(IRG) Independent Resources

Chairman's Statement

The period was very hard on all of us for a variety of reasons but we finally pulled it off in the end. The experience is not something I'd like to re-live anytime soon. To the extent that I have a lot at stake in our company's success let me say that it is my personal mission to begin realising value from our investments. The period leading up to June this year was particularly frustrating. Some of this was self-inflicted and some of this was imposed on us. Let me briefly explain the choices we made, what we accomplished, and where we intend to go.

Rivara

In arguably the most important development since our Company's AIM admission, the Environmental Impact Assessment Commission ("VIA Commission") a decision-making body of Italy's Ministry of Environment is reported to have cleared the project to proceed. The Company has not yet received formal notification of this event.

Rivara, as most of you already know, has the potential to become the most competitive merchant gas storage facility on the continent. It sits in Europe's third-largest gas market and on the main natural gas trunk-line that links Europe's future gas supplies to market, and increasingly so. The need for flexibility in gas supply management is becoming more critical all the time. As the old take-or-pay gas supply contracts expire and become increasingly rigid, as the market and the number of participants grow, and as the existing nuclear infrastructure reaches the end of its useful life, high-performance gas storage facilities, such as Rivara, capable of handling large volumes will become even more essential than they are already. Today in Italy we are still rationing storage supply and barely keeping up with increasingly disruptive weather patterns. Key suppliers have become less reliable, infrastructure has failed and there is near-universal consensus that new infrastructure must be built to cope. In this context, putting forward what we believe will be Europe's lowest-cost supplier of gas storage capacity, we feel confident that there is a lot of value in the project.

Whilst some legitimate safety concerns had to be addressed during the environmental approval process, the principle causes of the delay to Rivara have been a mixture of parochial politics, bureaucracy and institutional overlap. Purely technical questions are not difficult to address and document, although this does take time as it involves the application of rigorous, leading-edge and multidisciplinary geoscience expertise. The political aspects are harder to manage when they are fractured, contentious and in evolution, which is the case in this part of the world. Rivara is an aquifer storage (a deep porous reservoir, saturated with brine) and although aquifers have routinely been used all over the world to store gas, they have never been used in Italy. Rather, Italy relied on its dominant operator to convert its technically suitable depleted gas fields into storage facilities. In a culture averse to change, anything "new" is suspect, particularly if it is not home-grown. With the environmental clearance, the national government has finally accepted that there are no good reasons not to allow the project to proceed. Naturally, we are pleased that they agree with us. But that is still not enough, as we have said many times. We intend to undertake a significant appraisal programme to demonstrate and optimise the future facility's technical performance. This will also allow us to make new down-hole measurements with the latest technology to silence those critics who, in good or bad faith, remain sceptical. In reality, such an appraisal has always been part of the programme if only because it is a vital step before the Final Investment Decision to build the plant. As we have often stated, why would anyone build a €300 million underground facility, designed to contain over twice that value in gas, if there were any doubt about its safety and reliability?

We recognise that these delays have created very serious investor fatigue and have had an impact on the project's credibility. In 2008, long before the recent environmental clearance, ERG acquired a 15% stake in the project for 9.5 million Euros, valuing IRG's stake in the project at 54 million Euros. There could be some merit in doing something similar, if only to demonstrate what the project is worth now. Needless to say, we will need to compare such a scenario with the value the market is putting on our shares. Right now that decision looks straightforward, but perhaps this will change.

Our job on Rivara in the meantime is to put the issues of the past behind us and work with local stakeholders who objectively have a lot to gain from Rivara. The project can help balance local budgets, provide both short and long-term employment, and generally reinforce the local economy for many years to come. The near-term objective, under the auspices of the Ministry of Industry, is to reach a sensible agreement with the Emilia- Romagna Region, the province, and the local communities on such matters. Following this, we intend to execute the appraisal programme with the objective of documenting the technical, legal, and financial package underpinning the Final Investment Decision. Our strategy includes the participation in Rivara of a large, integrated natural gas operator. Should we execute such a plan, the Company would eventually hold a much smaller - but much more valuable - stake in the project. Naturally, such a scenario would be expected to significantly reward patient shareholders.

Ribolla

We announced an update on Ribolla fairly recently. The "self-inflicted frustration" to which I alluded at the outset was related to Ribolla. Having gone through a cycle of operations on the play last year we realised that the resource was as much an unconventional shale-gas play as a Coal Bed Methane play. The target zone was deeper than we had initially envisaged and the techniques required to exploit this resource would have to come from the playbooks of an experienced unconventional gas operator. In the context of delays at Rivara we were unwilling to ask shareholders to finance a significant new round of operations - it would have been unnecessarily dilutive. The decision to farm-out, or finance the project at source, was therefore easy. What was not easy was finding a suitably credible third-party expert to review the asset and secure a quality report in final form. The process took too long but we are very happy with the high-quality work that finally emerged in the reports by DeGolyer and MacNaughton and Fugro-Robertson.

There is no doubt that the resource is very significant. Original gas in place and gross prospective gas resources (mean estimates) for the main coal seam, together with associated low-grade coal and organic matter-rich shale are, respectively, 15.2 and 4.5 billion cubic metres (537 and 160 billion cubic feet). An additional and promising 40-50m thick organic rich section has been identified, which remains under assessment. Farm-out negotiations have commenced with a number of companies which have experience in optimising development of analogous unconventional gas projects and have indicated an interest in Ribolla. The data room is expected to be opened shortly and we hope to invite a suitable partner to finance and execute a multi-well test programme, using the best available techniques. A number of financial institutions have expressed potential interest in funding the  asset, which, although certainly welcome, is not our current objective. We remain convinced that a capable unconventional gas operator would be best placed to help us more fully and more quickly realise the value in Ribolla.

Ksar Hadada

Last year the Company was carried during significant operations on our Tunisian interests. Those efforts were not successful and the previous operator withdrew from the joint venture. Ksar Hadada is an exploration permit onshore Tunisia near the Libyan border that remains highly prospective. The permit's Operator, PetroAsian Energy (Tunisia) Ltd, has a 78.03% Working Interest and IRG holds an 18.97% Working Interest. The JV is focusing on a new reservoir compartment of the Sidi-Toui Cambro-Ordovician prospect, as well as the very significant volume of oil-bearing Silurian Hot Shale, which is pervasive and effectively underlies the entire residual area of the permit at relatively shallow depth. The permit was recently renewed by the Tunisian authorities for an additional three years after the JV relinquished 3,360 km² of the previously-held 5,612 km² and committed to a new well and 100km of new 2D seismic. Ksar Hadada remains a non-core asset for the Company but one that we believe remains a very attractive opportunity. We expect third-party interest in the oil shale play but it is premature to speculate on how things will play out on Ksar Hadada.

Outlook

Our objectives in the months ahead are clear, achievable and value accretive for shareholders. We have a flexible financial position, giving us the means to reach our goals and remain highly motivated through our ownership position. Our knowledge of and experience with our assets, coupled with this financial flexibility, will allow us to grow significantly in the year ahead while providing excellent returns for shareholders. I look forward to providing further updates over the next few months.