130710_Patersons_Research_on_MetroCoal

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RESEARCH NOTE PATERSONS SECURITI ES LIMITED 1

All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibilityor liability on any account whatsoever on the part of this firm or any member or employee thereof.

RESEARCH NOTE

METROCOAL LTD

Undervalued, JORC increases pending

We are initiating coverage on MetroCoal (MTE) with a price target of$0.50 per share and a Speculative BUY recommendation. MetroCoalis an early stage exploration company with all of its projects locatedin Queensland. Current JORC resources total 464Mt.

The three main projects are Bundi, Juandah, and Columboola. TheCEO is Mike OBrien, who has worked for thirty-five years includingroles as GM of large underground and opencut coal mines inQueensland. The company has the ambition to identify 2.5-3.5btonnes of coal over the next two years.

In valuing MTE we have used an in-situ valuation and have takenwhat we believe is a conservative standpoint. We are using $0.25/tas an EV/t multiple for MTEs mostly underground resources in the

Surat Basin. Our total valuation is $76m compared to the currentmarket capitalisation of only $34m.

Net Cash of $8.5m amounts to $0.06 per share. Under its currentexploration programme MTE has enough cash to progress well intothe second half of next year.

MTE is trading at only $0.10 per tonne of resource, on the very lowend of multiples. Many other coal exploration companies are tradingat levels over A$0.50 /t and over $1/t in some cases. On an EV/tcomparison like this, especially with the further, substantial resourceincreases likely, MTE looks undervalued. The very relevant recenttransaction where Cockatoo Coal is buying Anglos coal assets in theSurat Basin works out at $0.75/t.

MetroCoal has a JV partnership with CCIEC over the Columboolaproject. CCIEC will farm-in to 51% of Columboola for $30m. The JValready has FIRB approval and is now pending Chinese governmentapprovals. CCIEC will be the manager of the JV and it will also havefirst rights to enter in JVs over MetroCoals other tenements. CCIEC isa subsidiary of China Coal, the second largest coal miner in China,with 125Mt RoM produced in 2009.

It is significant that CCIEC has taken a half stake in the Columboolaproject even before any coal resources have been identified to JORCstandard. Also, the value placed on Columboola, $60m for 100%, ismore than double the enterprise value of the whole of MTE, whichholds a number of other similar projects, which in turn have alreadybeen explored to a JORC standard. The market is clearly, andsignificantly undervaluing MTEs coal assets.

The near term catalysts for the stock include further resourcesincrease and upgrades, and potentially, further investments from JVpartnerships. Our valuation leaves much upside to both furtherincreases in volume of coal and improvements in category in thecoming 12 months not to mention any possible improvements in coalmarket values for in-situ resources.

From our point of view, the groundwork already conducted to buildthe substantial coal resources and advancing 3 projects has receivedlittle recognition and there is still a big gap between the value in MTEand the current share price. The current takeover hunger for coalassets underlines the fundamental demand for the commodity.

13 July 2010

12mth Rating SPEC BUY

Price A$ 0.24

Target Price A$ 0.50

12m Total Return % 108.3

RIC: MTE.AX BBG: MTE AU

Shares o/s m 141.7

Free Float % 40.0

Market Cap. A$m 34.0

Net Debt (Cash) A$m -8.5

Net Debt/Equity % na

3m Av. D. Tover A$m 0.13

52wk High/Low A$ 0.37/0.17

2yr adj. beta na

Valuation:

Methodology Resources

Value per share A$ 0.51

Analyst: Andrew Harrington

Phone: (+61 2) 8238 6214

Email: [email protected]

Pate rsons Secur i t ies L imi ted ac ted as L e ad Ma n a g er a n d U n d e r w r i t e r t o t h e I P O i n D e c e mb e r 2 0 0 9 w h i c h r a i s e d $ 1 0 m a t $0 .25 pe r share . Pa te rsons rece ived a fee fo r t h is se rv ice.

12 Month Share Price Performance

$0.0

$0.1

$0.2

$0.3

$0.4

$0.5

80

100

120

140

160

180

200

MTE (LHS)

Rel. S&P/ASX 200 RES

Performance % 1mth 3mth 12mth

Absolute 6.3 -16.4 na

Rel. S&P/ASX 300 7.6 -11.7 na

A SPEC BUY on cheap coal resources in the Surat


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13 July 2010 Metrocoal Ltd



Table of Contents

Undervalued , JORC inc reases pending ................................................................... 1

Investment Case.................................................................................................... 3Risks ............................................................................................................ 3Valuation ...................................................................................................... 4MTE Capital Structure and Shareholders ............................................................ 4Peer Comparison ............................................................................................ 5

The MetroCoal Business and Assets ....................................................................... 7Project Locations ............................................................................................ 7Surat Basin Infrastructure ............................................................................... 7Bundi Project (EPC 1164 & 1167)...................................................................... 8The Columboola Project (EPC 1165) .................................................................. 9The CCIEC Partnership .................................................................................... 9Juandah UCG Project .....................................................................................10MTE Statement of Resources...........................................................................10Exploration Tenements...................................................................................11The Thermal Coal Market................................................................................12Directors and Senior Management....................................................................13


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Investment Case

MetroCoal is an early stage exploration company with all of its projects located inQueensland. Current JORC resources total 464Mt. In valuing MTE we have used an in-situvaluation and have taken what we believe is a conservative standpoint. We are using

$0.25/t as an EV/t multiple for MTEs mostly underground resources in the Surat Basin. Ourtotal valuation is $76m compared to the current market capitalisation of only $34m.

The three main projects are Bundi, Juandah, and Columboola. The CEO is Mike OBrien, whohas worked for thirty-five years in the mining and minerals industry and has over twenty-five years experience with Shell Coal and Anglo Coal. This includes operational roles as GMof large underground and opencut coal mines in Queensland. The company has theambition to identify 2.5-3.5b tonnes of coal over the next two years.

Net Cash of $8.5m amounts to $0.06 per share. Under its current exploration programmeMTE has enough cash to progress well into the second half of next year.

MTE is trading at only $0.10 per tonne of resource, on the very low end of multiples. Manyother coal exploration companies are trading at levels over A$0.50 /t and over $1/t in somecases. On an EV/t comparison like this, especially with the further, substantial resourceincreases likely, MTE looks undervalued. The very relevant recent transaction whereCockatoo Coal is buying Anglos coal assets in the Surat Basin works out at $0.75/t.

Our valuation leaves much upside to both further increases in volume of coal andimprovements in category in the coming 12 months not to mention any possibleimprovements in coal market values for in-situ resources.

One important element of the MetroCoal business is the JV partnership with China CoalImport & Export Company (CCIEC) over the Columboola project. CCIEC will farm-in to 51%of Columboola for $30m. The JV already has FIRB approval and is now pending Chinesegovernment approvals. CCIEC will be the manager of the JV and it will also have first rightsto enter in JVs over MetroCoals other tenements. CCIEC is a subsidiary of China Coal, thesecond largest coal miner in China, with 125Mt RoM produced in 2009.

It is significant that CCIEC has taken a half stake in the Columboola project even beforeany coal resources have been identified to JORC standard. Also, the value placed on

Columboola, $60m for 100%, is more than double the enterprise value of the whole of MTE,which holds a number of other similar projects, which in turn have already been explored toa JORC standard. The market is clearly, and significantly undervaluing MTEs coal assets.

The near term catalysts for the stock include further resources increase and upgrades, and

potentially, further investments from JV partnerships. From our point of view, thegroundwork already conducted to build the substantial coal resources and advancing 3projects has received little recognition and there is still a big gap between the value in MTE,even on our cautious assumptions, and the current share price. The current takeoverhunger for coal assets underlines the fundamental demand for the commodity. Accordingly,we initiate coverage with a price target of $0.50 per share and a BUY recommendation.

Risks

Changes in laws and regulations can have a big negative impact on miners. The recent

proposed introduction of the MRRT on coal miners is still being finalised but it will harm thereturns to shareholders but nowhere near as much as the earlier RSPT. Secondly Theemergence of carbon pricing presents a significant potential risk to coal producers. Theimpact could be felt through the higher cost of coal as a fuel when considering it has thehighest CO2 emissions per unit of electricity produced.

All of MTEs projects are in the Surat Basin, which is dependent on rail and portinfrastructure that is yet to be constructed. The SBRJV rail line and WICET coal terminalprojects are expected to reach FID in the second half of 2010 and deliver coal by 2013 butcould be delayed. MTE has lodged EOIs to gain allocations for coal transport probably forthe second stage and is unlikely to be harmed by any first stage delays.


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Valuation

MetroCoal is an early stage exploration company. In valuing MTE we have used an in-situvaluation rather than our preferred NPV methodology because its projects are not well-enough advanced in order to have even scoping level parameters for costs and output.Despite the levels being paid for in-situ resources in recent transactions we have taken

what we believe is a conservative standpoint. We are using $0.25/t as an EV/t multiple forMetroCoals mostly underground resources in the Surat Basin. Note that we prefer to useMeasured and Indicated resources, in the absence of which we take a 50% discount toInferred resources. Our total valuation is $76m compared to the current marketcapitalisation of only $34m.

For the Juandah and Bundi projects we have taken the known JORC resources which resultsin a value of $24m and $36m, or $0.16 and $0.25 per share respectively. For Columboola,into which CCIEC has recently invested $30m for a 51% stake, we have made anassumption that at least 100Mt of Inferred coal will be identified in the short term. Thisresults in an attributable value of only $12m, or $0.08 per share despite the much higherimplied valuation from the CCIEC investment. These valuations leave much upside to bothfurther increases in volume of coal and improvements in category in the coming 12 monthsnot to mention any possible improvements in coal market values for in-situ resources.

Net Cash of $8.5m amounts to $0.06 per share. Under its current exploration programmeMTE has enough cash to progress well into the second half of next year.

Figure 1: Valuation Breakdown (attributable to MTE)

Valuation A$m A$/sh

Juandah 24.3 0.16

Bundi 36.5 0.25

Columboola (49%) 12.3 0.08

FX Hedging 0.0 0.0

Corporate (7.2) (0.05)

Unpaid Capital 1.6 0.01

Cash 8.5 0.06

Debt 0 0.0

Valuation 75.9 0.51

Price Target 0.50

Source: PSL

MTE Capital Structure and Shareholders

MetroCoal is listed on the ASX with 61m fully paid ordinary shares, 2.7m fully paid sharesescrowed until 19 September 2010, and 77.9m fully paid shares escrowed until 4 December2011, totalling 141.7m shares, giving a market capitalisation of $37m. There are 5.75m

options outstanding which are held by Directors and employees and have a strike price of$0.25 per share, and exercise dates of 4 December 2012. There are a further 0.5m optionsexpiring in December 2014. The company has no debt, and at last report had $8.5m incash.

The major shareholder of MTE is the ASX listed Metallica Minerals (MLM) which retains a56.5% stake, escrowed until December 2011, after floating MTE last year (see table belowfor a list significant shareholders).


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Figure 2: MetroCoal Significant Shareholders

Significant Shareholders Shares (m) %

Metallica Minerals 80.0 56.5

Bank of America Corp 10.0 7.1

ACD Services 4.1 2.9

John Haley 0.2 0.1

Andrew Gillies 0.2 0.1

David Barwick 0.2 0.1

Mike OBrien 0.2 0.1

Source: Bloomberg

Peer Comparison

For exploration companies we use metrics like EV/Resources. The curve is a rough guide tothe perceived market value of in-ground resources. We prefer to compare only Measuredand Indicated resources. Where a project has few or no resources in that category we apply

a 50% discount to the Inferred resource in order to maintain a reasonable comparison.

Figure 3: Coal Sector EV per Measured & Indicated Resources ($/t)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

AVA

EER

BLKCWEOC

ATQ

RES

REY

MTE

CCC

CPL

BND

NEC

COK

SMR

HUN

GLLRIV

CDN

NCR

CEYAAL

CNA

SRK

GNM

NHC

FLXWH

AQA

CZA

AJM

MCC

PRC

GCL

Source: Bloomberg & PSL

Companies that are already in production or that have metallurgical coal resources tend tohave higher valuations placed on their resources, and trade on the right-hand side of thecurve (see chart above).

Conversely, low energy, stranded resources have lower values. Over the past year thesevalues have risen dramatically from the post-Lehman-bankruptcy-lows of early 2009.During 2008, top-of-cycle transactions took place at around $4/t and even $6/t but thensubsequently there were many exploration companies that were being valued as if theirresources were worthless. The battle for control of Gloucester (GCL) has equated to a


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current EV/resource multiple of over $6.00/t. MTE is trading at only $0.10 per tonne ofresource, on the lower end of multiples. Many other coal exploration companies are tradingat levels over A$0.50 /t and over $1/t in some cases. Riversdale recently concluded apartial sale of one of its early stage assets in Mozambique at what equated to $1/t. On anEV/t comparison like this, especially with the further, substantial resource increases likelyto come from the partnership with CCIEC, MTE looks undervalued.

One very relevant recent transaction is the Cockatoo Coal purchase of Anglos coal assets inthe Surat Basin. Using our methodology the transaction works out at $0.75/t for theTaroom, Collingwood, and Ownaview opencut projects.

It is also worth noting that when CCIEC decided to farm-in to the Columboola project for$30m the project had no identified JORC resources, clearly highlighting the value in thetenements even from early drilling work. It must be emphasised; CCIEC is paying $30m for51% ofone of MTEs projects, implying that that project alone is worth $60m, or more thandouble the enterprise value of the whole company, which holds a number of other similarprojects.


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The MetroCoal Business and Assets

MetroCoal is a coal exploration company with 3 main areas under development, namelyBundi, Juandah and Columboola, all of which are in the Surat Basin. In addition the

company holds a large number of other coal tenements in the region. The total coalexploration area is over 4,500km2 and the company has the ambition to identify 2.5-3.5btonnes of coal over the next two years. So far MTE has indentified 464Mt to JORC standardsince listing in December 2009. The company is at an early stage but is ultimately aiming todevelop several underground thermal coal projects.

Additionally, MetroCoal is studying the potential for Underground Coal Gasification (UCG) insome of its tenements in particular, at Juandah.

Project Locations

MetroCoals coal projects are all located in Queensland and all bar one (in the GalileeBasin), are in the Surat Basin. The map below shows also the major mines in the areassurrounding MTEs projects.

Figure 4: MTEs coal tenements map

Source: MTE

Surat Basin Infrastructure

Infrastructure in Queensland remains constrained and has limited the growth of several coalproducers. In the Surat, MTE is dependant on a new rail line formerly known as theSouthern Missing Link but since re-christened as the SBRJV to reach the new port ofWiggins Island (WICET). Both of these are expected achieve financial closure during thesecond half of 2010 and be able to ship first coal during 2013.


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MetroCoal has submitted an EOI for each of the Rail and Port developers to secureallocations for coal export capacity. Currently the company expects that it will be aparticipant in WICET from Stage2 which is likely to follow on quickly on the heels of thecompletion of Stage1.

The recent controversy caused by the proposed introduction of a Resources Super ProfitsTax or RSPT, now watered down to the MRRT, led Xstrata to announce that it was pausing

its development of the Wandoan coal project and then subsequently re-starting. Wandoanis considered one of the foundation customers for the SBRJV and this has increasedconcerns that the rail project may be pushed back. A possible delay is not of major concernto MTE since it is not expecting to need the rail line within the short term. We would notethat ATEC, the developer of the SBRJV has stated that it needs 17Mtpa of committedcapacity to breakeven. That is a total that could easily be achieved by Syntech, CockatooCoal, NEC, and MetroCoal without Wandoan.

Bundi Project (EPC 1164 & 1167)

The Bundi project is located in the northern end of the Surat Basin directly south of theElimatta project belonging to NEC. The deposit is adjacent to and down dip of the identifiedopencut Wandoan coal project belonging to Xstrata and Northern Energys Elimatta mine.Historic drilling has confirmed the extension of the seams into the MetroCoal tenements.

Initial drilling has shown seam continuity of the Macalister Upper seam with thicknessbetween 2.5-4.0m at depths of 120-400m. This is readily amenable to longwall mining. Itmust be noted that currently all mining in the Surat is opencut but MTE has commissioned adesktop study from MCS (Mining Consultancy Services) to evaluate the key parameters forunderground mining. MTE reports that the study found no elements that cannot bemanaged with current practices. The main result for a conceptual 6.3-6.9Mtpa ROM mineincluded a pithead operating cost ranging between $17 -$20 per tonne. This appears veryattractive. One could estimate that after yield losses and transportation costs FOB priceswould be less than A$60/t tonne.

Figure 5: MTEs Bundi and Juandah project areas

Source: MTE


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The Columboola Project (EPC 1165)

The Columboola Project would also be an underground operation and the project is locatedto the south and west of the existing Cameby Downs coal mine owned by Syntech. The coalresources are down dip of the identified opencut coal at Cameby. MetroCoal has anexploration target for the project of 830Mt to 1,165Mt.

The CCIEC Partnership

One important element of the MetroCoal business is the JV partnership with China CoalImport & Export Company (CCIEC) over the Columboola project. In early April CCIECsigned an agreement with MTE to farm-in to 51% of Columboola for $30m. The JV alreadyhad FIRB approval and is now pending Chinese government approvals.

The JV terms include the founding of an Australian subsidiary into which the full $30m willbe deposited. After that $30m has been spent each company will contribute in proportion totheir ownership in the JV. Also, CCIEC will be the manager of the JV and it will also havefirst rights to enter in JVs over MetroCoals other tenements.

CCIEC is a subsidiary of China Coal, Chinas second largest coal miner, with 125Mt RoMproduced in 2009. It is also in the top 100 amongst all of Chinas companies.

It is important to note that CCIEC has taken a half stake in the Columboola project evenbefore any coal resources have been identified to JORC standard. Also, the value placed onColumboola, $60m for 100%, is more than double the enterprise value of the wholecompany. Add to this the fact that Columboola is likely to contain coal of similar depths,quality and amounts as the Bundi area implying an even greater value for the companysother projects which have already been explored to a JORC standard. The market is clearly,and significantly undervaluing MTEs coal assets.

Figure 5: Columboola Project area

Source: MTE


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Juandah UCG Project

Juandah Project area, east of Bundi has underground coal and could be traditionally minedbut it is also prospective for UCG. MTE reported a maiden JORC resource of 172Mt in April2009. MetroCoal is aiming for a 100Mt reserve to support a UCG operation capable ofproviding feedstock to make the equivalent of 20,000 barrels of high grade clean liquidfuels or a 400MW power station. Any project would likely begin with a small power station

that then leads to one of the larger options.

Juandah has coal seam thickness of up to 12m at depths between 180-300m. Importantlythe deposit does not have any overlapping gas tenements one of the few prospectiveareas in Queensland where this is the case. The Queensland government has granted LNC,CNX, and CXY the right proceed with their respective UCG projects but is still formulatingthe full licence conditions for the new category, Mineral f, of coal exploitation. MTE isfocused on improved resource definition and is in discussions with the various UCGtechnology suppliers in preparation for a UCG operation once the legislation and other sitesare matured.

We cover Cougar Energy (CXY) and we have run a MetroCoal UCG scenario under the samebase assumptions as we have used for the NPV of CXYs Kingaroy UCG project. Thesignificant differences in our starting conditions are 1) later start up in 2015 (instead of2013) and 2) higher contained energy of the coal (24GJ/t v 17GJ). For a 360MW power

station costing $415m in capex the valuation comes to $140m. Rough but still substantiallypositive and can be considered a free (but very valuable) option contained within an MTEshare.

MTE Statement of Resources

Figure 6: MTE Statement of Coal Resources and Reserves 100% Basis (Mt)

Mine/Project MeasuredResource

IndicatedResource

InferredResources

Resources

M&I

ProvedReserve

ProbableReserve

Total CoalReserves

Juandah 0 22.5 149.2 171.7 0

Bundi 0 0 292.0 292.0 0

Columboola 0 0 0 0 0

Dalby West 0 0 0 0 0

Lockyer 0 0 0 0 0

Injune 0 0 0 0 0

TOTAL 0 22.5 441.2 463.7 0 0 0

Source: MTE


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Exploration Tenements

MetroCoal also has a large tenement package across the Surat Basin and one tenement inthe Galilee. We have ascribed little value so far to these other exploration tenements butacknowledge that potential exists for resource discoveries that could impact on MTE and/orthe potential for further corporate activity to release some added value.

Figure 7: MTE Tenements

Basin Project Tenement Name Area (km)

Moreton Ipswich EPC 1152 Lockyer Valley 456.0

Surat Injune EPC 1159 Injune Creek 732.1

Surat Surat EPC 1164 Wandoan West 662.4

Surat Surat EPC 1165 Columboola 901.9

Surat Surat EPC 1166 Dalby West 296.1

Surat Surat EPC 1167 Roma North 890.2

Surat Surat EPC 1251 Wandoan West 2 58.5

Surat Surat EPC (A) 1609 Wandoan West 3 55.4

Surat Surat MDLA 406 Juandah 49.9Surat Surat MDLA 417 Elle 18.4

Surat Surat MDLA 418 Kay 18.4

Surat Surat MDLA 419 Jay 42.5

Ipswich Ipswich EPC 1501 Dugandan 60.8

Galilee Galilee EPC (A) 1640 Pentland South 340.0

Source: MTE


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The Thermal Coal Market

Thermal coal prices are determined by electricity and industrial demand specifically butmore broadly by the GDP growth of consuming regions. Prices are settled in annualnegotiations between major suppliers like Xstrata and consumers like Chubu Electric ofJapan and then the price is applied with some adjustments out to other suppliers. In thecase of MetroCoal, prices will be determined probably after prices have been settled byestablished suppliers. We have assumed that MTEs thermal product from the Surat Basinwill trade with similar dynamics to the seaborne thermal market.

The export thermal coal market has suffered a dramatic change in fortunes since 2008.During March 2009, Japanese benchmark coal prices were settled at US$70/t for JFY09,which is a big fall from the JFY08 price of US$125/t and an even bigger fall from pricessettled just 6 months earlier for annual contracts beginning 1 September 2008, which weresettled at US$155/t. Subsequently, spot prices have spent most of 2009 hovering aroundthe US$70 mark but since early 2010 have risen to around the US$100 mark, which iswhere annual contract prices have been settled, US$98/t to be precise. We have a longterm real price of US$55/t.

We would add that under current market conditions any future update to our forecasts is

more likely to require us to increase our prices rather than decrease them.

Figure 8: Coal Price History and Forecasts

20

70

120

170

220

270

320

CoalPrices(US

$/t)

Premium Hard

LowVol PCI

Semi-soft

Thermal

Premium Hard 41.90 39.75 42.75 48.20 46.20 58.00 126.90 114.00 96.00 300.00 128.00 220.00 160.00 140.00 125.00115.00 110.96

LowVol PCI 26.50 34.50 34.30 32.85 46.50 102.00 66.00 67.50 235.00 90.00 175.00 130.00 105.00 95.00 85.00 83.22

Semi-soft 31.50 30.60 36.75 33.50 30.00 43.00 79.50 58.00 63.90 240.00 95.00 160.00 120.00 100.00 90.00 80.00 77.67

Thermal 29.95 28.75 34.50 28.80 26.75 44.00 53.00 52.50 55.65 125.00 70.00 98.00 85.00 75.00 70.00 65.00 61.03

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Source: Bloomberg and PSL


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Directors and Senior Management

David Barwick - ChairmanDavid Barwick has played a significant role in successfully funding and bringing intoproduction, four mining projects throughout his career. He has considerable expertise inrestructuring and financing. David is an accountant and has more than 36 years experiencein the management and administration of publicly listed companies in both Australia and

North America. As a director, he has managed over twenty six public companies. David isalso Chairman of Metallica Minerals (MLM), Manaccom (MNL), Orion Metals (ORM) andPlanet Metals (PMQ).

Andrew L Gillies - Non-Executive DirectorAndrew Gillies has been Managing Director of ASX-listed Metallica Minerals Limited and itssubsidiaries since 1997. He has been instrumental in the selection and acquisition of all themineral assets now held by the Metallica group. Since 1985 he has worked continuously asa geologist in the mining and exploration industry across a range of commodities. He hasbeen a company geologist with BHP Gold Mines Ltd, Perseverance Corporation Ltd andCracow Mining Venture and as a consulting geologist for various exploration companies untilhis full time role with Metallica in 1997. Andrew is a Director of ASX listed Cape Alumina,Orion Metals and Planet Metals and is also a Director of the Queensland Resources Council.

John K Haley - Non-Executive Director

John Haley is currently Company Secretary, Chief Financial Officer and Executive Director ofMetallica Minerals and has been employed by the company since late 2003. He was untilrecently Company Secretary and Chief Financial Officer of Cape Alumina since its formation.He has had significant involvement in the listing of companies in Australia and Canada. Heis a Chartered Accountant, an Associate of the Institute of Chartered Secretaries andAdministrators and a Fellow of the Financial Services Institute of Australasia and theTaxation Institute of Australia. He has previously worked with Coopers & Lybrand andArthur Andersen & Co and in Australia.

Michael Hansel - Non-Executive DirectorAs a partner in law firm Hopgood Ganim lawyers, practising almost exclusively in corporatelaw, Michael brings considerable knowledge and skills to the MetroCoal board in the areas ofcapital raising, mergers and acquisitions, joint ventures, due diligence, takeovers andcorporate restructuring. He is admitted as a Solicitor of the Supreme Court of Queenslandand is a member of the Australian Institute of Company Directors.

Mike O'Br ien - CEOMike OBrien has worked for thirty-five years in the mining and minerals industry and hasover twenty-five years extensive management experience with multinational companiesShell Coal and Anglo Coal (subsidiary of Anglo American). His experience includesoperational roles as General Manager of a large underground longwall mine and as GeneralManager of a very large opencast mine that included a coal seam gas (CSG) operation. Hehas also held senior corporate positions including General Manager of Shell Coals technicalgroup that included responsibility for the mining, geological and engineering development.

Theo Psaros - Chief Operating Officer and Company SecretaryTheo Psaros is a Chartered Accountant with experience in financial management andadministration. He holds a Bachelor of Financial Administration from the University of NewEngland. He worked for Coopers & Lybrand and for PricewaterhouseCoopers providing

business advisory services, valuations and corporate finance transactions. He was CEO ofQueensland Rugby Union and more recently was CEO of the Porsche Carrera Cup Australia.

He was until recently the Company Secretary and CFO of Orion Metals (ORM).

Neil Mackenzie-Forbes - Exploration ManagerMr Mackenzie-Forbes is a geologist with 15 years of varied experience in coal, oil shale,gold and base metals. He has worked for Metallica Minerals, Suncor Energy, SouthernPacific Petroleum, Australian Resources, Gympie Eldorado Mining and Queensland MetalsCorporation. Neil has wide and varied exploration and mining experience including resourceand mine development. He worked with the Stuart Oil Shale Project in Central Queenslandfrom 1997 through to 2004 in the capacity of Senior Mine Geologist and EnvironmentalCoordinator. Neil has been associated with MetroCoal for the last 3 years, identifying andgenerating projects, initiating and managing exploration of MetroCoals tenements. Neilgraduated from the Queensland University of Technology with a Bachelor of Applied Sciencein 1993.


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