone. The Stockyard Creek Project is strategically well-located. The current drilling area lies approximately 3km west of the published alignment of the proposed Surat Basin rail corridor to Gladstone. It is approximately 48km south of the operating Moura-Gladstone rail line. Coal mining operations in the general region include Anglo Coal s Dawson mine to the north-west in the Moura area, as well as the Callide mine north-east of Biloela. 1.4 TALWOOD EXPLORATION ACTIVITIES A scout drilling program was completed at the Talwood Project during the quarter with six holes completed (1 core hole, plus 5 open holes) for a total of 837m. Up to three coal seams were intersected at reasonably shallow depths in three of the five open holes completed. This confirms the continuity of coal intersections from a nearby historical Queensland Government stratigraphic hole completed to the east of the tenement. A core hole was completed at this site with coal quality samples sent to the laboratory for analysis. Results are expected to be received in the next quarter. Drilling focussed on the southern portion of the tenement and future scout drilling is planned to confirm the continuity of coal seams in the northern part of the tenement. The number of coal seams intersected is expected to increase in the northern portion of the project based on the second (and last) historical Government drill hole located in the northern section of the Talwood tenement. Talwood is a greenfield site with very little previous exploration in the surrounding area. EPC1590 was granted to Endocoal in May 2010 to allow exploration for coal deposits located in Rugby type geological settings. These are characterised by the presence of smaller sub basins, lying within the early Permian sediments, along the north-western edge of the main Bowen Basin. Talwood is located approximately 15km west of the recently completed Northern Missing Link rail line joining the Moranbah rail system to the Abbot Point coal export port. It is also located east of and close to a railway alignment being planned to deliver coal from new mines to be developed further west in the Galilee Basin. In the general area, the well-established mining operations of Goonyella/Riverside and Newlands lie to the south-east and north-east of the Talwood Project area respectively. Talwood is located approximately 25km north from Pretoria Hill (EPC2135) where EOC and Carabella Resources (ASX: CLR) are forming a Joint Venture to deliver an exploration program also seeking Rugby type coal deposits. 1.5 DESKTOP STUDIES AND PROJECT REVIEWS Project reviews were revised during the quarter for all Endocoal granted tenements. Desktop studies were also continued for all of Endocoal's granted tenements that have not yet been drilled. The aim is to revise and continue to develop ongoing exploration programs, including drill program planning where appropriate. The results are being utilised during planning for the next Quarter s exploration activities. 3

4 2. MINE DEVELOPMENT ACTIVITIES 2.1 METEOR DOWNS SOUTH PROJECT EVALUATION COMPLETED On 4 April 2012, the Company announced that the MDS Open Cut Project Evaluation (Project Evaluation), undertaken by the mining engineering consultant, The Minserve Group, was completed and had undergone separate peer review. This Project Evaluation confirmed the capability for a direct-ship, open cut thermal coal mine to be constructed and operated at MDS. A summary of the Project Evaluation, for the Free-on-Truck (FOT) case announced, is as follows: Mining Cost (for run-of-mine (ROM) coal delivered into the ROM coal-sizer) Production Rate $ to 1.9 Mtpa Mine life 9 10 years Capital Expenditure Operating Expenditure (for FOT cost of sized product coal loaded onto a road-haul truck for despatch) High Productivity Outcome Average A$42million $37.11 per tonne 20,480 tonnes per employee per year It is the Company s aim to commence first production from MDS in late A copy of the full 4 April 2012 MDS Project Evaluation announcement can be viewed in ASX Releases, in the Investors area, at the Endocoal website: As previously advised in the March 2012 Quarterly Report, the Company continues to consider and evaluate potential coal off-take and joint venture agreement opportunities. 2.2 ENVIRONMENTAL MANAGEMENT PLAN ( EMP ) PROGRESSION As previously advised by the Company on 30 June 2011, the Queensland Government s Department of Environment and Resource Management (DERM) confirmed that the mining lease application (MLA) process for MDS could proceed by way of an EMP instead of an Environmental Impact Statement. This decision has allowed the Company to shorten the time period for the environmental approval portion of the MLA process. However, it still requires EOC to undertake significant environmental base line studies to allow the development and drafting of the EMP. Accordingly, the Company has continued to work closely with its consultants and various stakeholders throughout the June Quarter to work towards completion of the required EMP for MDS. The EMP is required to be lodged with and approved by DERM prior to the granting of the MDS Mining Lease It is envisaged that all necessary field work, base line studies and other planning for the EMP will be completed in the September Quarter The Company is hopeful that the final EMP can be lodged with DERM in September This is working towards a grant of Mining Lease in late 2012, or in early 2013, to allow first production from MDS in late

5 2.3 PORT AND RAIL OPTIONS FOR MDS Investigations are underway to deliver suitable logistics outcomes and to secure access to rail and port infrastructure. The Company is actively engaged in various processes involving QR Rail and Queensland port operators regarding future access to rail and port capacity. Also, preliminary discussions have been held with other mining companies where under-utilised capacity may become available at Gladstone port, prior to the availability of additional capacity arising from the WICET Stage 2 expansion program. Notwithstanding this, the Company has previously been able to acquire 2Mtpa in Wiggins Island Coal Export Terminal Stage 2 (located near Gladstone and due for completion in 2015). 2.4 ACCESS TO NORTHERN BOWEN BASIN PORTS The Company has continued to monitor progress with these potential northern port developments. During the period, communications have continued with each proponent at Dudgeon Point with regards to Endocoal s continuing interest in securing access to export port capacity in this region to support development of an export mine. Changes brought by the new Queensland Government with regards to the Abbot Point development have been noted. A watching brief is being maintained as further project development proposal details are expected to be released. 2.5 WATER OPTIONS FOR THE COMPANY S FUTURE PROJECTS During the June Quarter, the Company continued to monitor and has been an active participant in discussions regarding possible water allocation options for its future mine projects (other than MDS). The Company is actively engaged in various processes involving SunWater and other mining companies regarding future water infrastructure projects and water allocations in both the northern and southern Bowen Basin areas. 3. CORPORATE MATTERS Endocoal, via its corporate advisor Macquarie Capital, is in active dialogue with a number of parties in relation to potential merger and acquisition transactions. These activities are being pursued to maximise shareholder value across a range of potential company and/or project level opportunities which could include takeover, merger, acquisition transactions, divestment and/or joint venture transactions at either the project or tenement level. There is no guarantee that any such discussions will lead to a proposal to be put to shareholders for consideration and the Company will continue to keep the market fully informed in a timely manner as and when there are material developments. 4. SIGNIFICANT EVENTS SUBSEQUENT TO THE QUARTER In July 2012, the Company received notification that the State of Queensland proposed to grant to the Company, a new tenement known as Exploration Permit for Coal (EPC) 2253 Mt Inglis. It is expected that the Company will complete the final documents to allow EPC2253 to be formally granted to the Company in the September Quarter. (For location, see Fig1: Endocoal Current Tenure Areas) On 5 July, the company announced the appointment of a new CFO, Peter Edwards, who is based in Brisbane. Peter s appointment concludes the transition of the Company s Corporate Office from Sydney to Brisbane. After the end of the quarter the Company also announced the resignation of Mr Alan Broome on 24 July and the date for a shareholder meeting requisitioned for 29 August In response to the requisitioned meeting the Company released a Letter to Shareholders in Relation to EGM which details the Company s significant achievements since listing over 2 years ago

6 Competent Person s Statement: In accordance with the Australian Securities Exchange requirements, the technical information contained in today s announcement titled Quarterly Report Quarter Ending 30 June 2012 has been reviewed by Darren Walker, B.Sc. (Hons) in Geology employed by Endocoal Limited. Mr Walker is a member of the Australian Institute of Geoscientists and the Australasian Institute of Mining and Metallurgy 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 a Competent Person as defined in the 2004 Edition of the Australasian Code for reporting of Exploration Results, Minerals Resources and Ore reserves. Mr Walker consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. Competent Person s Statement: In accordance with the Australian Securities Exchange requirements, the information relating to the Rockwood JORC Resources contained in today s announcement titled Quarterly Report Quarter Ending 30 June 2012 has been provided by Phill Sides, B.App.Sc. (Geology), employed by JB Mining Services. Mr Sides is a member of the Australian Institute of Geoscientists 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 a Competent Person as defined in the 2004 Edition of the Australasian Code for reporting of Exploration Results, Minerals Resources and Ore reserves. Mr Sides consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. Statement of Compliance: The information in this report that relates to Marketable Reserves at Endocoal s South Meteor Downs Project is based on a mine plan, a mine schedule and costs prepared by The Minserve Group Pty Ltd. Mr Jeff Jamieson was responsible for the report s preparation and the reserve statement therein. He is both a Fellow of the Australasian Institute of Mining and Metallurgy, and a Chartered Professional (Mining) and is a Competent Person as defined in the 2004 Edition of the Australasian Code for reporting of Exploration Results, Minerals Resources and Ore reserves. Mr Jamieson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 6

7 Fig 1: Endocoal - Current Tenure Areas 7

8 About Endocoal Endocoal is an Australian public company focused on exploration of coal tenements and mine development in the Bowen Basin, Queensland s premier coal producing region. Endocoal currently holds JORC reserves and resources of 13Mt and 498Mt respectively. The Company is proceeding to develop an export-quality thermal coal open cut mine at its flagship Orion Downs tenement, positioned close to existing infrastructure. Endocoal has several other tenements in the Bowen Basin region. These will be the subject of future exploration and drilling activities. Near-term priority will focus on Rockwood tenement prospective for PCI coal; plus greenfield Talwood and Stockyard Creek Project tenements where scout drilling has commenced seeking coking coal. At both locations, coal seams have been intersected. At Pretoria Hill an exploration program with joint venture partner Carabella Resources (CLR) is being planned. Elsewhere, tenement applications target other locations identified as being potentially prospective for coal exploration. Endocoal Limited ACN ASX CODE: EOC Securities Information Ordinary Fully Paid Shares: 186.9m Unlisted Options 21.6m Directors & Management Rod Austin Interim Non-Executive Chairman Tim Hedley Chief Executive Officer Phillip McCarthy Non-Executive Director Lex Hansen Non-Executive Director Gavin Solomon Non-Executive Director Fred Yu Non-Executive Director For further information please contact: Tim Hedley, Chief Executive Officer Tel:

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