HILLALONG PROJECT - MDL324

The Company has entered into agreements to acquire the shareholding of Queensland Coal Exploration Pty Ltd which holds a Mineral Development Licence (MDL) over 3,189 hectares in the northern part of the Bowen Basin. The project is located 15 kilometres east of Glenden and 100 kilometres west of Mackay. There are a number of producing mines in the vicinity, including Newlands, Hail Creek and Burton.

The project has been the subject of previous exploration and has been assessed to contain approximately 11 million tonnes of measured resources that are potentially amenable to open cut mining to a depth of 80 metres and further measured, indicated and inferred resources of approximately 100 million tonnes amenable to underground mining. Limited testing indicates that the raw coal could produce dual products of coking and thermal coals.

Based on these attributes and the proximity to essential mining infrastructure, the Company believes this project is well placed for short term economic exploitation.

LOCATION AND TENEMENT PLAN


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GEOLOGY AND COAL SEAMS

Structurally MDL 324 lies within the Nebo Synclinorium within the north-eastern section of the Bowen Basin. The Bowen Basin contains a thick sequence of Permian and Triassic aged sediments, which in this area, are folded into a series of north-northwest trending synclines and anticlines. The Permian sequence contains widespread coal measures which include several economically important and extensive coal seams. Younger lithologies in the general region include Cretaceous aged granitoid intrusives and Tertiary sediments and lava flows. To the east of the project area the Permian sediments including the coal measures are partly concealed beneath the Tertiary sediments and basalt flows. In the MDL area there are two main structural features - the Hillalong anticline (to the west) and the south-western limb of the Exevale Syncline.

The main economic coal seam targeted within the MDL is the Hynds Seam within the Elphinstone Coal Measures (Rangal Coal Measures Equivalents). This seam consists of several plies and maintains a thickness of between 4.5 and 6.0 metres over most of the project area along a strike length of approximately 7 km. The thickness reaches up to 9.5 metres in the eastern portion of the MDL but it is possible that this increased thickness may be due to reverse faulting and be of relatively local extent. The overburden to the coal is generally an interbedded sequence of mudstone, siltstone and sandstone in the west which changes to a predominantly sandstone sequence in the east. The floor to the coal consists of a 4-6m sequence of interlayered tuffaceous or carbonaceous mudstone and siltstone with occasional coaly bands and lenses. This then grades with increasing depth into a fine to medium grained sandstone typical of the underlying Fort Cooper Coal Measures.

The Hynds Seam - Nature and Quality

In MDL 324 the Hynds Seam outcrops along the western and southern flanks of the Exevale Syncline and dips generally to the north and east at 12° to 20°.. The details of the seam are well documented from previous exploration drilling by CRA (39 holes, including 13 cored) and also from 40 holes drilled by QCE in 1996 (of which 6 were cored and 10 geophysically logged). The CRA holes were drilled on 500m centres with some infill drilling at 250m spacings. Regional work indicates that the Hynds seam is probably equivalent to the Lower Newlands-Vermont Seam, mainly using correlations from Matheson, 1990. The Hynds seam consists of interlayered dull coal (inertinite) and bright coal (vitrinite) with some thin bands of carbonaceous shale, siltstone, claystone and minor tuffaceous sandstone.


Coal Resources
                                   Summary of Hillalong Coal Resources - MDL 324

The proposed program will involve some 7000 metres of drilling including infill core drilling (coal seams plus also overlying and underlying rock sequences) with the core being extensively analysed. Coal quality parameters will be determined along with geotechnical analyses of the "roof" and "floor" strata to the coal seams. Drilling will also better establish the continuity and thickness of the Hynds Seam. This will enable mining method options to be studied as well as additional data input into possible wash-plant design requirements.

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