ABN 13 112 682 158

Level 2, 66 Hunter Street Sydney NSW 2000 Australia T: (61 2) 9300 3333 F: (61 2) 9221 6333 E: pnightingale@cockatoocoal.com.au W: www.cockatoocoal.com.au

REPORT ON ACTIVITIES FOR THE QUARTER ENDED

31 DECEMBER 2010

1. QUARTERLY ACTIVITY SUMMARY CORPORATE Acquisitions • Completion of Agreement to acquire interests in three coal projects

located in the Surat Basin, Queensland, for $105.5 million. • KEPCO completes the acquisition of 100% of the Bylong project in

the northwest Sydney Basin from Anglo and grants a 3 year call option for a 30% interest to Cockatoo.

• POSCO completes the acquisition of the Sutton Forest project in the southern Sydney Basin from Anglo and Cockatoo acquires a 30% interest in the Sutton Forest project from POSCO.

Capital • Cockatoo's 30% interest in the Sutton Forest project funded by POSCO subscribing for $21.5 million Cockatoo shares.

• $153.3 million equity raising successfully completed by way of an accelerated renounceable pro-rata entitlement offer and institutional share placement.

Baralaba/ Wonbindi - Minorities

• Legal proceedings which had been initiated by a Baralaba minority interest shareholder were settled.

• Major Japanese steel group JFE Shoji subsequently acquired ownership of the minority interest shareholding.

PRODUCTION Flood Impact • Baralaba mine coal production which was severely adversely

affected by wet weather and flooding during the quarter. • Safety audits and recovery assessments underway.

Tonnes • Baralaba mine coal production totalled 54,287 tonnes for the quarter.

Sales • Local flood events impacted production and transportation of product coal in the quarter.

• PCI coal sales totalled 21,248 tonnes for the quarter. • Thermal coal sales totalled 98,016 tonnes for the quarter.

EXPLORATION Bowen Basin • JORC Inferred Resources totalling 25.2 million tonnes newly defined

at the Baralaba South area. • A total of 598 holes for 72,425 metres have been drilled in the

Baralaba mine project to date. • A total of 288 holes for 52,812 metres have been drilled in the

Baralaba North project area to date. • Recent drilling in the Baralaba Mine project have geophysically

logged cumulative down hole coal intercepts of up to 24.9 metres with average intercepts of 8.9 metres.

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EXPLORATION Surat Basin • An increase of 53% in total JORC compliant resources for the Tin

Hut Creek project to 181.3 million tonnes. • Strike length of the Tin Hut Creek deposit extended by 6.0 kilometres

to 13.5 kilometres from northwest to the southeast. • A total of 600 holes for 74,734 metres have been drilled in the Surat

Basin projects to date. • Recent drilling in the Tin Hut Creek project has cumulative down

hole coal intercepts of up to 13.9 metres with an average thickness of 7.9 metres.

LOGISTICS Rail • Discussions advanced with both Queensland Rail and Surat Basin

Rail for future capacity to Gladstone. • Surat Basin Rail corridor proposed for State Development Area

declaration. • Queensland Co-ordinator General approves Surat Basin Rail EIS,

permitting project development. Port • Cockatoo selected as a 3 million tonnes per annum Wiggins Island

Stage 1 user. • Expression of Interest lodged to participate in the development of

Wiggins Island Stages 2 and 3. 2. CORPORATE ACTIVITIES 2.1 Completion of the Acquisition of Interests in Development and Exploration Projects On 24 December 2010, conditional agreements, as detailed by the Company on 7 July 2010, with Anglo American plc ('Anglo') to acquire development and exploration assets located in NSW and Queensland were completed. The projects acquired, as advised by Anglo, are:

• Bylong, North West Sydney Basin - 423Mt (150Mt Indicated and 273Mt Inferred) export grade thermal coal resource.

• Sutton Forest, Sydney Basin - 115Mt Indicated export grade metallurgical/thermal coal resource.

• Collingwood, Surat Basin - 237Mt (65Mt Indicated and 172Mt Inferred) export grade thermal coal resource.

• Taroom, Surat Basin - 198Mt (36Mt Measured, 89Mt Indicated and 73Mt Inferred) export grade thermal coal resource.

• Ownaview, Surat Basin - 171Mt Inferred export grade thermal coal resource. A summary of the transaction structure is:

• KEPCO has acquired 100% of Anglo Coal (Bylong) Pty Ltd from Anglo and granted a 3 year call option for a 30% interest to Cockatoo (details of the call option were disclosed on 7 July 2010).

• POSCO has acquired 100% of Anglo Coal (Sutton Forrest) Pty Ltd from Anglo and has transferred a 30% interest to Cockatoo. The project has been redesignated the Hume project.

• Cockatoo has acquired 100% of Anglo Coal (Taroom) Pty Ltd which owns 51% of the Taroom, Collingwood and Ownaview assets. Cockatoo intends, as part of the abovementioned call option with KEPCO, to transfer ownership of the 51% interest in Ownaview to KEPCO subject to satisfaction of certain conditions precedent.

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Cockatoo has paid Anglo $105.5 million for its 51% interest in the Surat Basin assets and has issued $21.5 million of Cockatoo shares to POSCO to fund Cockatoo's purchase of its 30% interest in the Hume project. Key project development teams have been established to determine the development pathway for each of the projects. Following completion, Cockatoo’s attributable resources have increased by 256 Mt, excluding any potential contribution from Bylong. Strategic Rationale This acquisition provides the following potential benefits to Cockatoo shareholders:

• exposure to large, high quality coking and thermal coal exploration and development assets with strong joint venture partners;

• positions Cockatoo as a major player in Queensland’s emerging Surat Basin region, with a total tenement holding of approximately 3,900 square kilometres;

• attributable JORC resources will increase by 256 Mt upon completion of all arrangements such that Cockatoo will become one of the largest coal development companies on the ASX in terms of JORC resources for Australian domiciled coal assets;

• diversifies Cockatoo’s development portfolio across key coal producing regions and related infrastructure capacity;

• potential for further upside through investment in additional exploration; and • accelerates Cockatoo’s progress toward its stated goal of becoming a significant

independent coal mining company. 2.2 Capital Management As previously advised, the Company issued 46,059,957 new fully paid ordinary shares to POSCO for consideration of $21.5 million to fund Cockatoo's purchase of its 30% interest in the Hume project. In addition, on 15 September 2010 the Company announced the launch of a fully underwritten accelerated renounceable pro-rata entitlement offer and institutional share placement equity raising. This equity raising, which totaled $153.3 million has been successfully completed and comprises:

• the issue of 241,003,571 new fully paid ordinary shares on the basis of a 2-for-5 accelerated renounceable pro-rata entitlement offer ('Entitlement Offer') at an issue price of $0.40 per new share to raise $96.4 million; and

• the issue of 126,526,000 new fully paid ordinary shares on the basis of an institutional share placement ('Institutional Placement') at an issue price of $0.45 per share which was determined via an institutional bookbuild to raise $56.9 million.

On 17 September 2010, the Company successfully completed the institutional component of the Entitlement Offer ('Institutional Entitlement Offer') and the Institutional Placement. Under the Institutional Entitlement Offer, new shares equivalent in number to entitlements not taken up by shareholders were sold by way of an accelerated bookbuild process, resulting in a clearing price of $0.45 per new share, representing a 12.5% premium to the underwritten issue price for the Entitlement Offer. Therefore institutional shareholders who elected not to take up their entitlements received $0.05 for each new share not taken up (less any applicable withholding tax).

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On 15 October 2010, the Company advised that it had successfully completed the retail component of the Entitlement Offer ('Retail Entitlement Offer'). Under the Retail Entitlement Offer, new shares equivalent in number to entitlements not taken up by shareholders were sold by way of a bookbuild process, resulting in a clearing price of $0.51 per new share, representing a 27.5% premium to the underwritten issue price for the Entitlement Offer. Therefore shareholders who did not take up their entitlements received $0.11 for each new share not taken up (less any applicable withholding tax). 2.3 Baralaba/Wonbindi Projects - Minority Interests On 19 October 2010, orders were made by consent in the Supreme Court of New South Wales dismissing the proceedings commenced by Republic Coal Pty Ltd ('Republic') in April 2009 against Cockatoo, Baralaba Coal Pty Ltd (‘Baralaba Coal’), Cockatoo Coal Marketing Company Pty Ltd, Mark Lochtenberg, Peter Nightingale and Norman Seckold. It was a condition of the settlement that the terms be kept confidential. Subsequently, on 20 October 2010, the Company was pleased to advise that JFE Shoji Trade Corporation ('JFE Shoji') had acquired all of the issued shares in Republic. Republic holds a 37.5% interest in Baralaba Coal and a 20% interest in Wonbindi Coal Pty Limited ('Wonbindi'). The Company holds the remaining 62.5% interest in Baralaba Coal and 80% interest in Wonbindi. There is no change in this ownership structure of Baralaba Coal or Wonbindi as a result of JFE Shoji acquiring all of the issued shares in Republic which has since been renamed JS Baralaba Wonbindi Pty Ltd. Baralaba Coal is the holder of the Company's operating Baralaba mine project and Wonbindi is the holder of the Company's adjacent Wonbindi and Baralaba North projects, located in the Bowen Basin, Queensland. JFE Shoji is the sales, procurement and marketing arm of Japanese steel giant JFE Steel Corporation, created in 2003 through the merger of Kawasaki Steel Corporation and NKK Corporation. JFE Shoji Holdings Inc., the holding company of JFE Shoji, is listed on the Tokyo Stock Exchange and has annual revenues of approximately $22 billion from operations which extend to the trade of coal, steel, non ferrous metals, chemicals, fuel, machinery and other equipment and materials in Japan and throughout the world. Baralaba Coal currently enjoys a long term PCI coal sales contract with JFE Steel Corporation, which is facilitated by JFE Shoji. The Company is delighted to welcome such an esteemed and significant coal industry participant as its partner in the Bowen Basin. 3. BARALABA COAL MINE The Company's Baralaba coal mine comprises MLs 5580, 5581, 5590, 5605 and 80157, MDL 184 and MLA 80169 which are held by the Company's 62.5% owned subsidiary, Baralaba Coal. The Baralaba mine is located near the town of Baralaba in south eastern limb of the Bowen Basin, Queensland. The Baralaba coal mine is an open-pit operation, managed by the Company and operated by contractors providing blasting, mining, and haulage. The Company undertakes its own coal preparation services. PCI coal for steel making and thermal coal are produced from multiple seams forming the well known Rangal Coal Measures. All the coal sold is exported from the Port of Gladstone.

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3.1 Queensland Flooding As previously reported, very high rainfall in the Upper Dawson River catchment area in September restricted access to the Baralaba Mine due to flooding along the Dawson River. Whilst the mine open cut pit remained operational, closure of the low level river crossing between the mine and Baralaba township interrupted operations for 40 days during the quarter. As has been widely reported in the news media, Queensland suffered a severely wet spring. In particular for the Company, substantial time was lost at the Baralaba mine in the December quarter as flooding of the Dawson River eventually prevented access to the mine for both road transport of product stocks and personnel entry to the mine. On 30 December 2010, the Company announced that flood water levels in the Baralaba region had reached record levels, equivalent to the 1:100 year flood design levels at the mine and the Baralaba mine was flooded. Subsequently, on 7 January 2011, the Company advised the following:

• No Company or contract personnel associated with the mine were injured as a result of the flooding.

• All Baralaba mine’s key capital assets, including offices, workshop and coal processing

equipment at Baralaba mine remained undamaged and on high ground.

• Advising a timetable for recommencement of Baralaba main pit production was deemed premature at that juncture, given the extent of the then ongoing flooding and uncertainty regarding future weather patterns. At a minimum however, a production delay of some weeks and potentially longer was indicated.

• The Company has sufficient cash reserves to meet the relatively low fixed costs of this

small (50,000 tonne/month) mining operation during any reasonably foreseeable restoration period. Typically less than 20% of the mine’s quarterly operating costs are from fixed costs.

• Peak flood levels in the region had passed, and access to the mine by Cockatoo staff was

undertaken to conduct a safety audit, and preliminary assessment.

• The Company has activated its water management plan, and dewatering processes would begin once approvals are in place. Mining engineers, hydrologists and environmental scientists will work in conjunction with the relevant Queensland Government departments to ensure all dewatering is conducted in a safe, efficient and environmentally sound manner.

• The Company will continue to progressively provide more detail on the timetable for

dewatering and recommencement of production as more detail becomes available. On 21 January 2011, the Company further advised in respect of progress for dewatering and resumption of mining at Baralaba:

• Dewatering of the Baralaba mine main pit had then commenced in accordance with relevant Queensland state environmental regulations, post significant falls in the flood levels affecting the Baralaba mine and the surrounding region. Water levels at the Dawson River had fallen from approximately 15.6 metres at the flood peak, to less than 6 metres as at 21 January 2011.

• A recommencement of mining from February is anticipated, as the dewatering delivers

access to exposed mining benches. A phased program of dewatering/mining is then expected to continue for several weeks as the mine returns to planned production capacity (~150,000t/quarter). A 1:1000 year flood levee will also be built, commencing from February.

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• The Company notes that an area of low strip (<10:1) ratio PCI coal adjacent to the main pit had previously been identified, and this will be assessed with a view to potential mining as the main pit dewatering sequence occurs.

• QR National also publicly advised that Moura rail line, via which Baralaba coal is

transported to port, had re-opened.

• The Company regards it as important to emphasise that current plans remain subject to: o ongoing mine access availability, o continuous environmental discharge monitoring and compliance, o availability of contracted mining and related equipment, and o may be subject to further revision should circumstances require.

• The Company reiterates that it incurs low fixed costs during periods of mining hiatus – and

that all key Company capital assets at site, including offices, workshop and coal processing equipment remain undamaged.

The Company also advises that exploration activities at the Company's Bowen Basin projects are currently anticipated to resume in the March quarter. 3.2 Baralaba Mine Production Production of coal for the December 2010 quarter was 54,287 tonnes, approximately 65% lower than December 2009 quarterly production of 156,145 tonnes and 48% lower than the September 2010 quarterly production of 103,885 tonnes. Production was constrained due to the restricted access to the Baralaba Mine caused by flooding of the Dawson River, as detailed above.

March 2010

Quarter

June 2010

Quarter

September 2010

Quarter

December 2010 Quarter

YTD 2010

ROM coal (tonnes) 98,948 147,540 103,885 54,287 404,660 Overburden (bcm) 687,575 1,668,202 1,144,382 747,780 4,247,939 3.3 Baralaba Mine Coal Sales

Shipments March 2010

Quarter

June 2010

Quarter

September 2010

Quarter

December 2010 Quarter

YTD 2010

PCI (tonnes) 84,405 61,929 34,249 21,248 201,831 Thermal (tonnes) 18,662 88,242 60,038 98,016 264,958 Totals 103,067 150,171 94,287 119,264 466,789 During the December quarter, shipment volumes were constrained due to the effect of local flooding restricting access to the Baralaba Mine and transportation of product coal from mine to port, as detailed above.

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4. BOWEN BASIN PROJECTS The Company's Bowen Basin projects comprise:

• MLs 5580, 5581, 5590, 5605 and 80157, MDL184 and MLA 80169 (Baralaba mine project), which are held by the Company's 62.5% owned subsidiary, Baralaba Coal Pty Limited;

• MDL 352, EPCs 1047, 2107 and 2143 to the south of Baralaba Township (Wonbindi project) and EPC 1047, MDLA 416 and MLA 80170 to the north of the Baralaba mine (Baralaba North project) which are held by the Company's 80% owned subsidiary, Wonbindi Coal Pty Limited; and

• The Dingo project comprising EPCs 862 (Dingo South), 863 (Middle Creek) and 1063 (Tryphinia) which are which are currently 49% owned by the Company's 100% owned subsidiary, Independent Coal Pty Limited and which are subject to a Joint Venture Farmout agreement.

Bowen Basin project areas.

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The Company's Bowen Basin projects extend from the Dingo project in the north to the Wonbindi project in the south and have contiguous target areas covering an area of approximately 56,320 hectares with Permian age, Rangal Coal Measures sub-cropping over a strike length of approximately 92 kilometres. Production at the Baralaba mine has demonstrated that the seams of the Rangal Coal Measures in this area have PCI and thermal coal properties. The seams mined at the Baralaba mine have been intersected in the Wonbindi, Baralaba South and Baralaba North target areas. 4.1 Baralaba Mine and Baralaba North Drilling As previously advised, drilling activities in the Bowen Basin projects areas were suspended during the quarter due to adverse weather conditions. Prior to the suspension of drilling in December, the Company was using two core drilling rigs, which successfully in-filled the known area of coal resource within ML 80157 and MDL 184 areas of the Baralaba mine project. Drill hole coordinates, coal qualities and cumulative thickness of coal at the Baralaba and Baralaba North project areas have been reported by the Company and are available on the Company’s website. Exploration potential remains open in most directions. 4.2 Bowen Basin Projects - Resources A summary of changes to the Company's Bowen Basin resources during the quarter is as follows:

• Increase in total of all classifications of JORC compliant Resources in the Bowen projects to 158.6 million tonnes, up 19%, or 25.4 million tonnes, from 133.2 million tonnes.

• Continuation of the coal quality coring program, laboratory analysis and interpretation of existing data has led to refinement in the geological models and enabled the upgrade of JORC Resource classifications.

• Conclusion of Resource modelling of the Baralaba South area, located between the Wonbindi project area and the township of Baralaba, has enabled the estimation of a previously undefined 25.2 million tonnes of Inferred Resources.

• Newly defined Measured and Indicated Resources are expected to directly contribute to additional Marketable Reserves following mine planning evaluation of the results.

During the quarter, results of the drilling activities in the ML 80157 and MDL 184 areas detailed above, and analysis in the area of interest principally upgraded the classification of previously announced JORC compliant resources and also increased the previously announced resource tonnage. Slight variations in the total estimation result from refinement and resultant more accurate estimation from the geological model due to additional Points of Observation. In the Wonbindi project area (MDL 352 and EPC 1047), detailed analysis of raw coal plies and seams, and seam washability data has continued. This resulted in an increase in, and an upgrade of the classification of, previously announced resources. The previously defined structural domains and Areas of Influence have been used to determine the areas of different JORC classification. Following modelling of the Baralaba South project area, which incorporated 65 previously announced geophysically logged drill holes, a JORC Inferred Resource of 25.2 million tonnes has been estimated to a depth of 200 metres.

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Current JORC Resources for the Baralaba Mine, Baralaba North, and Wonbindi projects, including all categories are:

Resources Project Tenement

Depth of Resource

(m) Measured (t)

Indicated (t)

Inferred (t)

Totals (t)

Baralaba Mine MDL 184 (MLA 80169) 200 0 2,943,363 10,140,310 13,083,672

ML 80157 200 1,427,310 2,225,255 4,580,618 8,233,183

ML 5605 100 1,160,135 470,973 504,102 2,135,210*

Baralaba North MDLA 416 200 0 9,413,619 36,418,862 45,832,482*

Baralaba South EPC 1047 200 0 0 25,221,301 25,221,301

Wonbindi MDL 352/EPC 1047 175 0 44,689,179 19,416,145 64,105,324

2,587,445 59,742,389 96,281,338 158,611,172

* Denotes unchanged JORC estimate from previous announcements. The fault-bound structural domains are comprised of JORC Measured, Indicated and Inferred categories depending on the number of Points of Observation (drill holes) within each area and the probability of economically viable development. Drilling activities and coal quality analytical efforts have focused on the distinct structural domains and as such upgrades in the JORC Resource categories have occurred within these defined areas. Consistent with the Company’s other Bowen Basin projects, the Area of Influence of drill holes in the Inferred Resource area is up to 4,000 metres. At this stage, no core drilling has been completed in the Inferred Resource area and, as a result, default seam densities derived from the nearby Wonbindi project have been used in the resource estimation (see the Company’s website for details). Conceptual mine planning over the Wonbindi and Baralaba mine projects will be further refined following the upgraded Resources. The Company envisages future production from the Baralaba mine, Baralaba North and Wonbindi project areas, subject to rail and port upgrades, as a key step in the realisation of the Company’s strategic goals. Activities upon recommencement of drilling activities will focus on:

• Core drilling for raw coal quality and washability data in the MLA 80170 area of the Baralaba North project.

• Additional open holes for structure and cored holes for raw coal quality and washability data within MDLA 416 and EPC 1047, where drilling will seek to further increase the known area of the coal resource, which is currently open in all directions.

• Additional open holes and coal quality core drilling in the Wonbindi project area. 4.3 Other Bowen Basin Projects Impeded by continuing wet weather and lcoal flooding, no field exploration work was undertaken at the Wonbindi or Dingo projects during the December quarter.

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Baralaba Mine and Baralaba North drill hole locations and JORC Resource estimates. Previously defined structural domains that, together with Areas of Influence around

drill holes, determine the JORC classification boundaries.

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Baralaba South drill hole locations and JORC Inferred Resource polygon. The Wonbindi JORC Resource polygons can be seen approximately 2 kilometres to the

south of the Baralaba South Inferred Resource area.

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5. SURAT BASIN PROJECTS The Company’s Surat Basin projects, including the Kingaroy project, comprise the following 100% owned projects:

Woori project (MDL 187 and MLAs 50247 and 50248). The Surat project:

EPC 796 (Horse Creek) and MDLA 441 (Krugers) EPC 813 (Dogwood Creek), MDLA 433 (Bottle Tree) and MDLA 451 (Bushranger) EPC 1041 (Miles) and MDLA 437 (Davies Road) EPC 1134 and MDLA 430 (Tin Hut Creek) EPC 1135 (Chinchilla) EPC 1136 (Dalby) EPC 1170 (Chinchilla #2) EPC 1278 (Tin Hut Creek North) EPC 1322 (Wandoan East) EPC 1950 (Chinchilla North) EPCA 1593 (Surcingle) EPCA 1967 (Macalister West) EPCA 2092 (Glenrowan). EPCA 2207 (Taroom East). EPCA 2231 (Giligulgul).

The Kingaroy project (EPC 882). The Condamine project (EPCs 963 and 1130). The Injune project (EPCs 1017 and 1018).

As announced on 10 September 2010, the Company has entered into an Exclusivity Agreement with Mitsui & Co. Ltd ('Mitsui') regarding the possible acquisition by Mitsui of an interest in some or all of the Company's 100% owned Surat Basin assets ('Possible Transaction'). The Company has agreed to give Mitsui an exclusive right, subject only to existing negotiations, to complete due diligence and investigations into a Possible Transaction by 11 March 2011. In addition, as announced on 24 December 2010, the Company has completed the acquisition of 100% of Anglo Coal (Taroom) Pty Ltd which owns 51% of the Taroom, Collingwood and Ownaview assets located in the Surat Basin. Mitsui holds the balance 49% in these tenements. As advised, Cockatoo plans to transfer ownership of the 51% interest in Ownaview to KEPCO. The relevant tenure for the 51% owned JVs are: EPC 640 (Collingwood) MDLs 158 and 275 (Taroom) MDL 283 (Ownaview) The Company's Surat Basin projects cover an area of approximately 4,000 km². The Juandah and Taroom Coal Measures of the Walloon Sub-Group both sub-crop within the Surat project area. The Woori and Tin Hut Creek projects comprise the Juandah Coal Measures. The Bottle Tree and Krugers prospects, which form part of the Surat project, are located within the Taroom Coal Measures. All projects, other than the Woori project, have not been fully explored and have further significant resource potential. Existing exploration data for the Collingwood and Taroom projects will be reviewed with a view towards developing further plans.

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Surat Basin project areas. 5.1 Surat Project During the quarter, positive drilling results in the Tin Hut Creek project, up to 6.0 kilometres to the south of the existing resource, were achieved thereby extending the strike length of the Tin Hut Creek deposit to 13.5 kilometres from northwest to the southeast. The deposit is approximately 1.6 kilometres wide from east to west and to a depth of approximately 150 metres. Drill holes in the south of the Tin Hut Creek deposit consistently intercepted in excess of 15.0 metres of cumulative coal at strip ratios less than 7:1. The east-west drill lines illustrate continuity of the Juandah Coal Measures, with the Macalister, Wambo and Iona Seams present in cumulative thicknesses of up to 21.3 metres. Drill hole coordinates and cumulative thicknesses of coal at the Surat project deposits have been reported previously by the Company and are available on the Company’s website. Recent flood events impacting southern Queensland have lead to a suspension of drilling activity in the Surat Basin while access is constrained due to road closures and saturated ground conditions. F

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5.2 Surat Basin Projects’ Resources A summary of changes to the Company's Surat Basin resources during the quarter is as follows:

• Increase in total of all categories of JORC compliant Resources for the Tin Hut Creek project to 181.3 million tonnes, up 53%, or 62.7 million tonnes, from 118.6 million tonnes.

• Total Resources now comprise 112.2 million tonnes Indicated Resource and 69.1 million tonnes Inferred, representing an upgrade of 95% of the previously announced JORC resource categories.

A total of 600 holes for 74,734 metres have been drilled in the Surat Basin projects to date, including 41 open core holes for 4,137 metres at the Tin Hut Creek project since the last update.

Tin Hut Creek JORC Resource area and project drilling to date.

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Current JORC compliant Resources for the Tin Hut Creek project are as follows:

Category

Project Tenement Depth of Resource

(m) Measured (Mt)

Indicated (Mt)

Inferred (Mt)

Total (Mt)

Tin Hut Creek (North) MDLA 430 <150 0 112.2 8.8 121.0 Tin Hut Creek (South) MDLA 430 <150 0 0 60.3 60.3

Total 0 112.2 69.1 181.3 5.3 Other Queensland Projects No field exploration work was undertaken at the Kingaroy, Condamine, or Injune projects during the December quarter. Acquisition of the Surat JV Projects – Collingwood, Taroom and Ownaview was not completed until 24 December 2010, limiting development activities within the quarter. 6. NSW PROJECTS As noted above, on 24 December 2010, the Company completed the acquisition of development and exploration assets located in NSW and Queensland from Anglo American plc ('Anglo') as detailed by the Company on 7 July 2010. The NSW projects are:

• Bylong, North West Sydney Basin - 423Mt (150Mt Indicated and 273Mt Inferred) export grade thermal coal resource. KEPCO has acquired 100% of Anglo Coal (Bylong) Pty Ltd from Anglo and granted a 3 year call option for a 30% interest to Cockatoo (details of the call option were disclosed on 7 July 2010).

• Sutton Forest, Sydney Basin - 115Mt Indicated export grade metallurgical/thermal coal

resource. POSCO has acquired 100% of Anglo Coal (Sutton Forrest) Pty Ltd from Anglo and Cockatoo has purchased a 30% interest from POSCO.

Cockatoo has been appointed as the manager of both projects and is currently establishing full project teams to undertake exploration, evaluation and development activities. Due to the timing of completion of the acquisition of these projects, limited activities were undertaken during the quarter.

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NSW project areas. 7. INFRASTRUCTURE 7.1 Queensland Rail The Company has continued discussions with Queensland Rail in relation to infrastructure needed to support the development of the Company’s Bowen Basin and Surat project developments to the Port of Gladstone and the planned Wiggins Island Coal Terminal and the Company has been selected as a designated Stage 1 user at Wiggins Island.

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7.2 Surat Basin Rail JV The Surat Basin Railway ('SBR') is a key link to be developed that will open up the Surat Basin coalfields to the Port of Gladstone. Negotiations to advance the SBR project and to secure rail capacity for the Company’s projects continued in the quarter. The timing focus of all parties is to successfully align the attainment of future capacity at Wiggins Island for the Surat in a co-ordinated fashion with development of the SBR. As previously reported, SBR advise that they have received notification from the Queensland State government that, having fulfilled a further tranche of SBR’s obligations under their Exclusive Mandate, the Government are prepared to commence the declaration of the relevant State Development Area – an essential step in the securing of SBR’s rail corridor. In addition, in December 2010, the Queensland State Co-ordinator-General announced that the Environmental Impact Statement and supporting reports, government approvals and evaluation of public submissions on SBR had received approval from the Department of Infrastructure and Planning, thus allowing the SBR project to proceed to the next stage of development. 7.3 Wiggins Island Coal Terminal Project - Gladstone During the quarter, the Company was selected as a 3.0 million tonne per annum Stage 1 user of the proposed Wiggins Island Coal Export Terminal ('WICET') at Gladstone, Queensland. The Company plans to use this Stage 1 allocation, together with its existing RG Tanna port allocation at Gladstone, to expand its Bowen Basin PCI and thermal coal total sales output from its current level of 550,000 tonnes per annum to 3.0 million tonnes per annum from 2014. The Company advises that sufficient rail capacity to deliver these increased WICET Stage 1 coal volumes to Gladstone is expected to be available via the Company’s existing rail access route. A total of eight coal producers have committed to a total of 27 million tonnes per annum capacity for the Stage 1 development of WICET. All Stage 1 allocations are subject to the applicants signing Take or Pay Agreements and WICET reaching financial close, which is scheduled for the end of April 2011. Each applicant, including Cockatoo, has entered into a deed, supported by a bid bond, detailing its intention to execute a binding Take or Pay Agreement and to meet its proportionate share of WICET's ongoing project costs up to financial close. Coal shipments through Stage 1 of WICET are expected to commence in 2014. Cockatoo has lodged an expression of interest to participate in Stages 2 and 3 of the WICET development which is expected to bring the total annual WICET export capacity to up to 80.0 million tonnes from 2015/16. The Company will undertake Agreements with WICET, along with other interested industry participants, to support the development of Stages 2 and 3 of the Terminal by WICET. F

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8. OTHER 8.1 Competent Person The information in this report that relates to Exploration Results or Mineral Resources is based on information compiled by Dr. Oliver Holm, geologist, who is a Member of the Australasian Institute of Mining and Metallurgy. Oliver Holm is a full-time employee of the Company who 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'. Oliver Holm has consented to the inclusion in this report of the matters based on his information in the form and context in which they appear. For further information, contact Mark Lochtenberg or Peter Nightingale on (61-2) 9300 3333. Yours sincerely

Mark H. Lochtenberg Managing Director 31 January 2011 pjn5798

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