Rey Group is the preferred applicant in respect of Applications for Exploration Permits (for Petroleum) 10/04-05 and 11/04-05, and is proceeding with these Applications that are subject to Native Title claims in respect of which the Right to Negotiate provisions of the Commonwealth Native Title Act 1993 apply.

The areas cover part of the Liveringa coal deposit and may be suited to significant coal seam gas accumulation on the basis of potentially thick coal seams with suitable rank and structure, and thick sequences of black shales underlying the coal. Gas desorbtion testing has initially returned low contained gas values however only one test was carried out from material from one hole. Further work will be carried out.

On 26 September 2006 Rey signed a binding agreement with Gujarat NRE Mineral Resources Ltd and it’s Australian Subsidiary, NRE Resources Pty Ltd, to farm into the above permits.

Rey has agreed to Gujarat’s participation in the applications on the following principal terms and conditions:

i. Gujarat will pay $250,000 and will asume operatorship of the permits;

ii. Rey will retain rights to any gas recovered from coals together with the utilisation of any coal in any gas or liquid conversion process and will have the right to explore for and deal with any coal and coal seam gas in the permits subject to compliance with all applicable regulations;

iii. The interest of the parties in relation to petroleum production will be 90% Gujarat and 10% Rey which 10% will be free carried until the Grant of a petroleum production license. Gujarat will have the right to re imbursement of 10% of the costs incurred to date from production;

iv. Gujarat will assume responsibility for meeting the work conditions imposed on the permits by Department of Industry and Resources (DoIR); and

More recently Rey has investigated the use of coal conversion gas and diesel using both in-situ and mined coal. Coal to diesel fuel technologies have been use for many years and are commercially feasible at current oil prices. Gujarat has also agreed to provide seismic data and reinterpret existing seismic data so as to be suitable for Rey’s coal exploration work.