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Stanmore Coal Limited ABN 27 131 920 968

Notice of general meeting & explanatory memorandum

Meeting information:

Date: Wednesday, 10 October 2012

Time: 10.00am (Brisbane time)

Place: Brisbane Polo Club, Naldham House, 193 Mary Street

(Cnr Eagle & Felix Streets), Brisbane, Queensland

This document contains important information regarding the General Meeting of Stanmore Coal Limited and should be read in its entirety. If you are in doubt as to how you should vote at the

General Meeting, you should seek advice from your accountant, solicitor or other professional adviser without delay.

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Contents

Chairman’s letter ................................................................................................................................. 1

Notice of general meeting ................................................................................................................... 4

Shareholder information ..................................................................................................................... 7

Explanatory Memorandum ............................................................................................................... 10

Glossary of terms .............................................................................................................................. 27

Schedule A – Pro forma adjusted balance sheet as at 31 December 2011 ................................. 30

Schedule B – Convertible Note terms ............................................................................................. 31

Schedule C – Investor Option terms................................................................................................ 38

Schedule D – CS Option terms ......................................................................................................... 41

Schedule E – Summary of Share Plan and Incentive Plan rules .................................................. 50

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Chairman’s letter

Dear Shareholder

I am pleased to be writing to you at this exciting time during the life of Stanmore Coal. The Company has achieved a number of significant milestones during 2012 which have helped to lay the foundations for the Company to implement its strategy for growth through securing access to export infrastructure.

Pit to Port allocations

In June of this year, Stanmore Coal executed a Capacity Commitment Deed for the Wiggins Island Coal Export Terminal (WICET) Expansion Phase 1 (WEXP1), located near Gladstone, which will provide the Company with five million tonnes per annum (Mtpa) of port capacity for The Range project. The Company also has a priority right for an additional two Mtpa capacity which will remain valid for use in the second phase of the WICET port expansion project, WEXPII, which can be utilised as the Company’s coal production capacity increases.

Concurrently, the due diligence for the two rail projects, Surat Basin Rail (SBR) and QR National (QRN) Moura rail system, which will facilitate transportation of coal from The Range to the port for export, have concluded. As a result, The Range project was invited to participate in the final feasibility study for the Gladstone Rail Capacity Expansion. The Company expects to be offered five million tonnes of capacity on the SBR. This will involve a study into the upgrade of the capacity of the existing QRN Moura line linking the SBR line with the WICET port.

The selection of The Range for both port and rail allocations represents two key milestones for the Company as they demonstrate a viable pit to port infrastructure solution for Stanmore Coal to transport five million tonnes per annum of export quality thermal coal to export markets.

Funding and investment

Stanmore Coal is one of only four coal producers from the Surat and Bowen basin regions which, together, will be offered to sign binding take or pay (TOP) contracts for WEXP1. Stanmore Coal’s commitment is to provide $44 million in funding, $18 million of which is due later this year. At the financial close of the expansion project, the Company’s contribution will convert to an equity interest in the WEXP1 port expansion.

The majority of capital raised will be applied to ensure Stanmore Coal to be able to meet its commitments under the WICET, SBR and QRN infrastructure projects prior to execution of the TOP contracts, which will require performance guarantees following execution. A small amount of the funding will be applied to fund associated working capital. Stanmore Coal has successfully secured equity and debt funding which, subject to Shareholder approval at this General Meeting, will enable the Company to meet its current commitments under these projects.

The Credit Suisse AG facility requires Stanmore Coal to raise additional capital of $25 million by 31 October 2012. If this is not achieved and a rectification plan cannot be agreed between Credit Suisse AG and Stanmore Coal, Credit Suisse AG may, under its review event rights, require Stanmore Coal to repay all or part of the drawn facility amounts. If Shareholders approve the various issues of securities to Greatgroup at this Meeting, Stanmore Coal will be able to satisfy the capital raising requirement under the CS facility. If Shareholders do not approve the various issues of securities to Greatgroup at this Meeting, Stanmore Coal will be unable to satisfy the capital requirement under the Credit Suisse AG debt facility. If this were to occur, Stanmore Coal would not be able to meet its current commitments under the WICET, SBR and QRN infrastructure projects prior to execution of the TOP contracts.

Equity and Convertible Note funding

In June of this year, Stanmore Coal successfully secured a $36.04 million investment in the Company by Greatgroup Investment Limited (Greatgroup), an investment vehicle managed by Hong Kong based private equity investment manager, Sprint Capital. $12.98 million worth of Shares have already been issued to Greatgroup. Shareholder approval is sought at this Meeting for a $14.03 million placement of 20,791,143 Shares at an issue price of $0.675 per Share and $9.03 million of notes convertible into 13.37 million Shares at $0.675 per Share, to Greatgroup. The issue and

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conversion price of $0.675 per Share reflect a 46.4% premium to Stanmore Coal’s 30 day VWAP and an 87.5% premium to Stanmore Coal’s last traded price of $0.36 on 26 June 2012, the Trading Day prior to the announcement of the placement.

Shareholder approval is also sought for the issue to Greatgroup of anti-dilution options (Investor Options) to subscribe for new Shares and Option Notes. Sprint Capital’s anti‐dilution rights under the Investor Options are triggered by the exercise (at any time) of a fixed number of board and management options, which are outstanding and in the‐money (Incentive Options). Accordingly, Investor Options shall be issued on the exercise (at any time) of any CS Options in connection with the debt funding (see below). The Investor Options, if issued, will be exercisable into Shares and Option Notes at the 60 day volume weighted average price (VWAP) of Stanmore Coal Shares on the Trading Day prior to a subscription notice being given to the Company. By Greatgroup agreeing to take a significant stake in Stanmore Coal (initially 19.99% with potential to be increased to 25% upon conclusion of the placements and conversion of the Convertible Notes), it has endorsed the quality of the opportunities that lie ahead for the Company and represents a significant contribution to its future growth strategy.

Debt funding

Of the total amount required to meet Stanmore Coal’s current commitments, $25 million will comprise debt funding from Credit Suisse AG

1.

As an incentive for Credit Suisse AG offering the debt funding package, Stanmore Coal has issued Credit Suisse AG 11,670,000 CS Options, which are currently required to be cash settled on exercise, and can, on Resolution 5 being passed, be settled by the issue of Shares. Cash settlement of the CS Options will reduce the amount of cash flow available to or otherwise place cash flow constraints on the Company. In comparison, issuing Shares on the exercise of the CS Options would result in greater cash flow flexibility and less financial constraints for the Company and its Subsidiaries.

Shareholder approval is also sought for the issue of Shares on exercise of the CS Options.

The pit to port allocations to Stanmore Coal coupled with the funding available (both equity and debt) to meet its capacity commitments, positions the Company to drive The Range Project into production.

The Directors strongly recommend Shareholders vote in favour of Resolutions 1, 2, 3 and 4 to issue securities to Greatgroup as well as Resolution 5 relating to the debt funding arrangements with Credit Suisse AG.

All of Resolutions 2, 3 and 4 must be approved in order for the Greatgroup funding to proceed unless Greatgroup and Stanmore Coal agree otherwise. All of these resolutions must be approved for Stanmore Coal to be in a position to meet its financial obligations leading up to execution of the TOP arrangements for the WICET, SBR and QRN infrastructure projects.

Employee incentives

Stanmore Coal’s ability to implement its development strategy and successfully participate in the WICET, SBR and QRN infrastructure projects is dependent upon the Company’s ability to retain current managers and other employees and to attract additional talent as required.

Incentivising employees is a key factor in motivating a team of skilled and engaged employees to improve the Company’s performance. Stanmore Coal wishes to implement a short term incentive plan (STI) for the issue of Shares and, a long term incentive plan (LTI) for the issue of Options which all employees will be eligible to participate in, subject to fulfilment of specified performance criteria.

Alongside the STI and LTI plans, Shareholder approval is also sought for the issue of Shares and Options to Nicholas Jorss on broadly the same terms as those on which employees will be incentivised under the share and option plans.

The Company has taken independent advice from a remuneration consultant regarding the structure of the plans and the terms on which the incentives are offered, including those being offered to Mr Jorss.

1 $36 million will comprise equity and Convertible Note funding from Greatgroup.

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On behalf of your Board, I encourage you to read this Notice and to vote in favour of the Resolutions at the Meeting or by proxy beforehand. Each Director who hold or control Shares, and to the extent they are not required to abstain from voting, intends to vote their Shares in favour of the Resolutions.

Yours sincerely

Neville Sneddon Chairman

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Notice of general meeting

Stanmore Coal Limited Notice is given that a general meeting of the Shareholders of Stanmore Coal Limited will be held at Brisbane Polo Club, Naldham House, 193 Mary Street (Cnr Eagle & Felix Streets), Brisbane, Queensland on Wednesday, 10 October 2012 and will commence at 10.00am (Brisbane time).

The Explanatory Memorandum accompanying this Notice provides additional information on the matters to be considered at the Meeting. The Explanatory Memorandum is intended to be read in conjunction with, and forms part of, this Notice.

Words that are defined in the Explanatory Memorandum have the same meaning when used in this Notice, unless the context requires otherwise.

SPECIAL BUSINESS

Part A: Issue of securities to Greatgroup Investments Limited

Resolution 1: Ratification of prior issue of Shares to Greatgroup

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

That for the purpose of Listing Rule 7.4 and for all other purposes, the prior issue of 19,228,887 Shares at $0.675 per Share to Greatgroup in accordance with the terms of the Subscription Deed which was announced on ASX on 28 June 2012 and otherwise conducted on the terms set out in the Explanatory Memorandum, is approved and ratified.

Resolution 2: Approval for proposed issue of Shares to Greatgroup


That, subject to Resolutions 3 and 4 being passed, for the purpose of Listing Rule 7.1, clause 4.1(a) of the Subscription Deed and for all other purposes, the issue of 20,791,143 Shares at $0.675 per Share to Greatgroup in accordance with the terms of the Subscription Deed and otherwise on the terms set out in the Explanatory Memorandum, is approved.

Resolution 3: Approval for proposed issue of Convertible Notes to Greatgroup


That, subject to Resolutions 2 and 4 being passed, for the purpose of Listing Rule 7.1, clause 4.1(a) of the Subscription Deed and for all other purposes, approval is given for the issue to Greatgroup of $9,027,029.48 of Convertible Notes, convertible into 13,373,377 Shares in accordance with the terms of the Subscription Deed and otherwise on the terms set out in the Explanatory Memorandum, and for the issue of Shares upon conversion of those Convertible Notes. F

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Resolution 4: Approval for proposed issue of Investor Options to Greatgroup


That, subject to Resolutions 2 and 3 being passed, for the purpose of Listing Rule 7.1, clause 4.1(b) of the Subscription Deed and for all other purposes, approval is given for the issue of Investor Options to Greatgroup in accordance with the terms of the Subscription Deed and otherwise on the terms set out in the Explanatory Memorandum, and for the issue of Shares and Option Notes upon exercise of the Investor Options and the issue of Shares upon conversion of the Option Notes.

Part B: Issue of CS Options to Credit Suisse AG

Resolution 5: Approval for proposed issue of Equity Settled CS Options to Credit Suisse AG and approval for financial assistance

To consider and, if thought fit, pass the following resolution as a special resolution:

That:

a) for the purpose of Listing Rule 7.1 and for all other purposes, approval is given for the issue of 11,670,000 Equity Settled CS Options to Credit Suisse AG and for the issue of Shares upon conversion of the Equity Settled CS Options; and

b) for the purpose of Part 2J.3 of the Corporations Act, approval is given for any financial assistance provided by Stanmore Coal Limited or by any Subsidiary to Credit Suisse AG in connection with the issue of 11,670,000 Equity Settled Options to Credit Suisse and the issue of Shares on exercise of the Equity Settled CS Options,

in accordance with the terms of the Option Deed and otherwise as described in the Explanatory Memorandum..

Part C: Ratification of prior issue of Placement Shares

Resolution 6: Ratification of prior issue of Shares pursuant to January Placement


That for the purpose of Listing Rule 7.4 and for all other purposes, the prior issue of 3,736,486 Shares at $0.74 per Share to institutional and sophisticated investors which occurred on 27 January 2012 (January Placement) and conducted as described in the Explanatory Memorandum, is approved and ratified.

Part D: Issue of Employee Incentives

Resolution 7: Approval for Stanmore Coal Director and Employee Share Plan (Share Plan)


That for the purpose of Listing Rule 7.2 exception 9(b) and for all other purposes, the Stanmore Coal Limited Director and Employee Share Plan (Share Plan) the terms of which are summarised in the Explanatory Memorandum, is approved.

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Resolution 8: Approval for Stanmore Coal Director and Employee Incentive Plan (Incentive Plan)


That for the purpose of Listing Rule 7.2 exception 9(b) and for all other purposes, the Stanmore Coal Limited Director and Employee Incentive Plan (Incentive Plan) the terms of which are summarised in the Explanatory Memorandum, is approved.

Part E: Issue of Director Incentives

Resolution 9: Approval for proposed issue of Shares to Nicholas Jorss under the Share Plan


That, for the purposes of Listing Rule 10.14 and for all other purposes, approval is given for the issue to the Managing Director of the Company, Nicholas Jorss, Shares under the Share Plan as short term incentives, as described in the Explanatory Memorandum.

Resolution 10: Approval for proposed issue of Options to Nicholas Jorss under the Incentive Plan


That, for the purposes Listing Rule 10.14 and for all other purposes, approval is given for the issue to the Managing Director of the Company, Nicholas Jorss, of Options under the Incentive Plan as a long term incentive on the terms set out in the Explanatory Memorandum, and for the issue of Shares upon exercise of those Options.

Resolution 11: Approval for proposed issue of Performance Rights to Nicholas Jorss under the Incentive Plan


That, for the purposes Listing Rule 10.14 and for all other purposes, approval is given for the issue to the Managing Director of the Company, Nicholas Jorss, of Performance Rights under the Incentive Plan as a long term incentive on the terms set out in the Explanatory Memorandum, and for the issue of Shares upon exercise of those Performance Rights.

By order of the Board Doug McAlpine Joint Company Secretary Date: 10 September 2012

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Shareholder information Voting exclusions

In accordance with the Listing Rules2 and the Corporations Act

3, the Company will disregard any votes

cast on each resolution (as applicable) by:



Greatgroup and its Associates.

Resolution 2: Approval for proposed issue of Shares to Greatgroup

Greatgroup, any person who might obtain a benefit, except a person solely in the capacity of a holder of Shares, if the resolution is passed, and their Associates.

Resolution 3: Approval for proposed issue of Convertible Notes to Greatgroup





Resolution 5: Approval for proposed issue of Equity Settled CS Options to Credit Suisse AG and approval for financial assistance

Credit Suisse AG, any person who might obtain a benefit, except a person solely in the capacity of a holder of Shares, if the resolution is passed, and their Associates.


Resolution 6: Ratification of prior issue of Shares pursuant to January Placement

any person who participated in the issue, being institutional and professional investors who were introduced to the Company through RBS Morgans Limited under mandate, and their associates.


Resolution 7: Approval for Stanmore Coal Director and Employee Share Plan (Share Plan)

each Director and each of their Associates.

Resolution 8: Approval for Stanmore Coal Director and Employee Incentive Plan (Incentive Plan)









2 Listing Rule 14.11. 3 Section 260B(1) and (2).

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Proxy voting - Corporations Act In accordance with the Corporations Act

4, a person appointed as a proxy must not vote, on the basis

of that appointment, on Resolutions 7, 8, 9, 10 and 11, being resolutions connected directly or indirectly with the remuneration of a member of Key Management Personnel for the Company if:

• the proxy is either:

• a member of Key Management Personnel for the Company; or

• a Closely Related Party or a member of Key Management Personnel; and

• the appointment does not specify the way the proxy is to vote on the Resolution.

However, for each of the eleven resolutions included in this Notice, the Company will not disregard a vote if:

• it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or

• it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

If the Proxy Form appoints the chair of the meeting as the proxy, but does not specify the way the proxy is to vote on the resolution and the appointment expressly authorises the chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of Key Management Personnel for the Company, the chair may vote the proxy. Further details regarding the appointment of the chair are included on the Proxy Form.

4 Section 250BD.

How to vote

You may vote at the Meeting in person, by proxy or, for a Shareholder who is a body corporate, by a corporate representative.

Voting in person

To vote in person, attend the Meeting on the date and at the time set out in the Notice. The Meeting will commence at 10.00am (Brisbane time) on Wednesday 10 October 2012.

Voting by proxy

A member who is entitled to attend and cast a vote at the Meeting is entitled to appoint a proxy. A proxy need not be a Member of Stanmore Coal. A form of appointment of proxy is enclosed with this Notice.

Proxies given by corporate shareholders must be executed in accordance with their constitutions, or signed by a duly authorised attorney.

If proxy holders vote, they must cast all directed proxies as directed and any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

An appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does:

• the proxy need not vote on a show of hands, but if the proxy does so, the

proxy must vote that way (ie as directed); and

• if the proxy has two or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and

• if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed);

• if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed);.

• If the proxy is also a Member, their appointment as a proxy does not affect the way that Member can cast any votes they hold as a Member.

All Proxy Forms will need to be lodged with the Company no later than 48 hours before commencement of the Meeting, being 10.00am (Brisbane time) on Monday 8 October 2012. Any Proxy Form received after that time will not be valid for the Meeting.

If you wish to appoint a proxy and are entitled to do so, then complete the enclosed Proxy Form in accordance with the instructions on it and return it to the Company’s share registry by the deadline for lodgement as follows:

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■ by using the reply paid envelope enclosed with this Notice;

■ by posting the Proxy Form to:

Computershare Investor Services Pty Limited

GPO Box 242 Melbourne

Victoria 3001 Australia

■ by faxing the Proxy Form to:

Computershare Investor Services Pty Limited

(within Australia)1800 783 447 (outside Australia) +61 3 9473 2555

Voting by corporate representatives

A corporate shareholder wishing to appoint a person to act as its representative at the Meeting must provide that person with an authority executed in accordance with the

company’s constitution and the Corporations Act authorising him or her to act as the company’s representative. The authority must be sent to the Company or its share registry in advance of the Meeting or handed in at the Meeting when registering as a corporate representative.

Right to vote

The Board has determined that, for the purposes of the Meeting, shares will be taken to be held by the persons who were the registered holders of those shares at 7.00pm (Brisbane time) on Monday 8 October 2012. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

Shareholder questions and comments

The chair of the Meeting will provide Shareholders with an opportunity at the meeting to ask questions and make comments.

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Explanatory Memorandum

Stanmore Coal Limited This Explanatory Memorandum has been prepared for the information of members of the Company in connection with the business to be conducted at the General Meeting of the Company to be held at Brisbane Polo Club, Naldham House, 193 Mary Street (Cnr Eagle & Felix Streets), Brisbane, Queensland on Wednesday 10 October 2012 commencing at 10.00am (Brisbane time).

The purpose of this Explanatory Memorandum is to provide information that the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions set out in the Notice. The Directors recommend Shareholders read the accompanying Notice and this Explanatory Memorandum in full before making any decision in relation to the Resolutions.

This Explanatory Memorandum forms part of and should be read in conjunction with the accompanying Notice. A number of words and terms used in this Explanatory Memorandum have defined meanings, which are set out in the glossary at the end of this document.


Background

Fundraising

On 28 June 2012, Stanmore Coal announced that it had secured $36.04 million through a placement and cooperation agreement with Greatgroup, an investment vehicle managed by Sprint Capital. Greatgroup has taken a significant investment stake in the Company. The fundraising comprises:

1 a $27.01 million placement of 40.02 million Shares at $0.675 per Share, consisting of:

a. the $12.98 million placement on 28 June 2012 of 19,228,887 Shares at $0.675 per Share (First Greatgroup Placement);

b. subject to Shareholder approval, a $14.03 million placement of 20,791,143 Shares at an issue price of $0.675 per Share (Second Greatgroup Placement); and

2 subject to Shareholder approval, $9.03 million of notes convertible into 13.37 million Shares at $0.675 per Share (Convertible Note Placement).

The Shares, which are the subject of the Second Greatgroup Placement and the Convertible Notes, will be issued within 5 Business Days of obtaining Shareholder approval.

Sprint Capital is a Hong Kong based private equity investment manager which targets mining and natural resources sector investments. The Stanmore Coal Board believes that partnering with Sprint Capital will provide Stanmore Coal with a solid basis from which it can pursue its growth objectives.

Under the cooperation and investment arrangement, Sprint Capital, through Greatgroup, has been appointed as a coal marketing manager for 15% of Stanmore Coal’s coal production and will explore other means to co-operate on future growth opportunities, including supporting the development of Stanmore Coal’s current project portfolio and cooperation for further investment in Queensland.

While, the initial term of the marketing agency will be five years from the date of first coal production, both parties have a long term view of the relationship evidenced by the ongoing nature of their cooperation arrangement under the Subscription Deed. Sprint Capital, Greatgroup and Stanmore Coal are committed to exploring other collaborative opportunities including funding for acquisitions and infrastructure development.

Anti-dilution rights – Investor Options

Also subject to Shareholder approval, Greatgroup will receive anti-dilution rights in the form of the Investor Options. The Investor Options are conditional options that will allow Greatgroup to preserve its 19.99%

5 Relevant Interest in Stanmore Coal, and its holding of Convertible Notes, which on

5 Subject to the maximum number of Shares and Option Notes that may be issued upon exercise of the Investor Options over

them, the number for which is calculated in accordance with the formula(s) set out in Schedule C, and the total of which are capped by the number of CS Options and Incentive Options.

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conversion would increase Greatgroup’s (and its Associate’s) Relevant Interest in Stanmore Coal to 25%

6. The Investor Options give Greatgroup the right to subscribe for new Shares and Option Notes

on:

• exercise (at any time) of any Incentive Options in whole or in part; and

• exercise of any CS Options. The CS Options were granted to Credit Suisse AG in accordance with the terms of the $25 million debt facility with Stanmore Coal and are subject to Shareholder approval (Resolution 5).

Subscription rights issued by Stanmore Coal to Greatgroup in connection with the Investor Options will allow Greatgroup to subscribe for Shares at the prevailing 60 day VWAP, and Convertible Notes with a conversion price at the prevailing 60 day VWAP. On each exercise of Incentive Options and CS Options in whole or in part, Stanmore Coal shall promptly provide Greatgroup with a notification. The relevant portion of the Investor Options will lapse:

• on the day after the day which is three months after such notification is given;

• if the Incentive Options or CS Options expire without being exercised, on the expiry of the Incentive Options or CS Options as relevant; or

• if the CS Options are exercised on or after 15 June 2015, ten Business Days after the CS Options are exercised.

Capital Structure

Below is a capital structure table which shows Stanmore Coal’s issued capital, assuming:

• shareholders approve Resolutions 2, 3 and 4 (but that the Convertible Notes are not converted and Investor Options are not exercised); and

• separately, conversion of the Convertible Notes (and assuming no other capital issue of Shares or securities convertible into Shares

7).

Capital Structure5

Pre-conversion of Convertible Notes (post Meeting approval)

# of Shares (m) % holding

Board & Management 42.3 21.14%

Institutional Investors 48.8 24.39%

Retail, private & Other 69.0 34.48%

Greatgroup (Sprint Capital) 40.0 19.99%

Total 200.1 100.00%

Capital Structure5

Post-conversion of Convertible Notes (c. 2014)

# of Shares (m) % holding

Board & Management 42.3 19.82%

Institutional Investors 48.8 22.86%

Retail, private & Other 69.0 32.32%

Greatgroup (Sprint Capital) 53.4 25.00%

Total 213.5 100.00%

A pro-forma balance sheet is included in Schedule A. Resolutions 1 through 4 ask Shareholders to approve the:

• First Greatgroup Placement which has already occurred (Resolution 1);

• proposed Second Greatgroup Placement (Resolution 2);

• proposed Convertible Note Placement to Greatgroup (Resolution 3); and

• proposed issue of Investor Options to Greatgroup (Resolution 4).

6 Subject to the maximum number of Shares and Option Notes that may be issued upon exercise of the Investor Options over

them, the number for which is calculated in accordance with the formula(s) set out in Schedule C, and the total of which are capped by the number of CS Options and Incentive Options. 7 The capital structure does not include any securities the subject of resolutions in Part E of this Notice.

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All of Resolutions 2, 3 and 4 must be approved in order for the Greatgroup funding to proceed unless Greatgroup and Stanmore Coal agree otherwise. All of these resolutions must be approved for Stanmore Coal to be in a position to meet its financial obligations leading up to execution of the TOP arrangements for the WICET, SBR and QRN infrastructure projects

Relevant Interest of Greatgroup

As a result of the First Greatgroup Placement, Greatgroup and its Associates hold a Relevant Interest in 10.72% of Stanmore Coal. If Shareholder approval is obtained for the Second Greatgroup Placement, Greatgroup and its Associates will hold a Relevant Interest in 19.99% of Stanmore Coal. If Shareholder approval for the Convertible Note Placement is obtained, and if all the Convertible Notes are converted into Shares (noting however the Convertible Notes cannot be converted into Shares until 27 June 2014

8), Greatgroup and its Associates will have a Relevant Interest in 25% of

Stanmore Coal9.

Stanmore Coal is seeking two approvals in relation to the Convertible Note Placement; one at this meeting in accordance with Stanmore Coal’s separate obligation under the Subscription Deed to seek Shareholder approval to enable the issue of the Convertible Notes to Greatgroup; and a second approval which Stanmore Coal intends to seek at its AGM and which is required under the Corporations Act to enable Greatgroup’s and its Associates’ Relevant Interest in Stanmore Coal to increase above 19.99% to 25% (through the conversion of the Convertible Notes into Shares although such conversion can only occur after 27 June 2014). This statutory approval is being sought at the AGM to enable Stanmore Coal sufficient time to engage an independent expert to prepare an Independent Expert’s Report in relation to Greatgroup and its Associates increasing their Relevant Interest to 25%.

The Independent Expert’s Report will be provided to Shareholders in connection with the second approval. The expert will be asked to consider whether, in its opinion, Greatgroup and its Associates increasing its Relevant Interest to 25% is fair and reasonable to Shareholders other than Greatgroup and its Associates.

If Shareholder Approval is obtained for the Second Greatgroup Placement (and consequently Greatgroup and its Associates will hold a Relevant Interest in 19.99% of Stanmore Coal), Greatgroup and its Associates will not be able to increase their Relevant Interest to 20% or greater without Shareholder approval for the purposes of the Corporations Act

10 (which will be sought at the

upcoming AGM), unless it makes a takeover bid for all the Shares in Stanmore Coal or an exemption applies, such as the "creep" exemption described below.

If, at the AGM, Shareholders approve Greatgroup and its Associates increasing their Relevant Interest in Stanmore Coal on conversion of the Convertible Notes, Greatgroup and its Associates will be able to increase their Relevant Interest in Stanmore Coal to 25% without making a takeover bid for all the Shares in Stanmore Coal. Effectively, Greatgroup will be able to convert all of the Convertible Notes, representing a further 5.01% Relevant Interest (assuming no further Shares are acquired by Greatgroup or its Associates and no dilutive new Shares are issued by Stanmore Coal), during the 12 month period from 27 June 2014, being the first date on which the Convertible Notes become capable of conversion.

If the approval to increase Greatgroup’s Relevant Interest is not obtained at the AGM but approval for the issue of the Convertible Notes is obtained at this Meeting, Greatgroup will still be entitled, under the statutory “creep” exemption

11, to increase its Relevant Interest and Voting Power in Stanmore

Coal in every six month period from the date of the Second Greatgroup Placement by a further 3% over the Voting Power Greatgroup held in the six months prior to that increase, provided they had Voting Power in Stanmore Coal of at least 19% throughout the prior six month period

12.

In addition, Stanmore Coal is required to use its best endeavours to ensure that Greatgroup has an opportunity to participate on a pro rata basis in any offer of Shares or other securities (other than those the subject of this Notice of Meeting) by Stanmore Coal in the two years after the date of the Subscription Deed.

8 Other than in circumstances where there is a change of control, in which case the Convertible Notes will automatically convert into Shares. 9 Assuming no further Shares are issued in Stanmore Coal between the date of this Notice of Meeting and conversion of the Convertible Notes. 10 Section 611(7) of the Corporations Act. 11 Section 611(9) of the Corporations Act. 12 Section 611(9) of the Corporations Act.

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Intentions of Greatgroup

As at the date of this Notice, Greatgroup’s intentions as a substantial shareholder in Stanmore Coal are to increase its shareholding in the Company to 19.99%, and subject to shareholder approval, to increase that Relevant Interest to 25%, and to maintain its representation on the Stanmore Coal Board through its right to appoint a nominee director. In addition, Greatgroup intends to continue to develop its strategic relationship with Stanmore Coal through its marketing agency and co-operation arrangements under the Subscription Deed. Otherwise, Greatgroup does not currently intend to change the operation or management of Stanmore Coal.

Fundraising impact

The investment by Sprint Capital, through Greatgroup, has enabled Stanmore Coal to manage the scale of Stanmore Coal’s debt facilities, thereby preserving its potential capacity to access debt funding in the future and maintain lower debt to equity ratios. The funds raised, and that will be raised, if the Greatgroup investment is approved by shareholders, combined with the Credit Suisse AG debt facility are sufficient to enable Stanmore Coal to fund its bid bond and equity contributions associated with securing rail and port infrastructure prior to signing TOP contracts.

The Credit Suisse AG facility requires Stanmore Coal to raise additional capital of $25 million by 31 October 2012. If this is not achieved and a rectification plan cannot be agreed between Credit Suisse AG and Stanmore Coal, Credit Suisse AG may, under its review event rights, require Stanmore Coal to repay all or part of the drawn facility amounts. If Shareholders approve the various issues of securities to Greatgroup at this Meeting, Stanmore Coal will be able to satisfy the capital requirement under the Credit Suisse AG debt facility. If this were to occur, Stanmore Coal would need to identify alternative funding measures to meet its current commitments under the WICET, SBR and QRN infrastructure projects prior to execution of the TOP contracts.


Resolution 1 seeks Shareholder approval and ratification for the prior issue to Greatgroup of 19,228,887 Shares at an issue price of $0.675 per Share.

Listing Rules

The Listing Rules13

, subject to certain exceptions (none of which are relevant for the present purposes), require prior approval of shareholders for an issue of securities if the securities will, when aggregated with all other issues during the previous 12 months, exceed 15% of the number of shares on issue at the commencement of that 12 month period.

Where shareholders subsequently approve an issue of securities, the issue will be treated as having been made with approval for the purpose of the Listing Rules

14, thereby replenishing the company’s

15% capacity and enabling it to issue further securities.

The Shares issued under the First Greatgroup Placement did not exceed the 15% limit. If Shareholders approve the issue of the Shares under the First Greatgroup Placement, this will replenish part of the Company’s 15% capacity, which will give the Company flexibility to issue further securities in the next 12 months up to the 15% limit without the need for prior Shareholder approval.

Regulatory information

The following information is provided in compliance with the Listing Rules15

.

Shares

Date of issue and allotment 29 June 2012.

Number of securities 19,228,887 Shares.

Issue price $0.675 per Share.

Terms of issue The Shares are fully paid ordinary shares in the Company, which, from their date of issue, will rank equally with, and have identical rights to, all other Shares and will be quoted on ASX.

Names of allottees or basis on which allottees determined

Greatgroup.

13 Listing Rule 7.1. 14 Listing Rule 7.1. 15 Listing Rule 7.5.

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Directors’ recommendation

The Directors unanimously recommend that you vote in favour of Resolution 1.

Resolutions 2 and 3: Approval for proposed issue of Shares to Greatgroup and for proposed issue of Convertible Notes to Greatgroup

Resolutions 2 and 3 seek Shareholder approval for the issue of 20,791,143 Shares at an issue price of $0.675 per Share and 13,373,377 Convertible Notes to Greatgroup, with the principal amount of $9,027,029.48 convertible into 13,373,377 Shares, pursuant to the terms of the Subscription Deed.

Listing Rules

Subject to certain exceptions (none of which are relevant for the present purposes), shareholder approval is required for an issue of securities if the securities will, when aggregated with all other issues during the previous 12 months, exceed 15% of the number of fully paid ordinary shares on issue at the commencement of that 12 month period

16.

As the issue of these securities would result in the Company exceeding the 15% limit, Shareholder approval is sought under Resolutions 2 and 3 for the issue of the securities under the Subscription Deed. This will give the Company flexibility to issue further securities in the next 12 months up to the 15% limit without the need for prior Shareholder approval.



.

Shares

Date of issue and allotment Five Business Days after the approval is obtained in accordance with the terms of the Subscription Deed, and in any event no later than three months after the approval is obtained.



Terms of issue The Shares are fully paid ordinary shares in the Company which, from the date of issue, will rank equally with, and have identical rights to, all other fully paid ordinary shares in the Company and will be quoted on ASX.


Greatgroup.

Convertible Notes

Date of issue and allotment Five Business Days after the approval is obtained in accordance with the terms of the Subscription Deed, and in any event no later than three months after the approval is obtained.

Number of securities 13,373,377 Convertible Notes, convertible into 13,373,377 Shares.

Face value Total amount of $9,027,029.48, reflecting a face value of $0.675 per Convertible Note.

Terms of issue The conversion period commences on 27 June 2014. The Convertible Notes mature:

• for those Convertible Notes issued on exercise of Investor Options as a result of the exercise of the CS Options on or after 15 June 2015, ten Business Days after the relevant CS Options are exercised; and

• otherwise on 27 June 2015.

The full terms of the Convertible Notes are contained in Schedule B.


Greatgroup.

16 Listing Rule 7.1. 17 Listing Rule 7.3.

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The Directors unanimously recommend that you vote in favour of Resolutions 2 and 3.


Resolution 4 seeks Shareholder approval for the issue of the Investor Options to Greatgroup pursuant to the terms of the Subscription Deed.

Listing Rules

Subject to certain exceptions (none of which are relevant for the present purposes), shareholder approval is required for an issue of securities if the securities will, when aggregated with all other issues during the previous 12 months, exceed 15% of the number of fully paid ordinary shares on issue at the commencement of that 12 month period

18.

Shareholder approval is sought under Resolution 4 for the issue of the Investor Options under the Subscription Deed. This will give the Company flexibility to issue further securities in the next 12 months up to the 15% limit without the need for prior Shareholder approval.



.

Investor Options

Date of issue and allotment The Investor Options will be issued as soon as possible following Shareholder approval being obtained at the Meeting, and in any event within three months of the date of the Meeting.

Number of securities 5,875,727 Investor Options exercisable over a maximum of 5,875,727 Shares.

1,472,606 Investor Options exercisable over a maximum of 1,472,606 Option Notes.

Issue price Nil.

Exercise Price In relation to Investor Options, regardless of whether they are exercisable over Shares or Option Notes, the volume weighted average price (VWAP) of the Company’s Shares on the ASX (including special crossings) on the 60 Trading Days immediately before the date on which a subscription notice is given to the Company to exercise any Investor Options by Greatgroup.

Terms of issue Upon exercise of the Investor Options over Shares, Shares will be issued which are fully paid ordinary shares, ranking equally, and having identical rights to, all other fully paid ordinary shares in the Company from the date of issue and will be quoted on ASX.

Upon exercise of the Investor Options over Option Notes, Option Notes will be issued.

The full terms of the Investor Options are contained in Schedule C of this Notice.

Lapse On each exercise of Incentive Options and CS Options in whole or in part, Stanmore Coal shall promptly provide Greatgroup with a notification.

The relevant portion of the Investor Options will lapse:

• on the day after the day which is three months after such notification is given;

• if the Incentive Options or CS Options expire without being exercised, on the expiry of the Incentive Options or CS Options as relevant; or

• if the CS Options are exercised on or after 15 June 2015, ten Business Days after the CS Options are exercised.


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Background

On 28 June 2012, the Company announced that it had obtained $25 million debt funding from Credit Suisse AG and had agreed to issue the CS Options to Credit Suisse AG on the terms set out in this Resolution.

The Option Deed was entered into and the CS Options were agreed to be granted by the Company as an incentive for Credit Suisse AG to provide the debt funding and to enter into the debt Facility Agreement. Consistent with the ASX announcement dated 28 June 2012, it is a term of the CS Options that they will only become Equity Settled CS Options, and capable of being exercisable for Shares, once the shareholder approvals described below have been obtained and 14 days have passed after the Company and its Subsidiaries have lodged the required statutory notices with ASIC.

The $25 million facility is available for drawdown by Stanmore Coal at any time, and will be drawn down as and when the Company requires funding to meet its current commitments under the WICET, SBR and QRN infrastructure projects prior to execution of the TOP contracts.

The Company and its Subsidiaries also gave certain undertakings and the Company’s Subsidiaries have an interlocking guarantee and indemnity for the repayment of money that may become owing, and to provide credit support for (among other things) their respective obligations under the Facility Agreement and any related document (including the Option Deed and the CS Options). The Company and its Subsidiaries granted Security Interests in respect of all their assets to secure their obligations under the Facility Agreement (including the guarantee and indemnity described above) and any related document (including the Option Deed and the CS Options). The Security Interests included a general security agreement provided by each of the Company and the Subsidiaries over all their assets and mortgages over mining tenements held by the Company or its Subsidiaries.

As the performance of the Company’s obligations under the Option Deed and the CS Options are secured by the Security Interests and other Finance Documents, and because of the operation of the financial assistance provisions of the Corporations Act, it is possible that the Company and its Subsidiaries may be considered to be financially assisting Credit Suisse AG to acquire the Equity Settled Options and the Shares in Stanmore Coal if Shares are issued to Credit Suisse AG on exercise of the Equity Settled CS Options.

The terms of the CS Options provide that the Company’s right to issue Shares on exercise of the Equity Settled CS Options is conditional on:

(a) the issue of Equity Settled CS Options being approved by the Shareholders pursuant to the Listing Rules

20; and

(b) the financial assistance being approved by the members of the Company and each Subsidiary in accordance with the Corporations Act

21 and 14 days has elapsed after the

Company and each Subsidiary has lodged with ASIC a notice relating to the approval required by the Corporations Act

22.

If Shareholder approval for the issue of Equity Settled CS Options is not obtained, on exercise of the CS Options by Credit Suisse AG, the Company will be required to pay Credit Suisse AG in cash the value of the CS Options being the difference between the exercise price (being the five day VWAP of Shares on the day prior to the date the exercise notice is delivered) and $0.518.

Cash settlement of the CS Options will reduce the amount of cash flow available to or otherwise place cash flow constraints on the Company. In comparison, issuing Shares on the exercise of the Equity Settled CS Options would result in greater cash flow flexibility and less financial constraints for the Company and its Subsidiaries.

20

Listing Rule 7.1. 21 Part 2J.3. 22 Section 260B(6).

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Resolution 5 – Approval for proposed issue of Equity Settled CS Options to Credit Suisse AG and approval for financial assistance

Listing Rules

The Listing Rules23

, subject to certain exceptions (none of which are relevant for the present purposes), require prior approval of shareholders for an issue of securities if the securities will, when aggregated with all other issues during the previous 12 months, exceed 15% of the number of fully paid ordinary shares on issue at the commencement of that 12 month period.

As the issue of the Equity Settled CS Options would result in the Company exceeding the 15% limit, Shareholder approval is sought under Resolution 5 for the issue of the Equity Settled CS Options under the Facility Agreement. This will give the Company flexibility to issue further securities in the next 12 months up to the 15% limit without the need for prior Shareholder approval.



.

Equity Settled CS Options

Date of issue and allotment

The Equity Settled CS Options will be issued and allotted as soon as possible following Shareholder approval being obtained at the Meeting and 14 days have passed after the Company and its Subsidiaries have lodged the required statutory notices with ASIC. The Equity Settled CS Options will be issued within three months of the date of the Meeting.

Number of securities 11,670,000 Equity Settled CS Options.

Issue price Nil.

Exercise Price $0.518 per Equity Settled CS Option.

Terms of issue The full terms of the Equity Settled CS Options are contained in Schedule D of this Notice.

Lapse The Equity Settled CS Options lapse at 5.00pm (Sydney time) on 26 June 2015.

Use of funds The Equity Settled CS Options were agreed to be granted as an incentive for Credit Suisse AG to enter into the debt Facility Agreement under which Credit Suisse AG agrees to provide funding to Stanmore Coal. The funds raised from the exercise of the Equity Settled CS Options will be applied by Stanmore Coal funding of port and rail infrastructure commitments and general working capital requirements.

Corporations Act

The Corporations Act25

provides that a company may financially assist a person to acquire shares (or units of shares) in the company, or its holding company, only in certain circumstances, one of which is where the financial assistance is approved by its members.

The financial assistance may be approved by a special resolution passed at a general meeting of the holding company (with no votes being cast in favour of the resolution by a person acquiring the shares, or units of shares, or by their Associates)

26.

Effects of the financial assistance

The adverse effects on the Company and each Subsidiary providing the Security Interests and otherwise entering into the Finance Documents are that:

1 it may impact on the ability of the Company, each Subsidiary or the Group as a whole to borrow money in the future because a financier may be deterred by the existence of the Security Interests from making finance available;

2 if the Company fails to pay amounts due or perform its obligations under the Facility Agreement, the CS Options, the Option Deed or the other related documents, then Credit Suisse AG may seek to enforce the Security Interests and other Finance Documents against the Company and/or the Subsidiaries. This will have an adverse impact on the financial position of the Company, the Subsidiaries and the Group as a whole; and

23 Listing Rule 7.1. 24 Listing Rule 7.3. 25 Section 260A. 26 Section 260B(1) and (2).

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3 in the event of the winding up of the Company or the Subsidiaries, Credit Suisse AG will rank ahead of the members of the Company and the Subsidiaries with respect to any amounts payable in connection with the Facility Agreement, the CS Options, the Option Deed and the other Finance Documents.

However, the Board has considered the Company’s balance sheet and cash flow projections and does not consider that the Company will have any cause to default on any of its obligations under the Facility Agreement, the CS Options, the Option Deed or the other related documents that may cause the Security Interests and other Finance Documents to be enforced against the Company or any of its Subsidiaries.

In addition, the Board considers that the Company will benefit from being able to issue Shares on exercise of the CS Options because it will present the Group with greater cash flow flexibility as compared with cash settling the CS Options.

Accordingly, the Board has concluded that:

1 the giving of financial assistance and entry into the Finance Documents will not materially prejudice the interests of the Company, its Subsidiaries or its members; and

2 the giving of financial assistance and entry into the Finance Documents is in the best interests, and for the corporate benefit, of the Company, its Subsidiaries and its members because (among other things):

a. the expected cash flows of the Company and its Subsidiaries will be more secure, and the Company will have increased flexibility to obtain future debt financing; and

b. if the Company is unable to issue Shares on exercise of the CS Options, the amount of cash flow available to the Company and the Subsidiaries to develop The Range Project will be reduced.




Resolution 6 – Ratification of prior issue of Shares pursuant to January Placement

Background

On 19 January 2012, Stanmore Coal announced it had successfully raised $10 million through the offer of a share purchase plan and subsequent placement (SPP and Placement). Due to the strong level of demand for Shares in Stanmore Coal under the SPP and Placement, a further placement (January Placement) of Shares was conducted, resulting in the placement of 3,736,486 Shares to institutional and sophisticated investors at $0.74 per Share, being the same price at which the SPP and Placement were conducted. The January Placement occurred on 27 January 2012 and raised approximately $2.8 million.

The Company seeks Shareholder approval for the issue of Shares under January Placement.

Listing Rules

The Listing Rules27

, subject to certain exceptions (none of which are relevant for the present purposes), require prior approval of shareholders for an issue of securities if the securities will, when aggregated with all other issues during the previous 12 months, exceed 15% of the number of fully paid ordinary shares on issue at the commencement of that 12 month period.

Where shareholders subsequently approve an issue of securities, the issue will be treated as having been made with approval for the purpose of the Listing Rules

28, thereby replenishing the company’s

15% capacity and enabling it to issue further securities.

The Shares issued under the January Placement did not exceed the 15% limit. Shareholder approval is sought under Resolution 6 for the prior issue of the Shares under the January Placement, to replenish part of the Company’s 15% capacity, which will give the Company flexibility to issue further securities in the next 12 months up to the 15% limit without the need for prior Shareholder approval.


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.

January Placement

Date of issue 27 January 2012.



Terms of issue The Shares were issued as fully paid ordinary shares, ranking equally with all other ordinary shares from the date of issue and having identical rights to existing ordinary shares and are quoted on ASX.


The Shares were issued to a number of institutional and sophisticated investors identified to the Company, by RBS Morgans Limited under mandate.

Use of funds To fund a definitive feasibility study at The Range, continuing exploration at other key projects of the Company, initial stage funding of port and rail infrastructure commitments and general working capital requirements.




Background

Stanmore Coal seeks to incentivise all of its employees through incentive schemes. The Board considers the use of such incentives is a reasonable means of remunerating employees, on the basis that they:

• encourage share ownership and aligns, in part, remuneration with the future growth and prospects of the Company, and in turn, encourages employees to drive toward the realisation of shareholder value;

• provide flexibility to the Company to actively manage the way in which it remunerates and incentivises employees;

• preserve the Company’s cash resources; and

• contribute toward the attraction and retention of skilled talent in a competitive employment market.

The Board believes that the future success of the Company will depend in large part on the skills and motivation of the people employed in the business and their ownership interest in the Company.

Resolutions 7 and 8: Approval for Stanmore Coal Director and Employee Share Plan (Share Plan) / Approval for Stanmore Coal Director and Employee Incentive Plan (Incentive Plan)

Background

It is the expectation of stakeholders and industry participants that the Company’s remuneration framework should provide competitive and appropriate remuneration so that the Company can attract and retain skilled employees and motivate them to improve Company performance. The Board believes that the introduction of incentive plans under which employees may be eligible to receive securities in Stanmore Coal will align the interests of employees with those of the Company and its Shareholders.

The Board sought independent advice from a remuneration consultant regarding the structure of the plans and the terms on which the incentives are to be offered, as well as benchmarking against identified competitor companies in the mining sector.

29

Listing Rule 7.5.

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Having regard to this advice, the Board proposes to adopt a remuneration scheme which offers tiered participation in a STI scheme, the Stanmore Coal Director and Employee Share Plan (Share Plan), and a LTI scheme, the Stanmore Coal Director and Employee Incentive Plan (Incentive Plan).

The maximum entitlement that an employee can earn is determined by reference to their seniority and strategic contribution to the business.

The Share Plan offers eligible employees, including executive Directors30

, the opportunity to participate in the Company’s STI scheme to allow them to earn additional remuneration up to 30% of their base remuneration each year and issued annually. Earning this incentive is conditional upon the fulfilment of specified performance criteria, which include contribution to total shareholder return, individual performance criteria tailored for the employee, safety, and discretionary criteria determined by a direct supervisor. 60% of the STI to which an employee may be entitled will be satisfied by the issue of Shares (based on the VWAP for Shares for the five days prior to issue), with the balance (40%) being satisfied by cash payment.

The Incentive Plan offers long term incentives to employees, including executive Directors31

, in the form of Options over Shares and Performance Rights over Shares, representing up to 20% of their base remuneration each year and issued annually. The Board’s current intention is to issue Options that are exercisable at a 34% premium to the VWAP for Stanmore Shares for the five days immediately prior to the issue and can be exercised one year from issue. Employees who make significant strategic contributions to the achievement of key organisational objectives will also have the opportunity to receive awards of Performance Rights. The Performance Rights are to be issued for nil consideration and will vest upon the achievement of key strategic milestones by Stanmore Coal.

The Company does not intend to issue more than an aggregate of 5% of its share capital, from time to time, under the plans.

The Share Plan and Incentive Plan each aim to more closely align rewards for performance with the achievement of the Company’s growth and strategic objectives for financial year 2013 and beyond.

Listing Rules

The Listing Rules generally restrict listed companies from issuing more than 15% of their issued share capital in any 12 month period without shareholder approval

32.

There are however, a number of exceptions to this restriction, one of which states that general Listing Rule requirements for shareholder approval

33 will not apply to an issue under an employee incentive

scheme (i.e. the Share Plan and the Incentive Plan), if within three years before the date of the issue, shareholders approved the issue of securities under the scheme as an exception to this rule

34.

If the Share Plan and the Incentive Plan are each approved by Shareholders, future issues under the plans will fall under the Listing Rule exemption.

35 This means that the Company will be able to issue

securities under the Share Plan and the Incentive Plan which will be exempt from counting towards the Company’s 15% threshold limit.

However, this exception does not apply to issues to directors and their associates36

, which issues will require separate approval.

If Resolutions 7 and 8 are approved, the approval will be valid for three years from the date it is obtained and must be refreshed in subsequent years in order for the Company to be able to rely on the Listing Rule exception

37.


As it is the first time that approval is being sought for the Share Plan and the Incentive Plan, no Shares, Options or Performance Rights have been issued under either plan as at the date of this Notice.

Resolutions 7 and 8 of this Notice do however seek Shareholder approval for the issue of Shares, Performance Rights and Options under the Share Plan and the Incentive Plan, to Nicholas Jorss.

30

Non-executive Directors are not eligible to participate in the Share Plan. 31

Non-executive Directors are not eligible to participate in the Incentive Plan. 32 Listing Rule 7.1. 33 Listing Rule 7.1. 34 Listing Rule 7.2 Exception 9(b). 35 Listing Rule 7.2 Exception 9(b). 36 Listing Rule 10.14 also extends to a person whose relationship with the company, a director or an associate of a director is, in ASX’s opinion, such that approval should be obtained. 37 Listing Rule 7.2 Exception 9(b).

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In compliance with the Listing Rules38

, a summary of each of the Share Plan and the Incentive Plan rules are sent out in Schedule E of the this Notice.


The Directors (Nicholas Jorss abstaining) unanimously recommend that you vote in favour of Resolutions 7 and 8.


Stanmore Coal seeks to incentivise all employees through STI and LTI schemes, which it extends to executive directors, under the Share Plan and the Incentive Plan respectively.

As an executive director of Stanmore Coal, Nicholas Jorss is an eligible employee for the purposes of the Share Plan and the Incentive Plan and is therefore eligible to participate under them. The terms on which it is proposed that Nicholas Jorss receive Shares, Options and Performance Rights are on broadly the same terms on which Stanmore Coal employees are incentivised.

The Board considers the proposed issue of Shares, Options and Performance Rights is reasonable and appropriate given:

• his relevant skills, which include more than 20 years of investment banking, engineering and project management experience, and which are relevant to the Company’s circumstances and its ability to realise shareholder value in the future;

• his contribution to the Company’s growth as a founding director; and

• benchmarking against identified competitor companies in the mining sector.

The proposed issue of Shares to Nicholas Jorss represent short term incentives, and the proposed issue of Options and Performance Rights represent long term incentives and would form part of the remuneration arrangements agreed by Stanmore Coal with Nicholas Jorss (subject to Shareholder approval).

In respect of the initial grants to Nicholas Jorss, the Board has determined that only 50% of his total potential STI and LTI entitlements will be granted to him.

The Board, having considered independent advice from a remuneration consultant regarding the structure of the plans and the terms on which the incentives are to be offered, as well as benchmarking data, believes the proposed issue of Shares, Options and Performance Rights to Nicholas Jorss is reasonable in the circumstances. The Board considers it is appropriate to rely on the reasonable remuneration

39 exception under the requirement to obtain shareholder approval for a

financial benefit to be given to a director40

.


Resolution 9 seeks Shareholder approval for the issue of Shares to Nicholas Jorss under the Share Plan as part of his short term incentive.

Listing Rules

Securities cannot be issued to a director under an employee incentive scheme without first obtaining shareholder approval

41.

Stanmore Coal has obtained an ASX waiver from compliance with the requirements of the Listing Rules

42 which allows Stanmore Coal not to include in this Notice of Meeting the maximum number of

Shares that will be granted to Nicholas Jorss in respect of each of the calendar years ending 31 December 2013, 31 December 2014 and 31 December 2015 on the basis that the Notice of Meeting sets out the method by which the number of Shares will be calculated in respect of each of those calendar years. This approval, if given, will last for three years.

38 Listing Rule 7.2 Exception 9(b). 39 Section 211 of the Corporations Act. 40 Section 208 of the Corporations Act. 41 If approval is given under Listing Rule 10.14, approval is not required under Listing Rule 7.1. 42 Listing Rule 10.15A.2.

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.

Issue date Dates to be determined by the Board, but in any event no later than three years after the approval is given at the Meeting. Thereafter, any further issues will require prior Shareholder approval.

STI entitlements will be assessed against the Performance Conditions in January of each year for the prior calendar year and, if satisfied, the applicable STI entitlement will be issued as soon as possible thereafter.

Loan terms There are no applicable loan terms.

Security details The details of any Shares issued under the Share Plan will be published in each Stanmore Annual Report relating to a period in which Shares have been issued. The Annual Report will also state that approval for the issue of Shares was obtained under Listing Rule 10.14.

Additional persons

Any additional persons who become entitled to participate in the Share Plan after the Resolution is approved and who were not named in this Notice will not participate until approval is obtained under Listing Rule 10.14.

Value of Short Term Incentive (STI) entitlement

Nicholas Jorss’ maximum STI entitlement will be equal to the value of up to 30% of his fixed remuneration for the year, subject to the satisfaction of the Performance Conditions. As determined by the Board, for the first calendar year, only 50% of Nicholas Jorss’ total STI entitlement will be granted to him, subject to satisfaction of the Performance Conditions (described below). The STI will be delivered in two components: Shares and cash.

Share component

Up to 60% of the value of Nicholas Jorss’ STI will be settled in Shares.

The number of shares will be calculated as follows:

Value of Shares = Maximum STI entitlement x 60% (being the maximum)

Number of Shares = Value of Shares ÷ Issue Price

Issue Price = five day volume weighted average price of the Company’s Shares prior to the date of issue.

Cash component

The balance of Nicholas Jorss’ STI will be paid in cash. No cash will be payable by Nicholas Jorss for the issue of Shares as part of his STI.

Example STI entitlement

Set out below is an example of the calculation of Nicholas Jorss’ STI entitlement, assuming his current base salary of $380,000 per annum and a five day VWAP of $0.36.

Maximum STI amount 30%

Amount to be paid in Shares 60%

Maximum amount in Shares 18%

Value of Shares to be granted

$ 68,400

Hypothetical five day VWAP of Shares

$ 0.36

STI entitlement (in Shares)

190,000

Maximum STI entitlement

Performance Conditions

Nicholas Jorss’ Share entitlement is subject to the satisfaction of Performance Conditions,

Whilst it is not necessary for all Performance Conditions to be satisfied in order to achieve an STI entitlement, each of the Performance Conditions will be attributed a relative weighting to the overall maximum STI entitlement. These weightings will be agreed with the Chairman on an annual basis. For the current STI Period, the applicable weightings are total shareholder return (25%), safety (25%), individual (20%) and discretionary (30%). These weightings may vary for the next STI Performance Period.

Further detail of each of the Performance Conditions is set out below.

Safety 100% of the safety related component is payable in the event there are no fatalities and the Company’s total recordable) total reportable injury frequency rate (TRIFR) is maintained in

43 Listing Rule 10.15A.

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the STI Performance Period at or below coal industry standards as reported by the Department of Mines and Energy.

Individual Satisfaction of individual key performance indicators agreed with the Chairman on an annual basis.

Discretionary Satisfaction of the discretionary component will be determined in the discretion of the Chairman, by reference to both your individual and the Company’s general performance for the STI Performance Period.

Total Shareholder Return (TSR)

The total shareholder return component is payable on a sliding scale by reference to the Company’s TSR performance in the STI Performance Period compared with the Company’s Competitor Group as follows:

Company TSR position

relative to Competitor Group

Percentage of TSR

component earned

Equal to or greater than 80th

percentile

100%

From the 67th up to the 80th

percentile

50%

From the 50th up to the 67th

percentile

20%

Competitor Group means the following group of companies in the mining sector (subject to annual review):

• Carabella Resources (CLR);

• Bandanna Energy Limited (BND);

• Nucoal Resources Limited(NCR);

• Endocoal Limited (EOC);

• Guilford Coal Limited(GUF);

• Metrocoal Limited (MTE);

• Cockatoo Coal Limited (COK); and

• Cokal Limited (CKA).


The Directors (Nicholas Jorss abstaining) unanimously recommend that you vote in favour of Resolution 9.


Resolution 10 seeks Shareholder approval for the issue of Options, and Shares issued on exercise of the Options, to Nicholas Jorss under the Incentive Plan as part of his long term incentive.

Listing Rules

Securities cannot be issued to a Director under an employee incentive scheme without first obtaining Shareholder approval

44.

The purpose of Resolution 10 is to seek approval in accordance with the Listing Rules45

of the issue of Options, and Shares issued on exercise of the Options, to Nicholas Jorss, Managing Director of Stanmore Coal.

Stanmore has obtained an ASX waiver from compliance with the requirements of Listing Rules46

to allow Stanmore Coal to not include in this Notice of Meeting the maximum number of Options that will

44 If approval is given under Listing Rule 10.14, approval is not required under Listing Rule 7.1. 45 Listing Rule 10.14.

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be granted to Nicholas Jorss in respect of each of the financial years ending 30 June 2013, 30 June 2014 and 30 June 2015 on the basis that the Notice of Meeting sets out the method by which the number of Options will be calculated in respect of each of those financial years.



.

Maximum number of securities

The maximum number of Options (representing his LTI entitlement48

) which Nicholas Jorss will be entitled to receive is that number of Options which is equal to the value of up to 20% of his fixed remuneration (in the relevant financial year), subject to the satisfaction of the Vesting Conditions. As determined by the Board, for the first financial year, only 50% of Nicholas Jorss’ total potential LTI Option entitlement will be granted to him. One Share will be issued upon conversion of each Option.

Issue Price The Options will be issued for nil consideration on the basis their issue represents an incentive for future performance, but will be subject to a Vesting Condition (being continued employment), and an Exercise Price.

Exercise Price A 34% premium to the VWAP of the Company’s Shares for the five days prior to the date of issue of the Options (Issue Date).

Example Exercise Price

Set out below is an example of the calculation of the Exercise Price, assuming the Exercise Price is calculated at the date of this offer.

Five day VWAP = $0.36

Premium = $0.36 x 0.34%

Exercise Price = $0.36 + $0.12 (rounded down)

Accordingly, in this example, the Exercise Price would be $0.48 per Option.

Example LTI entitlement

Set out below is an example of the calculation of Nicholas Jorss’ LTI entitlement to Options, assuming a base salary of $380,000 per annum and a five day VWAP of $0.36.

LTI portion of salary 20%

Value of Options to be granted

$ 76,000

Hypothetical 5 VWAP of Shares $ 0.36

Exercise Price @ 34% Premium $ 0.48

Potential value of one Option $ 0.12

(Using Black Scholes Methodology)

LTI entitlement (in Options)

633,333

Exercise Date Subject to the rules of the Plan, the Options will be exercisable on or after the one year anniversary of the Issue Date.

Vesting Condition

The Board retains the right to cancel unvested Options in the event Nicholas Jorss ceases employment due to termination or resignation.

Change of Control

If, in the opinion of the Board, a Change of Control Event has occurred, or is likely to occur, the Board may declare an Option to be free of any Vesting Conditions and Options which are so declared may, subject to any other rule, be exercised at any time on or before the relevant Expiry Date and in any number.

Expiry Date If not exercised, the Options will automatically lapse two years from the date of issue.

Issue Date Options under the Incentive Plan will be issued to Nicholas Jorss as soon as possible after the end of the relevant financial year, and in any event, no later than three years after the date of the Meeting.


46 Listing Rule 10.15A.2. 47 Listing Rule 10.15A. 48 In addition to the Performance Rights proposed to be issued under Resolution 11.

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Security details The details of any Options issued under the Incentive Plan will be published in each Stanmore Annual Report relating to a period in which Options have been issued. The Annual Report will also state that approval for the issue of Options was obtained under the Listing Rules

49.

Additional persons

Any additional persons who become entitled to participate in the Incentive Plan after the Resolution is approved and who were not named in this Notice will not participate until approval is obtained under Listing Rule 10.14.




Resolution 11 seeks Shareholder approval for the issue of Performance Rights, and Shares issued on exercise of the Performance Rights, to Nicholas Jorss under the Incentive Plan, as part of his long term incentive arrangements.

Listing Rules

Securities cannot be issued to a Director under an employee incentive scheme without first obtaining Shareholder approval

50.

The purpose of Resolution 11 is to seek approval in accordance with the Listing Rules51

of the issue of Performance Rights, and Shares issued on exercise of the Performance Rights, to Nicholas Jorss, Managing Director of Stanmore Coal.



.

Maximum number of securities

500,000 Performance Rights, which are to be issued in two tranches of 250,000 (Tranche One and Tranche Two), each having different Vesting Conditions.

Each Performance Right is exercisable, subject to the Vesting Conditions and during the applicable period for exercise, for one Share.

Issue Price The Performance Rights will be issued for nil consideration on the basis their issue represents an incentive for future performance, and will be subject to performance based Vesting Conditions.

Exercise Price It is a term of the Incentive Plan that Performance Rights have a nil exercise price.

Exercise Date Subject to the rules of the Plan and satisfaction of the applicable Vesting Conditions, the Performance Rights will be exercisable on or after the one year anniversary of the Issue Date.

Vesting Condition

The Tranche One Performance Rights will vest subject to the grant of the mining lease for the tenement at The Range project.

The Tranche Two Performance Rights will vest subject to first commercial coal production at The Range project occurring.

The Board retains the right to cancel unvested Performance Rights in the event Nicholas Jorss ceases employment due to termination or resignation.

Change of Control

If, in the opinion of the Board, a Change of Control Event has occurred, or is likely to occur, the Board may declare a Performance Right to be free of any Vesting Conditions and Performance Rights which are so declared may, subject to any other rule, be exercised at any time on or before the relevant Expiry Date and in any number.

Expiry Date If not exercised, the Performance Rights, being both Tranche One and Tranche Two, will automatically lapse on 30 June 2020.

Issue Date The Performance Rights under the Incentive Plan will be issued to Nicholas Jorss as soon as possible after the Meeting, and in any event, no later than one month after the date of the Meeting.

49 Listing Rule 10.14. 50 If approval is given under Listing Rule 10.14, approval is not required under Listing Rule 7.1. 51 Listing Rule 10.14. 52 Listing Rule 10.15.

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Security details The details of any Performance Right issued under the Incentive Plan will be published in each Stanmore Annual Report relating to a period in which Performance Right have been issued. The Annual Report will also state that approval for the issue of Performance Rights was obtained under the Listing Rules

53.

Additional persons

Any additional persons who become entitled to participate in the Incentive Plan after the Resolution is approved and who were not named in this Notice will not participate until approval is obtained under Listing Rule 10.14.



53 Listing Rule 10.14.

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Glossary of terms

In the Notice and Explanatory Memorandum the following words and expressions have the following meanings:

AGM Annual General Meeting of Shareholders.

Associate has the meaning in the Corporations Act.

ASX ASX Limited ACN 008 624 691 and the securities exchange operated by it.

Board the board of Directors of the Company.

Business Day a day other than a Saturday, Sunday or public holiday in Brisbane, Queensland or Hong Kong.

Board the board of Directors.

Change of Control Event In relation to the Incentive Plan, has the meaning in Schedule E.

Closely Related Party has the meaning in section 9 of the Corporations Act.

Company Stanmore Coal Limited ABN 131 920 968.

Convertible Note Placement subject to Shareholder approval under Resolution 3, the issue of $9,027,029.48 of notes convertible into 13,373,377 Shares at $0.675 per Share.

Convertible Notes convertible notes issued by the Company (each a Convertible Note) at 100% of their face value, and convertible to Shares based on the terms set out in the Deed Poll which is included in Schedule B.

Corporations Act Corporations Act 2001 (Cth).

CS Options the 11,670,000 CS Options that were issued on 27 June 2012 to Credit Suisse AG pursuant to the Option Deed, which are currently only capable of being cash settled and will, on Resolution 5 being passed, and other conditions being satisfied, also become Equity Settled CS Options.

Deed Poll the convertible note deed poll executed on 27 June 2012 by the Company and Greatgroup.

Directors the directors of the Company from time to time (each a Director).

Equity Settled CS Options means the CS Options that allow settlement on exercise by the issue of Shares.

Explanatory Memorandum the explanatory memorandum that accompanies the Notice.

Facility Agreement the Guarantee and Note Issuance Facility Agreement dated 27 June 2012 between, among others, the Company and Credit Suisse AG.

Finance Document each of the Facility Agreement, the CS Options, the Option Deed and the related documents.

First Greatgroup Placement the $12.98 million placement on 28 June 2012 of 19,228,887 Shares at $0.675 per Share.

General Meeting or Meeting the meeting of Shareholders convened pursuant to the Notice.

Gladstone Rail Capacity Expansion

means the series of projects, which together, will increase the coal capacity (measured in Mtpa) for the rail transportation of coal from the producers in the Central Queensland coal network to the Gladstone coal terminal operated by Gladstone Ports Corporation.

Greatgroup Greatgroup Investments Limited, a registered holder and purchaser of securities issued pursuant to the Subscription Deed.

Group the Company and each Subsidiary.

Incentive a right to acquire or to be transferred a Share in accordance with the terms of which they are issued by the Board, at its discretion, and the rules of the Incentive Plan and may be either an Option (which has an exercise price other than nil) or a Performance Right.

Incentive Options the following in the money Options over Shares held by Board and management as at the date of execution of the Subscription Deed and which remain outstanding:

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a. 6,350, 000 Options with an exercise price of $0.19 per Shares, expiring 9 December 2012;

b. 3,500,000 Options with an exercise price of $0.19 per Shares, expiring 31 December 2013; and

c. 525,000 Options with an exercise price of $0.15 per Shares, expiring 16 January 2014.

Incentive Plan the Stanmore Coal Director and Employee Incentive Plan, which is the subject of Resolution 8, the terms of which are summarised in the Schedule E of this Explanatory Memorandum.

Investor Options the conditional options granted to Greatgroup to provide as anti-dilution protection, under the Subscription Deed (each an Investor Option).

January Placement the prior issue of 3,736,486 Shares at $0.74 per Share by placement to institutional and sophisticated investors which occurred on 27 January 2012 and is the subject of Resolution 6.

Key Management Personnel a person having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company.

Listing Rules the official listing rules of ASX.

LTI long term incentive.

Member means a Shareholder.

Mtpa million tonnes per annum.

Notice the notice of meeting of Shareholders dated 3 September 2012.

Option an option over a Share.

Option Deed the Option Deed dated 27 June 2012 between the Company and Credit Suisse AG.

Option Note notes which may be issued to Greatgroup in the terms set out in Schedule C and on terms identical to the Convertible Notes save and except the issue price (being 100% of the face value) of the note is the 60 day VWAP on the Trading Day immediately before the date on which Greatgroup gives a subscription notice for the relevant Option Notes.

Performance Period in relation to the:

a. Share Plan, means each calendar year, commencing on 1 January and ending on 31 December; and

b. Incentive Plan, means each financial year commencing 1 July and ending on 30 June.

Performance Right a performance right is an Incentive issued under the Incentive Plan which has an exercise price of nil.

Proxy Form a proxy form accompanying the Notice.

QRN or QR National QR National Limited.

QRN Moura the QR National Moura railway line, located in Central Queensland, south west of Gladstone, which links with the Blackwater system to form the Capricornia Coal Chain and provides coal transportation services from the Dawson and Callide Valleys in Central Queensland to Gladstone.

Relevant Interest has the meaning in the Corporations Act.

SBR the Surat Basin Rail or Surat Basin Railway, also known as the ‘Southern Missing Link’, which is the railway project being conducted in Queensland which will be approximately 210 km in length and will connect National's western rail system near Wandoan (230 km north-west of Toowoomba) with QR National's Moura system near Banana (130 km west of Gladstone).

Second Greatgroup Placement

subject to Shareholder approval, a $14.03 million placement of 20,791,143 Shares at an issue price of $0.675 per Share, the subject of Resolution 2.

Security Interests has the meaning under the Personal Property Securities Act 2009 (Cth), which is a interest in personal property provided to secure payment or performance of an obligation, which may take the form of a fixed and/or floating charge, mortgage or similar restriction over property.

Shares fully paid ordinary shares in the capital of the Company (each a Share).

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Shareholder a registered holder of Shares.

Share Plan the Stanmore Coal Director and Employee Share Plan, which is the subject of Resolution 7, the terms of which are summarised in Schedule E of this Explanatory Memorandum.

Sprint Capital Sprint Capital Partners (HK) Limited, and any of its affiliates and related parties.

STI short term incentive.

STI Performance Period the Performance Period applicable for the STI.

Subscription Deed the Subscription and Cooperation Deed between the Company and Greatgroup dated 27 June 2012, as amended by deed on or about 28 August 2012.

Subsidiary each wholly-owned subsidiary of the Company.

The Range the coal mine project currently being undertaken by Stanmore Coal which is located 24 kilometres south east of the Wandoan township, within the Surat Basin.

TOP take or pay.

Trading Day has the meaning given in the Listing Rules.

TSR the change in a company’s share price over the STI Performance Period, plus dividends (if any) notionally reinvested in the company’s shares, expressed as a percentage of the opening price of that company’s shares on the first date of the STI Performance Period, as calculated and subject to any adjustments considered appropriate by the Board.

Voting Power has the meaning provided in the Corporations Act.

VWAP volume weighted average price.

WICET Wiggins Island Coal Export Terminal.

WEXP1 Wiggins Island Coal Export Terminal Expansion Phase 1.

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Schedule A

Pro forma adjusted balance sheet as at 31 December 2011

31/12/2011 Post Balance

Date

Greatgroup

share issue (1)

CS Facility

(2) Total

(1,3)

half-year

reviewed

Movements

(unaudited)

Assets A$m A$m A$m A$m A$m

Current Assets

Cash 18.0 5.9 23.0 21.0 67.9

Receivables 1.4 0.3 1.7

Total Current Assets 19.4 6.2 23.0 21.0 69.6

Total Non-Current Assets 26.7 17.2 0 0 43.9

Total Assets 46.1 23.4 23.0 21.0 113.5

Liabilities

Current Liabilities (2.1) (0.1) 0 0 (2.2)

Non Current Liabilities 0 (4.0) (9.0) (21.0) (34.0)

Total Liabilities (2.1) (4.1) (9.0) (21.0) (36.2)

Net Assets 44.0 19.3 14.0 0 77.3

Equity A$m A$m A$m A$m A$m

Share Capital4 49.6 22.5 14.0 86.1

Reserves & Retained Earnings (5.6) (3.2) (8.8)

Total Equity 44.0 19.3 14.0 0 77.3

1. Assumes Shareholder approval of Resolutions 2, 3 and 4. 2. Assumes maximum draw down under the CS Facility. 3. Assumes no exercise of the Incentive Options or the CS Options, and therefore no exercise of the

Investor Options. 4. The share capital does not include any securities the subject of resolutions in Part E of this Notice.

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Schedule B

Convertible Note terms 1. Definitions and interpretation

1.1 Definitions

In these conditions the following expressions have the following meanings:

Acceleration Notice has the meaning given to that term in clause 9(a).

Business Day has the meaning given to that term in the Subscription and Cooperation Deed.

Change of Control means where:

(a) a takeover bid is made for the Company that is recommended by the Board of the

Company;

(b) a Court convenes a meeting to approve a scheme of arrangement (other than for the

purpose of, or in connection with, a scheme for the reconstruction of the Company);

or

(c) a third party acquires a Relevant Interest (within the meaning of the Corporations

Act) of 50% or more of the Shares.

Constitution means the constitution of the Company.

Conversion Amount means in respect of each Convertible Note, the Face Value of the Convertible Note.

Conversion Date means in respect of a Convertible Note, the date on which the Noteholder or the Company exercises its conversion right in accordance with clause 6.1, 6.2 and 6.9 as applicable.

Conversion Notice means a notice substantially in the form set out in schedule 3.

Conversion Period means the period:

(d) commencing on the date which is 24 months after the date of execution of this Deed

Poll; and

(e) ending on the date which is one Business Day prior to the Maturity Date.

Conversion Shares means such number of Shares to be issued to a Noteholder upon conversion of Convertible Notes, calculated in accordance with clause 6.6.

Convertible Note means a convertible note issued by the Company on the terms set out in this document, then on issue.

Corporations Act means the Corporations Act 2001 (Cth).

Director has the meaning given to that term in the Subscription and Cooperation Deed.

Event of Default means any event or circumstances described in clause 8.

Face Value means $0.675.

Immediately Available Funds means bank cheque or telegraphic transfer of cleared funds to an account nominated by the payee.

Insolvency Event has the meaning given to that term in the Subscription and Cooperation Deed.

Investor has the meaning given to that term in the Subscription and Cooperation Deed.

Issue Date means in respect of each Convertible Note the date the Convertible Note is recorded in the Register as having been issued by the Company.

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Maturity Date means in respect of the Convertible Note, thirty six months after the date of this Deed Poll.

Note Certificate means a certificate substantially in the form set out in schedule 1.

Noteholder means a person recorded in the Register as the holder of the Convertible Note.

Register means the register of Convertible Notes and Noteholders maintained by the Company in accordance with clause 3.

Share has the meaning given to that term in the Subscription and Cooperation Deed.

Shareholder Approval means the approval to the issue of the Conversion Shares by resolution of the shareholders of the Company in accordance with section 611 item 7 of the Corporations Act.

Subscription and Cooperation Deed means the agreement of that name between the Company and Greatgroup Investments Limited, to which this document is attached.

Transaction Document means:

(a) this document;

(b) the Subscription and Cooperation Deed;

(c) any agreement or instrument created under any of them; and

(d) any document entered into for the purpose of amending, novating, restating or

replacing any of them.

1.2 Construction

Unless expressed to the contrary, in this document:

(a) words in the singular include the plural and vice versa;

(b) any gender includes the other genders;

(c) if a word or phrase is defined its other grammatical forms have corresponding

meanings;

(d) “includes” means includes without limitation;

(e) no rule of construction will apply to a clause to the disadvantage of a party merely

because that party drafted, put forward or would benefit from any term;

(f) a reference to:

(i) a person includes a partnership, joint venture, unincorporated association,

corporation and a government or statutory body or authority;

(ii) a person includes the person’s legal personal representatives, successors,

assigns and persons substituted by novation;

(iii) any legislation includes subordinate legislation under it and includes that

legislation and subordinate legislation as modified or replaced;

(iv) an obligation includes a warranty or representation and a reference to a failure

to comply with an obligation includes a breach of warranty or representation;

(v) a right includes a benefit, remedy, discretion or power;

(vi) “$” or “dollars” is a reference to Australian currency;

(vii) this or any other document includes the document as novated, varied or

replaced and despite any change in the identity of the parties;

(viii) writing includes any mode of representing or reproducing words in tangible and

permanently visible form, and includes fax transmissions;

(ix) this document includes all schedules and annexures to it; and

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(x) a clause, schedule or annexure is a reference to a clause, schedule or

annexure, as the case may be, of this document;

(g) if the date on or by which any act must be done under this document is not a

Business Day, the act must be done on or by the next Business Day; and

(h) where time is to be calculated by reference to a day or event, that day or the day of

that event is excluded.

1.3 Headings

Headings do not affect the interpretation of this document.

2. Convertible Notes

2.1 Terms of issue

The Convertible Notes are issued on the terms set out in this document. 2.2 General terms

Each Convertible Note:

(a) is issued at the Face Value;

(b) constitutes a separate and individual acknowledgement of the indebtedness of the Company to the Noteholder in respect of the Face Value for each Convertible Note; and

(c) may be

(i) redeemed in accordance with clause 4; or

(ii) converted into Shares in accordance with clause 6.

2.3 Status of Convertible Note

(a) The Convertible Notes rank at all times pari passu with all other present and future unsecured obligations of the Company.

(b) The Convertible Notes do not confer on the Noteholder any entitlement to:

(i) vote at a general meeting of shareholders of the Company;

(ii) receive dividends; or

(iii) participate in any issue of securities, other than upon conversion on the

Convertible Note.

2.4 Notices

The Noteholder will have the same rights as a holder of Shares to receive notices of general meetings, reports and financial statements of the Company.

3. Register of Convertible Notes

3.1 Establishing the Register

The Company must establish and maintain a Register and enter on the Register:

(a) the name and address of the Noteholder;

(b) the number of Convertible Notes held by each Noteholder;

(c) the following information in relation to each Convertible Note:

(iv) the Issue Date;

(v) the Maturity Date;

(vi) the Face Value; and

(vii) the Interest Rate;

(d) details of all transfers of Convertible Notes made in accordance with this document, including the date of registration of such transfers;

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(e) in relation to Convertible Notes no longer outstanding, particulars of its conversion into Shares; and

(f) such other information as is required by any applicable law.

3.2 Register available for inspection

(a) The Register must be kept at the registered office or principal place of business of the Company or any other place permitted by the Corporations Act.

(b) Subject to any exemption granted under the Corporations Act, the Register must be open at all reasonable times during business hours for inspection by any person.

(c) On the request and at the expense of any person inspecting the Register, the Company must provide to the person an extract from the Register as soon as practicable after the making of the request.

3.3 Register conclusive

In the absence of evidence to the contrary, the Register is proof of the matters shown in the Register.

4. Mandatory redemption

On the Maturity Date, the Company must redeem all Convertible Notes held by the Noteholder by paying to the Noteholder the Face Value for the Convertible Notes in Immediately Available Funds.

5. Shareholder approval

(a) As soon as possible after the issue of the Convertible Notes, and in any event by no later than 31 December 2012, the Company must convene a general meeting to obtain Shareholder Approval, if required in order to convert the Convertible Notes.

(b) The Noteholder must:

(i) afford to the Company, the Company’s legal representatives and any other

parties appointed by the Company (including any independent expert)

reasonable access to such documents, records and other information (subject

to any existing confidentiality obligations owed to third parties) and such

reasonable cooperation as the Company, the Company’s legal representatives

and any other parties appointed by the Company; and

(ii) as soon as reasonably practicable provide the Company, the Company’s legal

representatives and any other parties appointed by the Company (including

any independent expert) with any information reasonably requested by them,

reasonably required for the purpose of preparing the independent expert’s report,

explanatory memorandum and notices to convene the general meeting required for

Shareholder Approval.

6. Conversion

6.1 Conversion by Noteholder

(a) At any time during the Conversion Period, the Noteholder may request the Company to confirm whether it is able to issue a notice under section 708A(5)(e) of the Corporations Act in relation to any Shares to be issued upon conversion of a Convertible Note without disclosing any “excluded information” (as that term is defined in section 708A(7) of the Corporations Act).

(b) As soon as reasonably practicable, but in any event no later than two Business Days, after receiving a request from the Noteholder under clause 6.1(a), the Company must confirm to the Noteholder whether it would be able to issue such a notice under section 708A(5)(e) of the Corporations Act, if a Conversion Notice was received from the Noteholder at that time.

(c) Subject to the prior receipt of any necessary Shareholder Approval, a Noteholder may, at any time during the Conversion Period, convert a minimum of the lesser of:

(i) 3,000,000 Convertible Notes; or

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(ii) the number of Convertible Notes they then hold,

into Shares by delivering to the Company:

(iii) an executed Conversion Notice specifying the Convertible Notes to be

converted (which must be no less than the number specified in clause 6.1(c));

and

(iv) Note Certificates in respect of the Convertible Notes to be converted.

(d) Subject to clause 6.1(f), when the Company receives the Conversion Notice, it must on that date:

(i) issue the Conversion Shares to the Noteholder; and

(ii) deliver holding statements to the Noteholder in respect of the Conversion

Shares.

(e) Within 5 Business Days of the issue of the Conversion Shares, the Company, in accordance with section 708A(5) of the Corporations Act, must lodge with ASX a cleansing notice (Cleansing Statement) in relation to the issue of the Conversion Shares.

(f) If the Company is not lawfully able or it reasonably believes it would be prejudicial to the Company’s interests to issue a Cleansing Statement when the Company receives the Conversion Notice, the Company must, as soon as practicable but no later than within one Business Day of receipt of the Conversion Notice, inform the Noteholder of that fact, in which case the requirement to issue the Conversion Shares will be deferred by ten Business Days from the date of receipt of the Conversion Notice by which time the Company must:

(i) issue the Conversion Shares to the Noteholder; and

(ii) deliver holding statement to the Noteholder in respect of the Conversion

Shares;

(iii) and it must:

(iv) lodge the Cleansing Statement within the time required by the Corporations

Act; or

(v) lodge a disclosure document complying with Part 6D.2 of the Corporations Act

within 20 Business Days of the issue of the Conversion Shares.

6.2 Conversion by the Company

Subject to the prior receipt of any necessary Shareholder Approval, at any time during the Conversion Period, provided always that no Event of Default is subsisting, the Company may convert all of the Convertible Notes held by the Noteholder into Shares by delivering to the Noteholder an executed Conversion Notice specifying that all of the Convertible Notes are to be redeemed and converted, in which case clauses 6.1(d), 6.1(e) and 6.1(f) will apply with the necessary amendments.

6.3 Time of conversion

A conversion right is deemed to have been exercised on the Conversion Date and provided that the Conversion Date occurs before the Maturity Date, the party providing the Conversion Notice is entitled to require the Convertible Notes to be converted despite the fact that any Shares to be issued following such conversion may be issued after the Maturity Date.

6.4 Conversion

If the Noteholder or the Company exercises its conversion rights in respect of a Convertible Note under and in accordance with clause 6.1 or 6.2, as applicable:

(a) the Company must comply with the Conversion Notice by:

(i) redeeming the Convertible Note for the Face Value; and

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(ii) applying the Face Value as subscription funds for the Conversion Shares which are to be issued to the Noteholder in accordance with clause 6.1.

(b) the Noteholder must promptly deliver to the Company the Note Certificate in respect of the Convertible Note.

6.5 Irrevocable direction

A Conversion Notice given in accordance with this document is irrevocable, unless otherwise agreed by the Company and the Noteholder.

6.6 Calculation of Conversion Shares

The Conversion Shares will be calculated in accordance with the following formula:

B

A CS =

where: CS = the Conversion Shares to be issued to a Noteholder.

A = the aggregate Conversion Amount for the number of Convertible Notes being converted by the Noteholder.

B = the Face Value.

6.7 Rounding

Where the total number of Conversion Shares calculated in accordance with clause 6.6 results in a fraction of a Share, that fraction will be disregarded.

6.8 Ranking of Shares

Shares issued on the conversion of Convertible Notes will rank in all respects pari passu with all other Shares on issue.

6.9 Automatic conversion

On a Change of Control, all Convertible Notes held by the Noteholder will automatically convert into Conversion Shares in accordance with clause 6.6 without any further act required of any party, on the following terms:

(a) in the case of a recommended takeover bid, 15 Business Days after the Change of Control;

(b) in the case of a scheme of arrangement, on a date agreed by the Company and the Investor and failing agreement, in sufficient time to ensure the Noteholder is on the register of members of the Company to enable it to vote at the scheme meeting; and

(c) in the case of a third party acquiring a Relevant Interest in 50% of more of the Shares, within 15 Business Days after the third party lodges its substantial shareholder notice under Chapter 6C of the Corporations Act in relation to that holding.

7. Cancellation of Convertible Notes

The Convertible Notes redeemed or converted in accordance with this document will automatically be cancelled and may not be re-issued.

8. Events of Default

Each of the following is an Event of Default (whether or not caused by anything outside the control of any party):

(a) untrue warranty: a representation, warranty or statement made by the Company in a Transaction Document is untrue or misleading in any material respect;

(b) void document: a Transaction Document is void, voidable or otherwise unenforceable by Investor;

(c) compliance unlawful: it is unlawful for the Company to comply with any of its obligations under a Transaction Document or it is claimed to be so by the Company;

(d) Insolvency Event: an Insolvency Event occurs in relation to the Company; or

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(e) cessation of business: the Company ceases or threatens to cease to carry on its business or a substantial part of its business.

9. Acceleration on an Event of Default

(a) If an Event of Default occurs and is subsisting, the Noteholder may by notice to the Company declare that the Face Value of each Convertible Note then on issue is immediately due and payable by the Company (Acceleration Notice).

(b) Within ten Business Days of receipt of an Acceleration Notice, the Company must pay the Noteholder in Immediately Available Funds the aggregate of the Face Value of each Convertible Note then on issue.

10. Effect of reconstruction of share capital

Subject to the Listing Rules, if prior to the Maturity Date, there is any bonus issue of Shares or reorganisation of the issued share capital of the Company, including any consolidation, subdivision, reduction, cancellation or return then, the Face Value (but not the Conversion Amount) will be adjusted by the Company as appropriate and consistent with the reorganisation to ensure that the proportion which the Shares to be issued to that Noteholder on exercise of its conversion rights after the bonus issue or reorganisation has occurred bears to the total Shares on issue, is the same as it would have been had the bonus issue or reorganisation not occurred.

11. Transfer

The Noteholder may transfer the legal and/or beneficial interest in all but not some of the Convertible Notes to any third party without the prior written consent of the Company.

12. Cancellation and replacement of Note Certificates

(a) If any Note Certificate is worn out or defaced then, on production of it to the Company, the Directors must cancel it and issue a new Note Certificate in its place.

(b) If a Note Certificate is lost or destroyed, then:

(i) on proof of the loss or destruction to the satisfaction of the Directors; or

(ii) on evidence satisfactory to the Directors that the Company will be indemnified for the issue of a new Note Certificate and any of out-of-pocket expenses,

a new Note Certificate will be sent to the persons entitled to the lost or destroyed

Note Certificate. An entry as to the issue of the new Note Certificate and indemnity

(if any) will be made in the Register.

13. Terms binding on parties and successors

This document will inure for the benefit of and be binding on the parties and their respective successors and permitted substitutes and assigns and (where applicable) legal personal representatives.

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Schedule C

Investor Options terms

Defined terms used in this Schedule have the same meaning as terms used in the Glossary unless otherwise stated in this Schedule.

Investor Options over Shares

1 Greatgroup is granted Options which require Stanmore Coal to issue to Greatgroup the number of Option Shares specified in paragraph 2 if Stanmore Coal issues Shares after 27 June 2012 pursuant to:

a. the exercise of any Incentive Options in whole or in part: or

b. the exercise of any CS Warrants in whole or in part.

Option Shares means Shares which may be issued to Greatgroup under paragraphs 2 and 9.

CS Warrants means the 11,670,000 options issued to Credit Suisse AG on 27June 2012.

2 The number of Options Shares granted to Greatgroup in respect of any issue of Shares as provided in paragraph 1 is the number calculated as follows:

*A worked example is included at the end of this Schedule.

where:

N = the number of Shares in respect of which Investor Options are granted (rounded to the nearest whole number).

S = the number of Shares issued in respect of the exercise of the Incentive Options or the CS Warrants respectively.

3 Greatgroup may exercise Investor Options granted under these terms by:

a. delivering a subscription notice for the relevant Option Shares and Option Notes; and

b. paying the Option Exercise Amount to Stanmore Coal,

in each case no later than the day three months after the date on which Stanmore Coal notifies Greatgroup under paragraph 4 of the issue of any Shares on exercise of the Incentive Options. The relevant Investor Options will lapse on the day after the day three months after a notification is given under paragraph 4.

Option Exercise Amount means the Option Exercise Price multiplied by the relevant number of Shares.

Option Exercise Price means, in relation to an exercise of an Investor Option, the VWAP on the 60 Trading Days immediately before the date on which Greatgroup gives a subscription notice.

4 Stanmore Coal must promptly notify Greatgroup each time an Incentive Option is exercised or Shares are on exercise of the CS Warrants.

5 For the avoidance of doubt, each time Stanmore Coal issues further Shares pursuant to the exercise of Incentive Options or CS Warrants, Greatgroup will have the right to exercise further Investor Options in accordance with these terms.

6 If Greatgroup delivers a subscription notice and pays the Option Exercise Amount in accordance with paragraph 3, Stanmore Coal must issue the relevant Shares to Greatgroup on or before the fifth Business Day after the later of receipt of the subscription notice and receipt of the Option Exercise Amount.

7 If there is any reorganisation of the capital of Stanmore Coal, the terms of the Investor Options will be amended in accordance with the Listing Rules applying at the relevant time.

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8 Greatgroup is not entitled to participate in any new issues of Shares (including a rights issue or a bonus issue) with respect to such Investor Options without first exercising the Investor Options in accordance with these terms.

9 In the event of the occurrence of a Change of Control:

a. Stanmore Coal must give notice in writing of the Change of Control to Greatgroup;

b. Greatgroup must immediately be granted an option to require Stanmore Coal to issue Greatgroup with the number of Shares calculated in accordance with paragraph 2, provided that for this purpose “S” shall be defined as:

c. S = the maximum number of Shares which may be issued in respect of the exercise of the outstanding Incentive Options or pursuant to the CS Options which are outstanding immediately prior to the occurrence of the Change of Control. Notwithstanding paragraph 3, any outstanding Investor Options issued under these terms must be exercised within ten Business Days failing which the relevant Investor Options will lapse.

d. The terms of paragraph 3 shall otherwise apply to any Investor Options arising under this paragraph 9.

Change of Control means:

a. a takeover bid is made for Stanmore Coal that is recommended by the Board of Stanmore Coal;

b. a court convenes a meeting to approve a scheme of arrangement (other than for the purpose of, or in connection with, a scheme for the reconstruction of Stanmore Coal); or

c. a third party acquires a Relevant Interest (within the meaning of the Corporations Act) of 50% or more of the Shares.

10 Stanmore Coal must obtain Greatgroup’s prior written consent to issue or agree to issue any securities, other than the CS Warrants, to Credit Suisse AG before 27 June 2013.

11 Investor Options do not carry a right to attend and vote at meetings of ordinary security holders, and do not carry a right to receive a dividend.

Investor Options over Option Notes

12 Greatgroup is granted Investor Options which require Stanmore Coal to issue Greatgroup with the number of Option Notes in paragraph 13 if Stanmore Coal issues Shares after 27 June 2012 pursuant to:

a. the exercise of any Incentive Options in whole or in part: or

b. the exercise of any CS Warrants in whole or in part.

13 The number of Option Notes in Stanmore Coal which may be subscribed in respect of any issue of Shares as provided in paragraph 12 must be the number calculated as follows:

*A worked example is included at the end of this Schedule.

where:

N = the number of Option Notes rounded to the nearest whole number

S = the number of Shares issued in respect of the exercise of the Incentive Options or the CS Warrants respectively.

14 Greatgroup may exercise these options by:

a. delivering a subscription notice for the relevant Option Notes; and paying the Option Note Amount to Stanmore Coal, in each case no later than the earlier of the following dates:

i. three months after the date on which Stanmore Coal notifies Greatgroup of the issue of any Shares; and

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ii. the day before the Maturity Date.

Maturity Date means the later of:

i. for those Option Notes issued on exercise of Investor Options as a result of the exercise of the CS Options on or after 15 June 2015, ten Business Days after the relevant CS Options are exercised; or

ii. otherwise on 27 June 2015.

Option Note Amount means the number of Option Notes which are the subject of a subscription notice under paragraph 14(a) multiplied by the Option Note Price.

Option Note Price means the VWAP on the 60 Trading Days immediately before the date on which Investor gives a subscription notice under paragraph 14(a).

15 The relevant Investor Options will lapse on the day after the day which is three months after a notification is given for the exercise of Incentive Options or Shares are issued under the CS Warrants. In the event of the occurrence of a Change of Control:

a. Stanmore Coal must give notice in writing of the Change of Control to Greatgroup;

b. Greatgroup must immediately be granted an option to require Stanmore Coal to issue Greatgroup with the number of Option Notes calculated in accordance with paragraph 13, provided that for this purpose “S” shall be defined as: S = the maximum number of Shares which may be issued in respect of the

exercise of the outstanding Incentive Option or pursuant to the CS Warrants which are outstanding immediately prior to the occurrence of the Change of Control.

c. Notwithstanding paragraph 14(a), any outstanding Investor Options issued under these terms must be exercised no later than the earlier of the following dates:

iii. the date which is ten Business Days after the date Stanmore Coal notifies Greatgroup of the Change of Control; and

iv. the day before the Maturity Date,

failing which the Investor Options shall lapse.

16 The terms of paragraph 3 shall otherwise apply to any Investor Options arising under this paragraph 16.

17 Investor Options may not be transferred.

Worked example:

On 31 March 2013, Stanmore Coal receives a notice of exercise from directors and management holding Incentive Options to acquire 1,200,000 Shares and issues those Shares to the individuals.

Upon receiving notice of the issue of those Shares, Greatgroup may subscribe for additional Shares in Stanmore Coal as follows:

• 1,200,000/3 X 19.99/25 = 319,840 Shares

At the same time, Greatgroup may subscribe for additional Option Notes in Stanmore Coal as follows:

• 1,200,000/3 X 5.01/25 = 80,160 Option Notes

The price of the Shares acquired upon the exercise of the Investor Options, and the OptionNotes acquired upon the exercise of the Investor Options over Option Notes will be the volume weighted average price of Stanmore Coal’s shares in the 60 Trading Days immediately prior to the date under which Greatgroup subscribes for the Shares and Option Notes respectively.

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Schedule D

CS Option terms

1. Definitions and interpretation

1.1 Definitions

In these conditions the following expressions have the following meanings:

Agent means Credit Suisse AG, Singapore Branch.

ASIC means Australian Securities and Investments Commission.

ASTC Settlement Operating Rules means the settlement rules of ASX Settlement Pty Limited.

ASX means ASX Limited ACN 008 624 691.

ASX Listing Rules means the listing rules of ASX and the securities exchange operated by it.

Bonus Issue has the meaning given in Chapter 19 of the ASX Listing Rules.

Business Day has the meaning given in Chapter 19 of the ASX Listing Rules.

Cash Settlement means, in relation to an Option, the settlement method set out in clause 4.3.

Cash Settlement Amount means, in relation to an Option, the greater of:

(a) the Exercise Price less the Strike Price; and

(b) zero,

as determined in accordance with clause 9.

Cash Settlement Payment Date means, in relation an Option:

(a) if the condition in clause 3.1 is not satisfied at the time of issue of the applicable Exercise Notice, the date being 2 Business Days after the applicable Exercise Notice has been received by the Company; or

(b) in any other case, the date which is seven Business Days after the applicable Exercise Notice has been received by the Company.

Company means Stanmore Coal Limited ABN 27 131 920 968.

Corporations Act means Corporations Act 2001.

Exercise Notice has the meaning given in clause 4.1(1).

Exercise Period means, in relation to an Option, the period commencing on (and including) 27June 2012 and ending at 5.00 pm (Sydney time) on 26 June 2015.

Exercise Price means, in respect of an Option, the five day volume weighted average closing trading price of Shares on the ASX ending on the day immediately before the date of an Exercise Notice in respect of that Option as noted on the Bloomberg page “SMR AU Equity VWAP” or, if that data is not available from that source, another appropriate information source as determined by the Agent.

Expiry Date means 5.00 pm (Sydney time) on 26 June 2015.

Facility Agreement means the Guarantee and Note Issuance Facility Agreement to be entered into on or about 27 June 2012 between the Company, Credit Suisse AG, Singapore Branch and others.

Holder means the registered holder of an Option.

Law has the meaning given in the Facility Agreement.

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Option has the meaning given in clause 2.1.

Option Loan Amount has the meaning given in clause 4.3(2).

Pro-rata Issue has the meaning given in Chapter 19 of the ASX Listing Rules.

Physical Settlement means, in relation to an Option, the settlement method set out in clause 4.4.

Register means the register of Holders of Options referred to in clause 8.1.

Security Trust Deed has the meaning given in the Facility Agreement.

Share means a fully paid ordinary share in the capital of the Company.

Strike Price means A$0.518.

Tax has the meaning given in the Facility Agreement.

1.2 Interpretation

In these conditions unless the context otherwise requires:

(1) If any day appointed or specified by these conditions for the payment of any money or the doing of any act or thing falls on a day that is not a Business Day, the day so appointed or specified will be deemed to be the next day which is a Business Day.

(2) Reference to any thing (including any amount) is a reference to the whole or any part of it and a reference to a group of things or persons is a reference to any one or more of them.

(3) If an expression is defined, other parts of speech or grammatical forms of the expression have a corresponding meaning.

(4) Words importing any gender include all genders.

(5) Headings are for ease of reference only and do not affect the interpretation of these conditions.

(6) Words importing the singular include the plural and vice versa.

(7) References to persons include bodies corporate and any other entity.

(8) References to a body which has ceased to exist or has been reconstructed, amalgamated, reconstituted or merged, or the functions of which have become exercisable by any other person or body in its place, will be taken to refer to the person or body established or constituted in its place or the person or body by which its functions have become exercisable.

(9) References to a person include the legal personal representatives, successors and assigns of that person.

(10) A reference to a statute, ordinance, code or other law includes regulations and other statutory instruments under it and consolidations, amendments, re-enactments or replacements of any of them (whether of the same or any other legislative authority having jurisdiction).

(11) References to these conditions or an agreement or document include the conditions, agreement or document as varied, changed or replaced from time to time.

(12) References to writing include any mode of representing or reproducing words in tangible and permanently visible form.

(13) A reference to money is to Australian currency.

(14) References to including and similar expressions are not words of limitation.

2. Entitlement on exercise of Options

2.1 Each option (Option) entitles its Holder, subject to these terms and conditions, upon exercise to:

(1) under a Cash Settlement, receive the Cash Settlement Amount; or

(2) subject to clause 3, under a Physical Settlement, subscribe for and be issued and allotted one Share upon the payment to the Company of the Strike Price.

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3. Condition Precedent to Physical Settlement

3.1 The shareholders of the Company and each of the Subsidiaries must pass a resolution to approve the Options being granted by the Company to Credit Suisse, AG, Singapore Branch in accordance with the requirements its constitution and the requirements of rule 7.1 of the ASX Listing Rules (in respect of the Company only) and Part 2J.3 of the Corporations Act, and 14 days must pass after the Company and each of the Subsidiaries lodges with ASIC a notice relating to the approval in accordance with section 260B(6) of the Corporations Act, before the provisions of these terms and conditions relating to Physical Settlement (including paragraph (b) of the definition of “Option”, the definition of “Physical Settlement”, clauses 2.1(2), 4.4, 4.6, 5 and 7.2(1), and clauses 4.2(1),4.2(3)) and 10.2(2) to the extent they relate to Physical Settlement, will have effect.

3.2 If the condition in clause 3.1 is not satisfied within five months of the date of issue of an Option, none of the provisions of these terms and conditions relating to Physical Settlement (including clauses 2.1(2), 4.4, 4.6, 5 and 7.2(1), and clauses 4.2(1), 4.2(3) and 10.2(2) to the extent they relate to Physical Settlement) ever become binding.

3.3 The condition in clause 3.1 may not be waived.

3.4 The Company must give a notice to the Holder as soon as practicable after the condition in clause 3.1 has been satisfied.

4. Exercise of Options

4.1 Exercise Notice

(1) The Holder may at any time during the Exercise Period give a notice (Exercise Notice) to the Company to exercise an Option.

(2) An Exercise Notice must be in writing and in the form set out in Schedule 1 and must be delivered to the registered office of the Company (or such other place as the Company may notify Holders in writing).

(3) An Exercise Notice for an Option received by the Company will be deemed to be a notice of the exercise of that Option as at the date of receipt.

(4) An Exercise Notice must be in respect of a minimum number of Options being the lesser of:

(a) 250,000 Options; and

(b) the entire number of Options that are registered in the name of the Holder.

4.2 Settlement method

(1) Subject to clauses 3, 4.2(3) and 4.2(4), within five Business Days after receipt of an Exercise Notice by the Company, the Company must notify the Holder, in its sole discretion, whether the relevant Options will be subject to Cash Settlement or Physical Settlement.

(2) If the Company fails to notify the Holder of its chosen settlement method within the time period specified in clause 4.2(1), the relevant Options will be subject to Cash Settlement.

(3) Subject to clause 3, to the extent Physical Settlement of any Option which is the subject of an Exercise Notice would cause the Holder or the Company to contravene any law or regulation, including under Chapter 6 of the Corporations Act, the relevant Option will be subject to Cash Settlement. A Holder may at any time during the Exercise Period give notice to the Company that Physical Settlement of any Option would cause the Holder to contravene any law or regulation.

(4) For the avoidance of doubt, if the condition in clause 3.1 is not satisfied at the time of issue of an Exercise Notice, the applicable Options will be subject to Cash Settlement and such Options may not be subject to Physical Settlement in any circumstances.

(5) If an Option is subject to Physical Settlement, the Holder, as a condition of becoming the registered holder of an Option, authorises the Company to register the Holder as the holder of the Shares to be allotted to the Holder upon Physical Settlement of any Options and accepts such Shares subject to the constitution of the Company.

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4.3 Cash Settlement

(1) If Cash Settlement applies to an Option, the Company must pay the full amount of the Cash Settlement Amount for the Option in cash or cleared funds on the Cash Settlement Payment Date. If the Company is required to make a deduction or withholding for or on account of Tax the sum payable by the Company must be increased to the extent necessary to ensure that the Holder receives a sum net of any deduction or withholding equal to the sum which it would have received had no deduction or withholding for or on account of Tax been made or required to be made. If the Company is required to make a deduction or withholding for or on account of Tax, the Company must make that deduction or withholding and any payment required in connection with same within the time allowed and in the minimum amount required by Law and within 30 days of making either a deduction or withholding for or on account of Tax, or any payment required in connection with that deduction or withholding, the Company must deliver to the Holder entitled to the payment evidence satisfactory to that Holder that the deduction or withholding has been made and any appropriate payment paid to the relevant taxing authority.

(2) The Company may, by giving written notice to the Holder prior to the Cash Settlement Payment Date, request that the Holder lend to the Company an amount equal to the Cash Settlement Amount. Provided that no Event of Default or Potential Event of Default has occurred and there remains outstanding one or more Loans or Bank Guarantees (each as defined in the Facility Agreement) under the Facility Agreement on or before the Cash Settlement Payment Date, the Holder shall be deemed to have made a loan to the Company in an amount equal to the Cash Settlement Amount on the Cash Settlement Payment Date (Option Loan Amount) and the Company shall be deemed to have borrowed such amount from the Holder.

(3) The Option Loan Amount shall be deemed to be a loan from the Holder to the Company made on the same terms as a loan made by a lender under Facility C of the Facility Agreement on the basis that:

(a) the Holder is the lender and the Company is the borrower;

(b) the principal amount of the loan is equal to the Option Loan Amount;

(c) the Utilisation Date for the loan is the applicable Cash Settlement Payment Date;

(d) the repayment date is two years from the date of the Facility Agreement, unless the Company elects to extend the term for a further one year, in which case it shall be three years from the date of the Facility Agreement (Repayment Date); and.

(e) all other conditions applicable to a loan under Facility C of the Facility Agreement (including provisions relating to the calculation and payment of interest) apply to the loan deemed to be made pursuant to this clause 4.3.

For the avoidance of doubt, a loan made or deemed to be made by a Holder to the Company under this clause 4.3 is not a Loan (as defined in the Facility Agreement) and shall not be treated as a loan for the purposes of the Facility Agreement.

(4) The obligation of the Holder to lend the Option Loan Amount on the Cash Settlement Payment Date under this clause 4.3 to the Company shall, without any further action, be satisfied by way of set-off of that amount against the applicable Cash Settlement Amount payable by the Company to the Holder on the applicable Cash Settlement Payment Date.

(5) If the Borrower exercises its right to extend the original Repayment Date under clause 4.3 of the Facility Agreement, the Company must pay to any Holder that has made a loan to the Company under this clause 4.3 an extension fee equal to 1% of the principal amount of any such loans that remain outstanding at the time of extension.

4.4 Physical Settlement

(1) Subject to clause 3, if the Company nominates Physical Settlement of Options under section 4.2(1) then, within five Business Days after receiving notice from the Company of its chosen settlement method, the Holder must pay the full amount of the Strike Price for each Option exercised in cash or cleared funds.

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(2) Subject to clause 3, within three Business Days after receipt of the Strike Price, the Company must allot to the Holder the number of Shares for which the Options are exercised at the Strike Price.

4.5 Uncertificated holding statements

(1) The Company must send to the Holder a certificate, a holding statement or other statement in respect of the Options held and any Shares issued on exercise of those Options within the time periods specified in, and in accordance with, the applicable provisions of the Corporations Act, ASX Listing Rules, ASTC Settlement Rules (if applicable) and the constitution of the Company.

(2) The Company must tell the Holder in writing of the Strike Price and Expiry Date of the Options within the time prescribed by the ASX Listing Rules after the first holding statement or other statement is sent and, in any case, no later than 30 days before the Expiry Date.

4.6 Ranking of Shares allotted on exercise

Subject to clause 3, shares allotted upon exercise of Options under clause 4.4 will be fully paid and rank equally in all respects with all other issued Shares from the date of allotment and will be held subject to the constitution of the Company.

4.7 Lapse

(1) Any Option which has not been exercised by 5.00 pm (Sydney time) on the Expiry Date will lapse.

(2) An Exercise Notice is not effective if it is received by the Company after 5.00 pm (Sydney time) on the Expiry Date.

5. Quotation of Shares

5.1 Subject to clause 3, if Shares are quoted on ASX at the time of exercise of the Options, the Company must make an application to ASX for the number of Shares issued upon exercise of Options under clause 4.4 within ten Business Days after the allotment of those Shares.

6. Quotation of Options

6.1 The Options will not be quoted on any stock exchange.

7. New, Bonus and Pro-Rata Issues

7.1 General

(1) A Holder cannot participate in a new issue of securities in the Company without first exercising the Options under clause 4.4.

(2) Holders who exercise their Options under clause 4.4 before the applicable record date for the new issue will be entitled to participate in that new issue.

(3) Except as expressly set out in these conditions, a Holder does not have any right to change the Strike Price of an Option or the number of Shares over which an Option can be exercised.

7.2 Bonus Issues

If there is a Bonus Issue to the holders of Shares in the Company then:

(1) subject to clause 3, under a Physical Settlement, the number of Shares over which each Option is exercisable will be increased by the number of Shares which the Holder would have received under the Bonus Issue if the Option had been exercised before the record date for the Bonus Issue; and

(2) under a Cash Settlement, the Cash Settlement Amount referred to in clause 4.3 will be increased by multiplying the Cash Settlement Amount by the increased number of Shares that would be allotted to a Holder under clause 7.2(1) if the relevant Options were subject to Physical Settlement.

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7.3 Pro-rata Issue

If the Company makes a Pro-rata Issue (except a Bonus Issue) to the holders of Shares, the Strike Price shall be reduced according to the following formula:

O1 = O - E[P – (S+D)]

N + 1

where:

O1 = the new Strike Price;

O = the old Strike Price;

E = the number of Shares into which one Option is exercisable;

P = the value of a Share at the time the pro-rata rights issue is made as determined by an accountant independent of the Company, or if the Shares are listed on the ASX, the average closing trading price per Share (weighted by reference to volume) during the five trading days ending on the day immediately before the relevant ex date for that Pro-rata Issue;

S = the subscription price for a Share under the Pro-rata Issue;

D = any dividend due but not yet paid on existing Shares (which will not include the new Shares to be issued under the Pro-rata Issue);

N = the number of Shares with rights or entitlements that must be held to receive a right to one (1) new Share.

7.4 Reconstructions of Capital

(1) Subject to clause 7.4(2):

(a) if the Company consolidates its Shares, the number of Options shall be consolidated in the same ratio as the Shares and the Strike Price shall be amended in the inverse proportion to that ratio;

(b) if the Company subdivides its Shares, the number of Options shall be subdivided in the same ratio as the Shares and the Strike Price must be amended in inverse proportion to that ratio;

(c) if the Company returns any capital to the holders of Shares in cash or in kind (including any cash dividend, any distribution pursuant to a reduction or buy-back of share capital or any in specie distribution of the cash assets of the Company or otherwise), the number of Options must remain the same, and the Strike Price must be reduced by the same amount as the amount returned in relation to each Share;

(d) if the Company reduces its capital by a cancellation of paid up capital that is lost or not represented by available assets and there is no cancellation of Shares, the number of Options and the Strike Price must remain unaltered;

(e) if the Company cancels Shares on a pro rata basis, the number of Options shall be reduced in the same ratio as the Shares and the Strike Price of each Option shall be amended in inverse proportion to that ratio; and

(f) in the event of any other reconstruction of the issued capital of the Company, the number of Options or the Strike Price, or both, must be reorganised so that a Holder will not receive a benefit that the holders of Shares do not receive.

(2) In the event of any reorganisation including subdivision, consolidation, reduction, return or cancellation of the issued capital of the Company on or prior to the Expiry Date, if the Company is admitted to the official list of ASX, the rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules governing reorganisations in force at the time of the reorganisation.

8. Maintenance of Register and transfers of Options

8.1 Register of Holders of Options

(1) The Company will keep and maintain, or cause to be kept and maintained, a register of Holders of Options.

(2) The Company must ensure that the Register is maintained in compliance with the Corporations Act and all other applicable rules and requirements.

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8.2 Transfer of Options

(1) Subject to the constitution of the Company, ASX Listing Rules, ASTC Settlement Rules and clause 8.2(2), all Options are transferrable.

(2) Subject to clause 11.2, the provisions of the constitution of the Company relating to a transfer of Shares apply, with necessary alterations, to a transfer of Options.

9. Role and duties of Agent

(1) Any calculation, determination or adjustment required to be made under these terms and conditions (including calculation of the Cash Settlement Amount, the Option Loan Amount, any adjustment to these terms and conditions under clause 7 or any payment or repayment to be made by the Company pursuant to a loan under clause 4.3 shall be made by the Agent (acting in good faith and in a commercially reasonable manner) on behalf of the Company (provided that any failure by the Agent to make any calculation, determination or adjustment shall not relieve the Company from its obligation to make any payment when due under and in accordance with these terms and conditions). Subject to this clause 9 , the Company and each Holder agree to be bound by any such calculation, determination or adjustment.

(2) On each date on which the Company is required to make a payment under these terms and conditions (including in respect of a loan under clause 4.3, the Company must make the same available to the Agent for value on the due date at the time and in the funds specified by the Agent.

(3) Payment by the Company to the Agent for the account of a Holder satisfies the Company’s obligation to make that payment.

(4) Each payment received by the Agent for a Holder is to be made available by the Agent as soon as practicable after receipt to the Holder entitled to receive payment in accordance with this document to the account as that Holder may notify to the Agent by not less than 5 Business Days' notice.

(5) If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by the Company under these terms and conditions, the Agent must apply that payment towards the obligations of the Company pro rata according to the amount then owing to all Holders.

(6) The Agent's duties under these terms and conditions are solely mechanical and administrative in nature. The Agent has no other duties except as expressly provided herein.

(7) The Agent may resign by giving notice to the Company. If the Company has not appointed a successor Agent within five days after notice of resignation was given, the Agent (after consultation with the Company) may appoint a successor Agent. The Agent's resignation notice only takes effect on the appointment of a successor. On the appointment of a successor, the retiring Agent is discharged from any further obligation in respect of these terms and conditions.

(8) If the Company wishes to dispute any calculation, determination or adjustment made by the Agent under these terms and conditions, the Company must notify the Agent in writing within 1 Business Day of receipt of notice by it of the relevant calculation, determination or adjustment. If the dispute is not resolved by the Company and the Agent within a further 1 Business Day, the Company may refer the dispute to a Chartered Accountant of not less than ten years experience in an internationally recognised firm of accountants (Expert). If the Company and the Agent do not agree within a further 1 Business Day on the identity of the Expert, such accountant shall be nominated by the president from time to time of the Institute of Chartered Accountants in Australia (or any successor body or title). If that person is unwilling to nominate an individual but only to provide a list of possible Experts, the Expert will be the first person on the list who is willing to act as the Expert. The Agent and the Company must promptly provide any indemnities or other undertakings reasonably requested by the president of the Institute of Chartered Accountants or by the Expert. The Expert must be asked to give an opinion on whether the calculation, determination or adjustment is in accordance with these terms and conditions. The Expert’s decision is final and binding on the Agent , the Holders and the Company, in the absence of manifest error. The Expert shall act as an expert and not as an arbitrator.

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10. Security Trust Deed

10.1 The obligations of the Company to a Holder under and in respect of an Option are secured and subordinated obligations of the Debtor in accordance with the terms of the Security Trust Deed.

10.2 A Holder must not transfer an Option to another person unless that other person is:

(1) Credit Suisse AG or that other person becomes a beneficiary of the Security Trust Deed under and in accordance with the Security Trust Deed on or before it becomes a Holder; and

(2) subject to clause 3, a person to whom the Option may be transferred lawfully and without disclosure under Part 6D.2 of the Corporations Act or any equivalent disclosure under any law of any foreign jurisdiction.

11. Miscellaneous

11.1 Severance

(1) If a provision of these conditions or its application to any person or circumstance is or becomes invalid, illegal or unenforceable then the provision must, as far as possible, be interpreted as narrowly as possible to ensure that it is not illegal, invalid or unenforceable.

(2) If any provision or part of it cannot be so interpreted, then the provision or its part is taken to be void and severable. The remaining provisions of these conditions are not affected or impaired in any way.

11.2 Holders bound by Constitution

A Holder is bound by these conditions and the constitution of the Company insofar as the constitution relates to or governs the Options and the Shares issued upon exercise of the Options.

11.3 Waiver and Variation

(1) Subject to the ASX Listing Rules, ASTC Settlement Rules (if applicable) and the constitution of the Company, the directors of the Company may by resolution:

(a) waive strict compliance with any of these conditions; or

(b) add to, vary or otherwise change any of these conditions to ensure compliance with the ASX Listing Rules (if applicable) either generally in relation to all Holders or as they apply to a particular Holder.

(2) Any waiver, addition, variation or other change under clause 11.3(1) must not be made unless:

(a) any Holder effected by the waiver, addition, variation or other change so consents in writing; or

(b) the directors of the Company reasonably consider that the waiver, addition, variation or other change is required to ensure compliance with the ASX Listing Rules (if applicable) .

11.4 Notice of Expiry

The Company must send to Holders before the Expiry Date of the Options any notice required by Appendix 6A.6 of the ASX Listing Rules (as relevant).

11.5 Governing law

(1) These conditions are to be construed according to and are governed by the laws of New South Wales, Australia.

(2) Each of the Company and the Holder submits to the exclusive jurisdiction of the courts in and of New South Wales in relation to any dispute arising under these conditions.

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Schedule 1

Exercise Notice To: The Directors

Stanmore Coal Limited c/- Corporate Administration Services Pty Ltd Level 5, 10 Market Street Brisbane QLD 4000 (the “Company”)

I/We,

being the registered Holder of ___________ Options hereby exercise __________ Options granted

to me/us by the Company.

Subject to clause 4 of the terms and conditions of the Options, if the Options exercised under this

Exercise Notice are subject to Physical Settlement, I/we authorise you to register me/us as the

Holder of the Shares to be allotted to me/us and I/we agree to accept such Shares subject to the

constitution of the Company.

Dated: Signed for and on behalf of [Holder] by its authorised representatives in the presence of:

Signature of witness Signature of authorised representative

Name of witness (BLOCK LETTERS)

Name of authorised representative (BLOCK LETTERS)

Address of witness Signature of authorised representative

Name of authorised representative (BLOCK LETTERS)

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Schedule E

Summary of Share Plan and Incentive Plan rules

Summary of the key terms of the Share Plan

Plan overview The Board may, from time to time, in its absolute discretion, offer to issue Shares as part of its short term incentive strategy to an Eligible Employee under the Share Plan, and such offer may be accepted by the Eligible Employee.

Eligible Employees Any permanent full time or part time employee (including any executive director) of Stanmore Coal and its related bodies corporate (Group) is eligible to participate in the Share Plan and to be offered Shares if he or she satisfies the criteria or other performance conditions that the Board determines from time to time. The Board may set the criteria based on, for example:

• period of employment;

• actual or potential contribution to the Group; and

• any other matters the Board deems appropriate.

Plan limit In accordance with ASIC Class Order 03/184, the maximum number of Shares that may be issued under the Share Plan (or any other plan or similar arrangement) will not exceed 5% of the issued capital of the Company from time to time.

For the purposes of calculating this 5% limit, ASIC includes:

• all Shares issued (or which might be issued pursuant to the exercise of an incentive) in connection with the offer from time to time;

• the number of Shares in the same class that would be issued if all of the offers under the Share Plan were accepted (or if Incentives over them were exercised); and

• the number of Shares in the same class issued during the previous five years pursuant to an employee incentive scheme;

but specifically excludes:

• any offers which are received outside of Australia;

• offers made under a disclosure document;

• offers that do not require disclosure under section 708 of the Corporations Act (e.g. offers to investors under a 20/12 offer, sophisticated or professional investors and “senior managers” where a senior manager is a person who is concerned in, or takes part in, the management of the body (regardless of the person’s designation and whether or not the person is a director or secretary of the body); and

• options over Shares where the relevant option has lapsed (for these purposes including Incentives).

Issue price Shares will be issued for nil consideration under the Share Plan on the basis they represent valid consideration for the Eligible Employee’s performance as an employee.

Rights and restrictions of Shares

• Shares are entitled to receive a dividend where such Shares were issued on or before the relevant dividend entitlement date;

• Shares issued under the Share Plan rank equally in all respects with other Shares on issue;

• The Eligible Employee must comply with the Stanmore Coal Securities Trading Policy and the Constitution in respect of any Shares that may be issued under the Share Plan; and

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• Subject to law and the Stanmore Coal Securities Trading Policy, there will be no restrictions on the sale, transfer or disposal of Shares.

Administration The Share Plan is administered by the Board, which has absolute discretion to determine appropriate procedures for its administration and resolve questions of fact or interpretation and formulate special terms and conditions (subject to the Listing Rules, including any waiver granted by ASX) in addition to those set out in the Share Plan.

Termination and suspension

The Share Plan may be terminated or suspended at any time by the Board but any such suspension or termination will not affect nor prejudice rights of any Eligible Employee holding Shares at that time. The Board must provide written notice of any suspension or termination.

Amendments The Board may amend the Share Plan at any time, but may not do so in a way which reduces the rights of Eligible Employees’ existing rights without their consent, unless the amendment is to comply with the law, to correct an error or similar. The Board must provide written notice of any amendment.

Summary of the key terms of the Incentive Plan

Plan overview The Board may, from time to time, in its absolute discretion, offer to issue Incentives as part of its long term incentive strategy to an Eligible Employee under the Incentive Plan, and such offer may be accepted by the Eligible Employee.

Eligible Employees Any permanent full time or part time employee (including any executive director) of Stanmore Coal and its related bodies corporate (Group) is eligible to participate in the Incentive Plan and to be offered Incentives if he or she satisfies the criteria or other performance conditions that the Board determines from time to time. The Board may set the criteria based on, for example:

• period of employment;

• actual or potential contribution to the Group;

• any other matters the Board deems appropriate.

Plan limit In accordance with ASIC Class Order 03/184, the maximum number of Incentives that may be issued under the Incentive Plan (or any other plan or similar arrangement) will not, when aggregated with the number of Shares on issue, exceed 5% of the issued capital of the Company from time to time.

For the purposes of calculating this 5% limit, ASIC includes:

• all Shares issued (or which might be issued pursuant to the exercise of an Incentive) in connection with the offer from time to time;

• the number of Shares in the same class that would be issued if all of the offers under the Incentive Plan were accepted (or if Incentives over them were exercised); and

• the number of Shares in the same class issued during the previous five years pursuant to an employee incentive scheme;

but specifically excludes:

• any offers which are received outside of Australia;

• offers made under a disclosure document;

• offers that do not require disclosure under section 708 of the Corporations Act (eg offers to investors under a 20/12 offer, sophisticated or professional investors and “senior managers” where a senior manager is a person who is concerned in, or takes part in, the management of the body (regardless of the person’s designation and whether or not the person is a director or secretary of the body); and

• options over Shares where the relevant option has lapsed (for these purposes including Incentives).

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Acceptance of Offer An offer of Incentives may be accepted by an Eligible Employee to whom they are offered by delivering to the Company written notice of acceptance of the offer in the form determined by the Board and stated in the letter of offer.

Vesting Condition The Board will determine whether any performance hurdles or other conditions (including as to time) will be required to be met (Vesting Conditions) before the Incentives which have been issued under the Plan can vest.

Performance Rights will automatically vest on the business day after the relevant Vesting Conditions have all been satisfied, at which time the Company must issue Shares.

Issue price Unless otherwise determined by the Board, Incentives will be issued for nil consideration under the Incentive Plan on the basis that they represent valid consideration for the Eligible Employee’s performance as an employee.

Exercise price The exercise price for Incentives is as determined by the Board at the time of issue. An Option will generally have a cash exercise price of greater than nil, whereas Performance Right will generally have an exercise price of nil.

Exercise period The terms for exercise, including the exercise period, are stated in the offer letter but the exercise period must not exceed ten years and any Options or Performance Rights must not be exercised during a closed period prescribed in the Stanmore Coal Securities Trading Policy.

Lapse Once on issue, Incentives will lapse on the first to occur of:

• the stated expiry date;

• the failure to meet the stated vesting conditions within the prescribed period;

• the Eligible Employee ceases to be employed by the Group due to resignation or retirement:

o for vested Options, 60 days after the date of cessation of employment (or such longer period as the Board determines); and

o for unvested Incentives, the date of cessation of employment (or such longer period as the Board determines);

• the Eligible Employee ceases to be employed by the Group due to redundancy, or the Eligible Employee’s death, permanent illness or permanent physical or mental incapacity:

o for vested Options, six months after the date of cessation of employment (or such longer period as the Board determines); and

o for unvested Incentives, the date of cessation of employment (or such longer period as the Board determines);

• if the Eligible Employee ceases to be employed by the Group or another Group entity for any other reason:

o for vested Options, 60 days after the date of cessation of employment (or such longer period as the Board determines);

o for unvested Incentives, the date of cessation of employment (or such longer period as the Board determines); and

o a determination by the Board that causes the Incentive to be forfeited (i.e. fraud by the Eligible Employee).

Rights and restrictions of Incentives

• Incentives are not entitled to receive a dividend. Any Shares issued upon vesting of Incentives are only entitled to dividends if they were issued on or before the relevant dividend entitlement date;

• Shares issued under the Incentive Plan rank equally in all respects with other Shares on issue;

• In the event of a reconstruction of the Company (consolidation, subdivision, reduction, cancellation or return), the terms of any outstanding Incentives will be amended by the Board to the extent necessary to comply with the Listing Rules at the time of reconstruction;

• Any bonus issue of securities by way of capitalisation of profits or share capital account, will confer on each Incentive the right:

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o to receive on exercise or vesting of those Incentives, not only an allotment of one Share for each of the Incentives exercised or vested but also an allotment of the additional Shares and/or other securities the Eligible Employee would have received had the Eligible Employee participated in that bonus issue as a holder of Shares of a number equal to the Shares that would have been allotted to the Eligible Employee had they exercised those Incentives or the Incentives had vested immediately before the date of the bonus issue; and

o to have profits, reserves or share premium account, as the case may be, applied in paying up in full those additional Shares and/or other securities;

• Subject to a reconstruction or bonus issue, Incentives do not carry the right to participate in any new issue of securities including pro-rata issues;

• The Eligible Employee must comply with the Stanmore Coal Securities Trading Policy and the Constitution in respect of any Shares that may be issued under the Incentive Plan;

• Subject to law and the Stanmore Coal Securities Trading Policy, there will be no restrictions on the sale, transfer or disposal of Shares once issued.

• Incentives will not be quoted on ASX. The Company will apply for quotation of any Shares issued under the Incentive Plan.

Assignability An Employee cannot sell, assign, transfer or otherwise dispose of an Incentive except to his or her Associate.

Administration The Incentive Plan is administered by the Board, which has an absolute discretion to determine appropriate procedures for its administration and resolve questions of fact or interpretation and formulate special terms and conditions (subject to the Listing Rules, including any waiver granted by ASX) in addition to those set out in the Incentive Plan.

Change of control If, in the opinion of the Board, a Change of Control Event has occurred, or is likely to occur, the Board may declare an Incentive (whether Option or Performance Right) to be free of any Vesting Conditions and Incentives which are so declared may, subject to any other rule, be exercised at any time on or before the relevant Expiry Date and in any number.

Change of Control means where:

• a takeover bid is made and a person obtains Voting Power of more than 50% and the takeover bid has become unconditional;

• a court has sanctioned a compromise or arrangement (other than for the purpose of, or in connection with, a scheme for the reconstruction of the Company); or

• any other transaction which the Board determines will result in a change in

control of the Company.

Amendments Subject to the Listing Rules, the Board may amend the Incentive Plan at any time, but may not do so in a way which reduces the rights of Eligible Employees’ existing rights without their consent, unless the amendment is to comply with the law, to correct an error or similar.

Termination and suspension

The Incentive Plan may be terminated or suspended at any time by resolution of the Board but any such suspension or termination will not affect nor prejudice rights of any Eligible Employee holding Incentives at that time.

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