new hope, page-34

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Northern Energy has three main projects, Maryborough, Elimatta, and Yamala. Maryborough is a coking coal project
which is due to begin production in 2012. Maryborough will be a high cost operation and has enjoyed a big uplift due to
our increase in long-term coal prices, along with the other projects to lesser extent, the total valuation by 50%. The key element at the moment is the all cash takeover bid from New Hope (NHC) at $1.50/share.

The bid values NEC at $193m and is at a 55% premium to the then 30-day VWAP but it is still below our current valuation of $2.54/share. The market has reacted strongly to the announcement, with the shares trading above the bid price ever since. The bid works out on an EV/t basis at $0.33/t of total resources and looks relatively cheap when compared to recent transactions. We calculated an average EV/t average of $1.70/t for recent coal IPOs and mine acquisitions.

This would imply a valuation that would be hard to achieve but at the minimum we would anticipate a takeover at around the $0.50/t or $2.20/share. A higher price than $1.50 may be achieved if either Xinyang, which has 13% of the stock or Xstrata, which has the big Wandoan deposit next door to NEC?s Elimatta project enter the fray. We reiterate our BUY recommendation with a price target of $2.55.