prospects emerge out of turmoil

The following is an explantion as to why FAR was able to be in this once in a life time position and why the 3D data that SHELL now has with the CSEM will lead to a positive Shell decision ..

Hunt firms up drilling plans on two offshore tracts - Senegal 06/02/2008

Hunt The company has plans for drilling on both Senegal blocks in 2008. Two drillable prospects have been identified from previous seismic data in the Sangomar Deep block, namely Palmarin and Djifere.

now we come to why FAR ended up with a 90 % stake and operatorship .apologies if this has already been posted..

January 2009

Many resource companies are
reviewing corporate strategies,particularly in light of this pressure.Therefore it is encouraging when these changing strategies inadvertently yield unexpected, but
significant, value to junior explorers.

This occurred recently with First Australian Resources and its large offshore Senegal oil and gas play,.•
a project perhaps akin to Hardman Resource's Chinguetti in Mauritania further north.
First Australian Resources (30% interest) and United States private oil major Hunt Oil (60% interest) have
spent the last year or so conducting a seismic survey, analysing and interpreting the data to yield targets
that may attract a joint venture partner to fund the first deep exploration well with an estimated cost of
$US60 million.

This work has cost most of the $US20 million spent on the tenements to date, but has successfully yielded
targets with a combined mean of 1 billion barrels of oil in place.
In a surprise move early in November, Hunt Oil pulled out of the project and handed its interest to First Australian Resources (now 90%) with the remaining 10% owned by Senegal's national oil company, Petrosen. Understandably, the market is uncertain as to how this occurred and
whether Hunt's withdrawal indicates a downgrade in the prospectivity of the project. However, while Hunt Oil is a
private company and does not provide normal public company disclosure, we can interpret the events that

led to the company's withdrawal.In future, we believe that the market will come to see these events provided considerable value to FirstAustralian Resources' shareholders even though it wasn't appreciated at
the time. Hunt Oil's main oil-producing asset in Yemen reached its 25-year permit life recently and, while the
company sought an extension, the Yemen government decided not to renew it. We note that the company
appears to be shifting its focus away from frontier exploration and towards liquefied natural gas production. It is developing two capital-intensive LNG
projects, one in Oman and the other in South America. These could be deemed to provide stable and long-life
- albeit not necessarily high - returns.

In the Senegal project, Hunt was the major partner (60% interest) and operator. The task during 2008 was to
complete the seismic acquisition and interpretation, and then attract joint venture partners to drill the first
exploration well. The work revealed significant targets and we understand there were three key parties
expressing interest. However the data interpretation,
marketing and reviewing by interested parties took too long and dangerously approached the expiry of
the licence in November. We would not be surprised if new joint venture partners would be reluctant to commit
to funding a well so close to the tenement expiry date in combination with the uncertainty associated with
the world financial turmoil.

While Hunt, on behalf of the JV, sought an extension to the permits,the outcome was uncertain. There
was also a risk that the JV had moved into the next stage of the project (ie, commit to a well) because the
extension application had not been granted at the time of the completion of the initial permit timeframe.

While First Australian Resourcesis a minnow in the overall scheme,there was a risk that the Senegal
government could sue Hunt Oil for default ifit did not commit to a well.

On this background, we believe it became too hard and risky for Hunt to continue and, with the loss of
Yemen and a major focus on LNG, the company perhaps logically ehose to pull out of this frontier exploration.
Of course, had the extension not been granted, then First Australian Resources would have lost out,
but probably didn't face the risk of being sued for default by the Senegal government given its small size.

There is no doubt the granting of the 12-month extension and Hunt's withdrawal has been a major windfall
for First Australian Resources and is likely to have been totally unexpected. The company now has 12 months to secure ajoint venture syndicate to fund the first well, and its new 90% interest allows it capacity to significantly dilute its interest, but still retain a meaningful position.

Hopefully one or all three of the parties expressing an interest in the project prior to the tenement expiry
will emerge as the new JV partners.