News 11 March 2010

INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31st DECEMBER 2009

Spitfire Oil Limited is pleased to publish its unaudited interim results for the six months ended 31st December 2009, a summary of which is attached.

Introduction

Spitfire Oil Limited (“Spitfire” or “the Company”) and its subsidiaries (together “the Group”) recorded a loss before tax for the six months ended 31 December 2009 of A$1,093,816 (2008 A$766,608). The increase in losses arises as a result of lower interest income. Action has been taken in the period to reduce costs.

In the autumn of 2009 testwork and investigations into Spitfires’ proprietary L2VTM process to extract oil and other products from the lignite at Salmon Gums highlighted the expanding complexity and need for additional research in refining and finalising the process for commercial production. As a result the project is being reappraised and active development work suspended pending the conclusion of this appraisal and consideration of alternative technologies and / or other opportunities for the Salmon Gums lignite deposits.

Resource Delineation

Following the announcement on 16th July 2009 of a new lignite JORC resource of 876 million tonnes (indicated + inferred) no further resource delineation activities were undertaken.

Gold Programme

In September 2009, the Company commissioned a gold exploration program into the granite basement of a geologically prospective area at the intersection of the two faults located on its tenements. This program was started in October 2009 and by 31 December 78 holes had been drilled for 4,963 metres of aircore. At the time of reporting, this drilling program has been completed for a total of 131 holes and 6,354 metres of aircore. Analysis of bottom hole samples and regolith samples has recently commenced.

Personnel

The company retrenched its technical coal-to-liquids personnel when the R&D efforts were suspended in September. The Company’s CEO resigned on 2 December but currently continues to provide consultancy services to the company.

Other Business Opportunities

Although Spitfire’s primary objective remains the commercialisation of its L2V lignite-to-liquids technology over the large resource at Salmon Gums, management continues to evaluate other energy related opportunities and other possible synergistic business opportunities.

SPITIFIRE OIL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 31 DECEMBER 2009
(expressed in Australian dollars)

Half-year Full-year
Note 31 December
2009
Unaudited
A$
31 December
2008
Unaudited
A$
30 June
2009
Audited
A$
REVENUE 176,147 668,522 1,208,333
EXPENDITURE
Technology and development (430,681) (374,740) (697,216)
Corporate expenses (728,522) (905,363) (1,651,427)
Other expenses (110,760) (155,027) (296,710)
LOSS BEFORE INCOME TAX (1,093,816) (766,608) (1,437,020)
Income tax benefit / (expense) - - -
LOSS FOR THE HALF-YEAR (1,093,816) (766,608) (1,437,020)
OTHER COMPREHENSIVE INCOME
Exchange differences on translation of
foreign currency
(55,271) 2,060,920 2,056,914
Other comprehensive income for the period,
net of tax
(55,271) 2,060,920 2,056,914
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO MEMBERS OF SPITFIRE OIL LIMITED (1,149,087) 1,294,312 619,894
Basic and diluted loss per share (cents) 6 (2.6) (1.8) (3.4)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

SPITFIRE OIL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2009
(expressed in Australian dollars)

31 December 31 December 30 June
Note 2009
Unaudited
A$
2008
Unaudited
A$
2009
Audited
A$
CURRENT ASSETS
Cash and cash equivalents 8,582,902 11,656,022 10,019,229
Trade and other receivables 29,480 207,273 14,077
Other current assets 38,676 44,832 15,037
TOTAL CURRENT ASSETS 8,651,058 11,908,127 10,048,343
NON-CURRENT ASSETS
Plant and equipment 10,837 14,674 13,906
Intangible assets 7,985,848 6,489,280 7,590,913
TOTAL NON-CURRENT ASSSETS 7,996,685 6,503,954 7,604,819
TOTAL ASSETS 16,647,743 18,412,081 17,653,162
CURRENT LIABILITIES
Trade and other payables 324,782 374,233 202,299
Provisions 38,285 - 17,100
TOTAL CURRENT LIABILITIES 363,067 374,233 219,399
TOTAL LIABILITIES 363,067 374,233 219,399
NET ASSETS 16,284,676 18,037,848 17,433,763
EQUITY
Issued capital 5 20,854,412 20,854,412 20,854,412
Reserves 790,001 778,945 845,272
Accumulated losses (5,359,737) (3,595,509) (4,265,921)
TOTAL EQUITY 16,284,676 18,037,848 17,433,763

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

SPITFIRE OIL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2009
(expressed in Australian dollars)

Contributed Equity Options Reserve Foreign Currency Translation Reserve Accumulated Losses Total
A$ A$ A$ A$ A$
BALANCE AT 1 JULY 2008 20,854,412 592,667 (2,001,643) (2,828,901) 16,616,535
Total comprehensive income for the period - - 2,060,920 (766,608) 1,294,312
Share based remuneration - 127,001 - - 127,001
BALANCE AT 31 DECEMBER 2008 20,854,412 719,668 59,277 (3,595,509) 18,037,848
Total comprehensive income for the period - - (4,006) (670,412) (674,418)
Share based remuneration - 70,333 - - 70,333
BALANCE AT 30 JUNE 2009 20,854,412 790,001 55,271 (4,265,921) 17,433,763
Total comprehensive income for the period - - (55,271) (1,093,816) (1,149,087)
BALANCE AT 31 DECEMBER 2009 20,854,412 790,001 - (5,359,737) (16,284,676)

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

SPITFIRE OIL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2009
(expressed in Australian dollars)

Half-year Full-year
31 December 2009 Unaudited A$ 31 December 2008 Unaudited A$ 30 June 2009 Audited A$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (903,707) (2,052,256) (2,621,682)
Interest received 149,868 305,028 551,708
R&D tax concession received - 311,018 656,096
Net cash (outflow) from operating activities (753,839) (1,436,210) (1,413,878)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of plant and equipment - 6,727 10,484
Payment for purchases of plant and equipment - (2,946) (2,976)
Exploration expenditure (674,874) (3,073,108) (4,731,954)
Net cash (outflow) from investing activities (674,874) (3,069,327) (4,724,446)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash inflow/(outflow) from financing activities - - -
Net (decrease) in cash and cash equivalents (1,428,713) (4,505,537) (6,138,324)
Cash and cash equivalents at the beginning of the period 10,019,229 14,100,639 14,100,639
Effects of exchange rate changes on cash and cash equivalents (7,614) 2,060,920 2,056,914
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 8,582,902 11,656,022 10,019,229

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

SPITFIRE OIL LIMITED
Notes to the CONDENSED CONSOLIDATED financial statements

NOTE 1: BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT

This general purpose financial report for the interim half-year reporting period ended 31 December 2009 has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Australian Corporations Act 2001.

The summary accounts set out above do not constitute statutory accounts as defined by Section 84 of the Bermuda Companies Act 1981 or Section 435 of the UK Companies Act 2006. The condensed consolidated statement of financial position at 30 June 2009 and the condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the year then ended have been extracted from the Group’s 2009 statutory financial statements upon which the auditors’ opinion is unqualified. The condensed consolidated statement of comprehensive income has been prepared using information extracted from the Group’s 2009 statutory financial statements.

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2009 and any public announcements made by Spitfire Oil Limited during the interim period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

Copies of this interim report are being sent to all registered shareholders. Additional copies are available from the Company’s London office, 60 St James’s Street, London, SW1A 1LE.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except as set out below.

Changes in Accounting Policy

Spitfire Oil Limited had to change some of its accounting policies as the result of new or revised accounting standards which become operative for the annual reporting period commencing on 1 July 2009.

The affected policies and standards are:

Presentation of financial statements

AASB 101 (revised) prescribes the contents and structure of the financial statements. Changes reflected in this financial report include:

Principles of consolidation

AASB 127 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. This is different to the Group’s previous accounting policy where transactions with minority interests were treated as transactions with parties external to the Group.

The standard also specifies the accounting when control is lost. Any remaining interest in the entity must now be remeasured to fair value and a gain or loss is recognised in profit or loss. This is consistent with the Group’s previous accounting policy if significant influence is not retained.

The Group in future will allocate losses to the non-controlling interest in its subsidiaries even if the accumulated losses should exceed the non-controlling interest in the subsidiary’s equity. Under the previous policy, excess losses were allocated to the parent entity.

Lastly, dividends received from investments in subsidiaries, jointly controlled entities or associates after 1 July 2009 are recognised as revenue even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a result of the dividend payment. Under the Group’s previous policy, these dividends would have been deducted from the cost of the investment.

The changes were implemented prospectively from 1 July 2009. There has been no impact on the current period as there are no non-controlling interests within the Group. There have also been no transactions whereby an interest in an entity is retained after the loss of control of that entity and no dividends paid out of pre-acquisition profits.

Business combinations

AASB 3 (revised) continues to apply the acquisition method to business combinations, but with some significant changes.

All payments to purchase a business are now recorded at fair value at the acquisition date, with contingent payments classified as debt and subsequently remeasured through the income statement. Under the Group’s previous policy, contingent payments were only recognised when the payments were probable and could be measured reliably and were accounted for as an adjustment to the cost of acquisition.

Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and therefore included in goodwill.

Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. This decision is made on an acquisition-by-acquisition basis. Under the previous policy, the non-controlling interest was always recognised at its share of the acquiree’s net assets.

If the Group recognises acquired deferred tax assets after the initial acquisition accounting there will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the Group’s net profit after tax.

The changes were implemented prospectively from 1 July 2009. There has been no impact on the current period as there were no acquisitions by the Group during the period.

Segment reporting

The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. There has been no change to the reportable segments required to meet the new standard.

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the full Board of Directors.

NOTE 2: SEGMENT INFORMATION

The Group operates in predominantly one operating segment, being the exploration and mining for valuable resources that produce energy in Australia.

NOTE 3: DIVIDENDS

The Company has not declared any dividends in the period ended 31 December 2009.

NOTE 4: CONTINGENCIES

There has been no change in contingent liabilities or contingent assets since the last annual reporting date.

NOTE 5: ISSUED CAPITAL

31 December 2009 31 December 2008 30 June 2009
No A$ No A$ No A$
Issued and Paid Up Capital
Fully Paid Ordinary Shares 42,550,668 20,854,412 42,550,668 20,854,412 42,550,668 20,854,412
Total Issued Capital 20,854,412 20,854,412 20,854,412

NOTE 6: LOSS PER SHARE

31 December 2009 31 December 2008 30 June 2009
Basic and diluted loss per share (cents) (2.6) (1.8) (3.4)
a) Net loss used in the calculation of basic and diluted loss per share (1,093,816) (766,608) (1,437,020)
b) Weighted average number of ordinary shares outstanding during the period used in the calculation of basic and diluted loss per share 42,550,668 42,550,668 42,550,668

Options that are considered to be potential ordinary shares are excluded from the weighted average number of ordinary shares used in the calculation of basic loss per share. Where dilutive, potential ordinary shares are included in the calculation of diluted loss per share.

All the options on issue do not have the effect to dilute loss per share. Therefore they have been excluded from the calculation of diluted loss per share. There have been no other conversions to, call of, or subscriptions for ordinary shares since the reporting date and before the completion of this report.

NOTE 7: NET TANGIBLE ASSETS

31 December 2009 31 December 2008 30 June 2009
Net Tangible Assets (A$) 8,298,828 11,548,568 9,842,850
Shares (No) 42,550,668 42,550,668 42,550,668
Net Tangible Assets (cents) 19.5 27.1 23.1

NOTE 8: SUBSEQUENT EVENTS

No matter or circumstance has arisen since 31 December 2009, which has significantly affected, or may significantly affect the operations of the Group, the result of those operations, or the state of affairs of the Group in subsequent financial years.