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BIOCANE BOARD ANNOUNCEMENT

23 February 2010

 The company’s technical team has now successfully completed commissioning trials on all of the various components of the plant and has been able to process the cane into our “CowCandy” product, except only for the final process of mixing the desiccated juice back into the dried fibre. It is not anticipated that this will be a problem. There is an issue needing to be resolved with the stability of the fan in the drier, but once again the team believes that this can be resolved, but it will involve further expenditure. We have successfully sold some of the processed bulk product without the juice returned.

 It was planned to proceed immediately to process approximately 28,000 tonnes of cane standing in the fields of our quota shareholders. There is a difficulty with this in that the product handling facilities have not been completed which means that the product can only be delivered in bulk at this point of time.

 Regrettably the board has resolved not to proceed to attempt to process this cane now, but to immediately place the plant on full “off season stand by mode”. The decision has been made primarily due to our shortage of working capital which has resulted from the technical delays in commissioning the plant. The fact that the process handling facilities have not been completed and the recent wet weather have contributed to this decision.

 The company now needs to raise further working capital in order to be viable, with the plan that the plant can reopen in about June and process this standing cane and then immediately move on to process the 2010 crop currently growing.

 Sadly this means that we will have to terminate all of the staff immediately. The board deeply regrets this action and is acutely aware of the hardship this will cause our loyal and competent staff. On behalf of the shareholders, the board wishes to express our sincere thanks to all of the staff who have worked in extremely stressful and difficult conditions over the past few months.

 The board is doing everything in its power to place the company in the position where it can re hire the staff at the earliest possible time and reopen the plant for the 2010 processing. The board is negotiating with sophisticated and corporate investors to contribute the needed working capital in one lump sum, and provided this can be put in place, intends to honour its commitment to make a formal offer to all existing shareholders to buy further shares at 20 cents as previously announced. The board withdrew its Prospectus dated 22 January 2010, but if the further lump sum investment can be arranged, the Board plans to lodge a new Offer Information Statement or Prospectus later in the year.

 The board also advises of the resignation of Ruth Salway, who is battling cancer, as a Director and Secretary and expresses sincere thanks to her for her outstanding contribution to the company since inception, and we all wish her the very best in the future and success in her health battle. 

 John Rivett, Acting Chairman


 

BioCane Limited and Australian Sugar Cane Feeds Pty Ltd

BULLETIN TO SHAREHOLDERS

In a bulletin dated 30 November 2009 we advised Shareholders of an explosion that occurred during the warm-up/light-up phase in the commissioning of the gasifier. This bulletin gives a status update and advises of other developments in your company.

Damage to the equipment was minor and has been repaired. To establish the cause of the explosion, an independent expert was engaged. His report confirmed our understanding of the most likely cause of the explosions and he participated in the development of start-up procedures that would ensure there was no repeat of the incident. 

The cause was most likely the early gasification of the added coal with the manhole open. This created an explosive mix of air and the gasses coming off the coal and a spark or tongue of flame ignited this mix. Simply, the sequence of events – adding coal prior to bricking up the manhole – has been the error of judgement made by the commissioning engineer from the Chinese supplier Keyuan. 

We have therefore, in conjunction with the independent expert, the Keyuan engineer and our own personnel, prepared a new start-up procedure that now satisfies the Department of Workplace Health & Safety. We have undertaken a thorough review of all operational procedures to ensure that we have safe equipment and operational procedures. The expert’s opinion is that the plant is well designed and constructed and incorporates operational safeguards. However, there remain some registration requirements for equipment that forms part of the gasifier system that are necessary before we can re-start. Obtaining the required information from China has proved very difficult and slow. 

Your Board is keenly aware of the impacts of further delays on our shareholder, cane suppliers and personnel, however, it had little choice but to decide to suspend our workforce until the we are in a position to restart and move into commissioning. As the Christmas New Year period will fall in this period, your Board has decided that we will plan on restarting on Monday 4th January. 

The explosion has set back our commissioning much more than we had hoped. The last of the big lifts onto the top of the dryer have been completed and the factory is all but ready to operate.  The injured employee, ‘Digby’ De Grono, is continuing to make progress and remains in good spirits –and keen to get back to work – but that is unfortunately still some weeks away.

 Board Developments

Following the AGM, your Directorsmet to elect the office bearers for the year. We are pleased to announce that Yuan Suming (Suming to us all) has been elected Chairman and John Rivett Deputy Chairman. Ruth Salway continues as Company Secretary. Edward Harris has been elected Managing Director to replace General Manager Scott Grimley who wishes to retire as soon as the plant is commissioned. Suming will be spending what time he is able on the Sunshine Coast. He is very fluent in English and has proved to be most supportive of this project. Suming is the Vice President of the YinMore Group and brings enormous experience and ability to your company.  

OIS

The OIS has been prepared for distribution to existing shareholders and company personnel, however, it is delayed until our operational status is confirmed to maximise its attractiveness to investors. We will have this out as soon as we reasonably can. We are still keen to have this out hopefully before the end of this year.

John Rivett has just emailed to shareholders, who are on email, the offer of convertible notes available to shareholders, that will be declared in the OIS. If you have not received this communication, please call the office on 5476 2399 to request a copy of the offer should you be interested.

Your Board and I would like to wish all shareholders a Merry Christmas and a very good 2010. We look forward to seeing your investment finally come to fruition in the new year. 

Scott Grimley,

General Manager. 14th December 2009