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ASX ANNOUNCEMENT 28 June 2011

Maiden Resource Statement – Chile

Carbon Energy Limited (CNX) is pleased to advise that the Company has completed its maiden JORC Resource for the Mulpun coal deposit in Chile. The JORC Resources estimate totals 103 million tonnes at 2 metre coal seam thickness cut-off (Measured: 26 million tonnes, Indicated: 37 million tonnes, Inferred: 40 million tonnes). This entire resource is deeper than 200 metres and therefore is a primary target for Underground Coal Gasification (UCG) (see Attachment 1).

Carbon Energy is jointly developing a UCG project at Mulpun with Mulpun Energy, a subsidiary of Antofagasta Minerals S.A. based in Chile. Upon completion of agreed milestones Carbon Energy has the right to a contributing 30% interest in the Mulpun deposit.

This resource assessment is Carbon Energy’s first such assessment outside of Australia where it has Queensland based coal assets containing 668 million tonnes (450 million tonnes Inferred and 218 million tonnes Indicated with 2 metre cut-off) of JORC compliant resource.

Andrew Dash, Carbon Energy’s Managing Director said, “It is very pleasing to have completed our first resource assessment for Chile and to have successfully identified a substantial resource suitable for UCG.”

“Based on conservative assumptions, the 103 million tonnes of coal in this location could produce approximately 1,100 petajoules (PJ) of syngas1

Level 12, 301 Coronation Drive, Milton QLD 4064 Australia PO Box 2118, Toowong DC QLD 4066 Australia phone + 61 (0) 7 3337 9944 fax + 61 (0) 7 3337 9945

. This is a very significant energy resource for the Chilean market. By way of example, this would be sufficient to run a 300 MW power station for over 55 years.”

“Carbon Energy has always viewed Chile as an attractive market for energy projects due to the country’s reliance on imported fuel and rapidly growing energy demand of 8% p.a. When we started looking at this project in late 2009, electricity spot prices were US$120 per MWh, which was 3-4 times the price of electricity in Queensland. Recently, reports have indicated that spot prices have increased to US$220 per MWh making these some of the highest prices in the world.”

www.carbonenergy.com.au

Carbon Energy Limited ABN 56 057 552 137

Carbon Energy (Operations) Pty Ltd ABN 61 105 176 967

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“Electricity prices of $120/MWh to $220/MWh would equate to fuel prices into a power station of $14.5/GJ to $27/GJ on short run marginal cost basis.”

“Clearly the scale of this resource and the high energy market prices make this project very attractive to both Carbon Energy and Antofagasta Minerals. It also reinforces Carbon Energy’s strategy of taking a very targeted approach to pursuing key resources in attractive markets.” Mr Dash said.

Senior Management from Carbon Energy and Antofagasta Minerals met in Chile earlier this month to review the progress of the first UCG panel and discuss future developments.

In terms of progress, site works for the first UCG Panel in Chile are progressing well with the following completed or underway:

• Construction of access roads, drilling pads and lay down areas • Establishment of site project office on-site accommodation • Drilling of water monitoring wells is being conducted 24 hrs a day • Baseline environmental monitoring is underway

Front End Engineering and Design (FEED) is well progressed with Carbon Energy and Antofagasta Minerals now finalising FEED documentation prior to entering the detailed Engineering, Procurement and Construction (EPC) phase.

The parties have also agreed to accelerate feasibility studies and approvals required for a commercial scale power project based on using the Company’s proprietary UCG syngas technology.

Carbon Energy’s Australian developed UCG technology has the potential to unlock otherwise stranded coal resources and fundamentally change the dynamics of energy markets around the world and, in particular, locations such as Chile.

For and on behalf of the Board

Andrew Dash

Managing Director

Note 1: 103 million tonnes of coal at an energy content of 21.67 GJ per tonne has 2,232 PJ energy in place. Using a conservative UCG recovery figure of 50% (that takes into account pillars, losses and a gasification efficiency of 80%) the estimated recoverable energy is approximately 1,100 PJ should a resource of this size proceed to production. 1 petajoule (PJ) is equivalent to 1,000,000 gigajoules (GJ).

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Maiden Resource Statement – Chile 3 | P a g e

Competent Person Statement – Coal

The information in this release that relates to resources is based on information compiled by Dr C.W. Mallett, Executive Director Carbon Energy Limited who is a member of the Australian Institute of Mining and Metallurgy. Dr Mallett has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Mallett consents to the inclusion in the release of the matters based on his information in the form and context in which it appears.

About Carbon Energy Carbon Energy specialises in the production of cleaner energy and chemicals feedstock from its Underground Coal Gasification (UCG) syngas. The Company’s proprietary technology and unique approach to UCG and syngas production increases the efficiency of capturing carbon dioxide making it a leader in clean coal technology.

Carbon Energy’s technological advantage comes from its association with Australia’s premier research agency, CSIRO, which includes world-class geotechnical, hydrological and gasification modelling capabilities.

Carbon Energy is building a targeted international portfolio of coal assets suitable for UCG and accessible to high-value markets. The company has a global agreement with Incitec Pivot Ltd (Dyno Nobel) for potential ammonia applications from syngas production and has coal resource projects under development on four continents.

• In Australia, the Company has a power development agreement with Arcadia Energy Trading, subsidiary of Arcadia Petroleum for the potential development of a 300MW power station fuelled by syngas.

• In Chile, the Company is developing a project with Antofagasta Minerals, the world’s third

largest copper miner, for the development of electricity and gas projects fuelled by syngas.

• In the USA, the Company has agreements with Anadarko and with Great Northern

Properties to explore for and options to lease coal for project development in Wyoming, Montana and North Dakota.

• In Turkey, the Company has an agreement with Hema Endustri, part of Hattat Holdings,

to develop coal assets for a potential power station project.

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Maiden Resource Statement – Chile 4 | P a g e

Attachment 1

MULPUN JORC COAL RESOURCE

1. RESOURCE SUMMARY The coal deposit within the lease area subject to a commercial agreement between Carbon Energy and Antofagasta Minerals is assessed to contain JORC Resources of 19.6 million tonnes at 2 to 5 metres coal seam thickness cut-off (Measured: 1.1 million tonnes, Indicated: 17.7 million tonnes, Inferred: 0.8 million tonnes) and 83.6 million tonnes at a 5 metres coal seam thickness cut-off (Measured: 25.3 million tonnes, Indicated: 19 million tonnes, Inferred: 39.3 million tonnes). The total 103 million tonne resource is deeper than 200 metres and a primary target for UCG, of which 83.6 million tonnes is in the optimal seam thickness range greater than 5 metres.

Location

The Mulpun coal deposit is located in southern central Chile, 800 kilometres south of Santiago, and approximately 30 kilometres east of Valdivia.

Location map

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2. DISCUSSION Geology

The coal lies in an Early Tertiary paleovalley. Non-marine sediments including coal were initially deposited, and later covered by marine sand and clay, and Recent and Pleistocene unconsolidated sediments cover some of the old paleovalley. The location of the buried paleovalley has been delineated with geophysical gravity and seismic surveys, revealing a deep meandering incision in the basement, subsequently filled with non-marine and marine sediments. The coal deposit has been drilled over a strike length of 10 kilometres, and the paleovalley is approximately 1km wide, with a flat bottomed U shape, with relatively steep sides.

Resource Data

48 fully cored boreholes were drilled in the vicinity of the abandoned Mulpun Coal Mine by the original mine operators. All borehole material is retained in a core store apart from coal samples sent for analysis. Recently Mulpun Energy has drilled a further 5 boreholes to the northwest of the mine to test the extent of the coal. These new wells have standard geophysical logs for coal and were fully cored. Borehole locations are shown in Figure 1.

Figure 1 Boreholes and lease boundaries Mulpun

The Mulpun coal is divided into an upper and lower seam by a tuffaceous interseam (tonstein) that is consistently found across the coal deposit. Apart from a few locations, the tonstein is less than 1 metre thick and should allow both upper and lower seams to be taken in a single UCG operation.

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Maiden Resource Statement – Chile 6 | P a g e

The coal is constrained within the sides of a narrow meandering paleovalley. Coal is thickest in the centre of the paleovalley and thins near its edges. This forms a deposit with a linear core of thick coal, surrounded on the paleovalley edges by thinner coal. Carbon Energy has used the drilling results, gravity surveys and seismic surveys to determine the limits for areas where seams are of 2 metres and 5 metres minimum thickness.

MULPUN BOREHOLES WITH COAL INTERSECTIONS

Bore Northing Easting ElevationDepth M Upper

seam topM Upper seam

thicknessInterseam thickness

Depth M Lower seam top

M lower seam thickness

MU1 5597400 674229.7 33.15 200.8 2.05MU2 5600539 673261.2 102.2 329.58 2.32 0.4 337.25 3.7MU3 5600545 674128.9 97.43 313.95 3.45 0.4 317.8 5.34MU4 5601200 674470 89.49 225.26 0.05MU5 5601089 672410.7 119 352.33 0.07 12.48 364.88 0.12MU6 5600704 674659.8 83.02 282.17 2.98 0.45 285.6 4.76MU7 5600152 673023 96.06 299.15 3.65 0.5 303.3 3.55MU8 5599980 674366.7 77.72 289.82 4.43 0.67 294.92 4MU9 5601347 671743.5 91.32 325.25 6 0.6 331.85 2.4PU1 5594625 679968.5 119.73 145.8 3 1.8 150.6 1.9PU2 5594706 679528.9 138.57 179.4 0.02 0.55 191.98 1.26PU3 5595830 678442.2 114.28 194.25 3.7 0.5 198.45 3.64PU4 5596191 678083.6 66.54 144.98 0.69 0.7 146.37 2.36PU5 5596409 678182.3 43.49 126.65 6.05 0.87 133.57 2.63PU6 5596743 677869.1 36.26 98.2 3.3 0.15 101.65 0.73PU7 5596307 677910.8 50.74 133 2.37 0.4 135.77 2.78PU9 5596849 677195.7 38.79 143.54 3.26 0.56 147.36 2.86PU10 5595994 678688.6 84.75 161 6.55 1.7 169.25 5.69PU12 5596708 677361.8 35.03 134.45 1.95 0.54 136.94 4.92PU13 5597074 677570.4 39.18 106.05 0.65PU15 5597321 676421.8 40.98 158.3 5.05 0.45 163.8 5.05PU16 5597807 675648.2 43.21 168.05 3.15 0.55 171.75 4.39PU18 5597974 675900.3 68.81 207.05 3.2PU19b 5598143 675722.2 78.2 228.75 2.7 0.6 232.05 1.88PU20 5598087 676057.5 67.04 192.13 4.27 0.85 200 4.4PU21 5598396 675516.5 95.41 269.25 1.7 0.1 271.05 3.85PU22 5596429 677547.3 35.95 130.5 4.85 0.05 135.4 3.45PU23 5597258 677209 37.76 141 5.3 0.6 146.9 4.8PU24 5596852 676877.2 39.78 106.5 1.55PU25 5596160 677315.3 40.09 90.37 2.3PU26 5597350 676791.5 38.3 141.85 5.9 0.75 148.5 2.9PU27 5597613 676812.5 39.85 139.29 4.76 0.65 144.7 5.23PU28 5597098 676171 41.08 134.83 3.15 0.7 138.68 0.9PU29 5597930 677065 37.58 101.3 2.9 1 105.2 1.65PU30a 5599353 675220.1 90.67 281.17 5.03 0.6 286.8 7.15PU31 5599758 674651.1 83.15 287.25 4.7 0.55 292.5 8.5PU32 5599253 674993.4 79.23 271.73 3.12 1.3 276.15 1.13PU34 5598917 675429.1 90.22 252.9 4.87 0.53 258.3 6.65PU35 5598873 675264.8 88.35 274.3 3.5 0.5 278.3 3.25PU36 5598508 675684.3 92.3 260.65 7.15 0.65 268.45 6.25PU37 5597592 676412.4 44.08 161.4 4.3 0.9 166.6 0.4PU38 5598271 675527.9 73.49 232.4 4.7 0.95 238.05 4.9PU39 5598641 675341.8 95.48 270.4 4.1 0.57 275.07 3.78H1 5599822 673099.2 125.68 342.8 7.37 0.71 350.88 8.02H2 5599753 674888.4 37.5 229.7 3.8 0.6 234.1 5.1H3 5600347 673928.9 89.12 304.65 3.85 0.55 309.05 5.65H4 5600139 674364.7 87.11 299 4.1 0.7 303.8 6.37H6 5597406 676741.9 42.36 147.9 8.1 0.5 156.5 7.9

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Resource Analysis

All borehole data was incorporated into a Minescape geological model by leading international mining consultancy, Runge - Mining Software and Mining Consulting Services. Runge created resource polygons for the Mulpun coal seams and classified Measured, Indicated and Inferred resources based on borehole spacing.

Minescape resource polygons were interrogated by Carbon Energy, as constrained by a range of cut-off criteria:

• Coal resource occurring below 200 metres depth • Coal resource with thickness greater than 5metres • Coal resource with thickness greater than 2metres

Based on 89 laboratory analyses of coal cores, the average energy content for all coal core samples analysed is 21.67MJ/kg and resource tonnages were calculated using a density of 1.4kg/m3

JORC Resources are classified as Measured, Indicated and Inferred for areas where coal seams are greater than 2m thick and at a depth of more than 200m.

for the coal.

Coal resources were calculated using the following categories under the JORC code:

• Measured Coal Resources were estimated using data obtained from Points of Observation no more than 500 metres apart.

• Indicated Coal Resources were estimated using data obtained from Points of Observation no more than 1 kilometre apart.

• Inferred Coal Resources were estimated using data obtained from Points of Observation no more than 4 kilometres apart.

Table 2 JORC Coal Resource - Coal Seams at a depth of more than 200m

Measured million tonnes)

Indicated (million tonnes)

Inferred (million tonnes)

subtotal

Coal Resource (Seam thickness ≥ 2m and < 5m) 1.1 17.7 0.8 19.6

Coal Resource (Seam thickness ≥ 5m) 25.3 19 39.3 83.6

Totals 26.4 36.7 40.1 103.2

Competent Person Statement – Coal

The information in this release that relates to resources is based on information compiled by Dr C.W. Mallett, Executive Director Carbon Energy Limited who is a member of the Australian Institute of Mining and Metallurgy. Dr Mallett has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Mallett consents to the inclusion in the release of the matters based on his information in the form and context in which it appears.

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