TASMANIA SEL32/2003

This tenement covers 11,295 km2 and encompasses what Pure Energy believes are most of the CSG-prospective lands in Tasmania .

The Tasmanian Basin is a mature coal-mining production province, with significant coal resources. The Company believes it has significant potential for coal seam gas. Thick and extensive coal seams at the appropriate depths have been proven by over a century of coal-mining exploration and development. The Company believes the potential leverage of this high density of coal mining drill holes makes this area particularly attractive for rapid progression from appraisal into pilot and development.

Pure Energy’s objective is to evaluate and demonstrate both the distribution and economic viability of CSG production in the Tasmania Basin. If drilling and pilot programs are successful, the Company intends to rapidly develop this resource and to establish CSG as a viable energy source for Tasmania. The Company considers this tenement to be prospective for the following reasons:

• The area is known to be coal-rich, with numerous proven coalfields
• Historical drilling campaigns, from hundreds of boreholes, have demonstrated:
  • areally extensive, correlatable coal seams (>100 km2’s)
  • total net coal thickness greater than 10 metres, particularly in the Late Triassic coals of the northeastern part of the basin. The coal of the Fingal - Dalmayne coalfields, for example, are in the order of 10 to 20 metres thick, and have been largely delineated.
  • appropriate burial depth and coal maturity, for gas generation
  • evidence of structuring, for fracture enhancement and permeability
• The presence of gas has been proven in the Fingal Coalfield by a methane gas explosion at the Duncan Colliery in 1977
• The Tasmanian Gas Pipeline (TGP) and related gas distribution networks are in place and are being expanded. They run directly through the tenement near some of the most prospective CSG areas
• An electricity transmission system runs throughout the tenement, with distribution arms extending within five kilometres of the richest coal areas of the Fingal-Dalmayne region

The Company has identified its tier-one drilling target areas. The prime target in northeast of Tasmania (being Fingal-Dalmayne) covers an area of approximately 300 km2 with over 120 Mineral Resources Tasmania exploration holes already drilled . The central target area of 25 km2 has demonstrated thick and extensive coal through 26 core holes. If successful, Pure Energy’s plan is to leverage these existing boreholes to fast-track the reserves certification, given that the areal extent and thickness of the coal is already demonstrated by the historical drilling campaign.

The next step is to select final drilling locations within the Fingal Coalfield, which will likely involve twinning of existing boreholes. The Company intends to drill and test these wells and, if successful, move into pilot and production.