Kalimantan Gold Corporation Limited Coal Momentum

Kalimantan Gold Corporation Limited Coal Momentum

Kalimantan Gold Corporation Limited report further exploration progress on its promising coal prospects in East Kalimantan. Latest highlights include:

– Further evidence of significant coal occurrences at Mandul Island – High calorie coal showings at two other concessions – Four more coal concessions added to the Option Agreement signed in April 2008 – The Option period is extended by three months till January 2009

– Additional properties in East and Central Kalimantan under review, including one concession already in production

KLG Deputy Chairman and CEO Rahman Connelly commented, “We are very pleased with these latest developments relating to our coal prospects which demonstrate good progress on a number of fronts. At Mandul Island we are encouraged both by the quality of the coal and by the prospect of increasing the resource potential. The higher calorie coal showings in the Tengin Sejahtera and the Central Indo Coal concession are also good news at this stage, particularly as they are in an area where large coal mines have been extracting coal for a number of years immediately along strike from the areas we wish to test.” As noted below, our aim is to continue testing, on a priority basis, a range of our concessions by drilling.

Investigations conducted to date include the following highlights:

Mandul Island – PT Emas Hitam Coalindo (EHC)

An initial seven widely spaced drill holes have been completed, confirming the quality of the coal. Coal outcrops up to 2.4 metres thick had been mapped prior to the drilling which intersected up to three coal seams, with a maximum thickness of 3.7 metres. Four additional nearby concession areas are under application, which considerably expands the resource potential at Mandul Island. Once these have been granted an extensive 3,000 meter drilling program over 40 holes will be undertaken.

The analysis of the initial drilling indicates the coal at Mandul is a high moisture, sub-bituminous coal, with inherent moisture of between 13.40-15.14%, ash between 7.12-12.79% and a calorific value of between 4,739-5,455 kcal/kg. This quality of coal is now becoming commonly produced in Indonesia as a supply to the burgeoning Indian power sector and the domestic market. The data returned from the mapping and drilling has added confidence that the Mandul area contains significant coal occurrences and requires further exploration and definition of the coal quality and quantity. The location of the concession is excellent, with a haul of less than 10 kilometres to the open ocean.

PT Central Indo Coal (CIC)

Field investigations have successfully identified coal-bearing stratigraphy on the eastern flank of a regional anticline in the Pulaubalang Formation which is one of the significant coal-producing formations in East Kalimantan, particularly for higher ranked coals, with characteristic calorific values greater than 6,000 kcal/kg. The concession area immediately abuts producing areas within the PT Multi Harapan coal mine which currently produces approximately 1-2Mt per annum from coal seams between one and five metres in thickness, with an initial resource (now depleted) of 120Mt. Most of the coal produced is sold to the Indonesian domestic market.

Within the CIC concession area, the coal occurs as seams of up to 1.90 metres in thickness, while outcrops investigated outside of the concession indicate that the coal-bearing sections of the Pulaubalang Formation sediments trend into the concession. Coal quality analysis of the coal in the area returned a thermal value of 6,761 kcal/kg with total moisture of 11.90% and ash of 1.86%.

KLG plans to drill six holes to test the coal-bearing stratigraphy in the concession area.

PT Tengin Sejahtera (TS)

The TS concession area occurs within Pulaubalang Formation sediments close to the western shore of the Balikpapan Bay, near the major oil and coal town of Balikpapan. The Pulaubalang Formation in this area occurs as a syncline between older sediments and coal-bearing sediments have been mapped in the concession area. Although the seams located are thin, they indicate the presence of a coal-deposition environment and it is interpreted that the coal-bearing stratigraphy may not be fully exposed. The overall sequence comprises carbonaceous claystone, a good indicator of a prospective coal section.

A six drill hole programme is being planned to test the most prospective area, namely the interface between the older sedimentary formations and the lower sections of the Pulaubalang Formation, which is known to host coal seams up to several metres in thickness.

PT Citra Saga Utama (CSU)

Field surveys have defined a coal-bearing horizon within the concession area, with coal seams ranging up to more than two metres in thickness and 17 coal outcrops located to date. The coal-bearing sequence has been identified over four kilometres of strike length. Two seams have been identified as targets for drilling.

The quality of the coal is variable, with a calorific value from outcrop samples of between 5,477-5,804 kcal/kg, inherent moisture ranging between 13.10-15.22% and sulphur being highly variable between 1.81-5.40%. To date, the distribution of sulphur has not been adequately mapped and further work will be necessary to determine blending options for the coal. The concession area remains at a moderate priority level and further mapping is planned to determine the full strike length of the coal-bearing horizon which may extend to the southwest from the area initially mapped.

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