no farmout sc54a, page-18

Interesting to note the wording in the anual report about the farm in. The last sentence certainly is a get out of jail free card why announce terms before the farm in partner has signed on the dotted line.


FARMOUT

Subsequent to the end of the quarter, Kairiki announced that it had selected its preferred farminee party to farm-in to the SC 54A permit. The Party was granted an exclusive 60 day period to finalise its due diligence review and complete and execute farm-out and associated agreements. This exclusivity period was extended by an additional 30 days on 5 September 2011.

A condition of the farm-in negotiations requires the identity of the Party together with the terms of the farm-in agreement to remain confidential until the necessary farm-out documents have been executed.

The transaction contemplated will, if completed, result in Kairiki reducing its interest in SC 54A from 30.1% to 15.05% in return for a funded work programme involving drilling within the permit. Kairiki?s expenditure commitments in SC 54A in the short to medium term are therefore expected to be minimal.