Kangaroo Resources : Updated Coal Resources and Reserves for Pakar Coal Projects

Kangaroo Resources Limited

ABN: 38 120 284 040 ASX Code: KRL

12 September 2017 ASX

release

Updated Coal Resources and Coal Reserves for Pakar North and South Thermal Coal Projects, Indonesia Highlights

• Pakar North Coal Reserves increased by 52% from 155Mt to 236Mt. Importantly, the average Calorific Value ("CV") for Pakar North has increased from 3,785 Kcal/kg GAR to 3,885 Kcal/kg GAR.

• Coal Resources (which includes Coal Reserves) estimated at 1,090Mt (191Mt Measured, 533Mt Indicated and 366Mt Inferred). Previously estimated Coal Resources at 31 December 2010 were 3,019Mt (111Mt Measured, 1,092Mt Indicated and 1,816Mt Inferred) with the primary reasons for the current reduction being:

  • application of rigorous pit optimisation limits to Coal Resource estimates to satisfy JORC Code 2012 requirement to demonstrate reasonable prospects for eventual economic extraction;

  • relinquishment of approximately 5,118 hectares of Pakar South concessions (refer announcement dated 21 December 2016); and

  • the exclusion of 2,229 hectares of concessions in North and Pakar South that overlap with a third-party coal concession as a result of an ongoing legal dispute (refer announcement dated 22 August 2017).

• Coal Reserves estimated at 399Mt (127Mt Proved and 272Mt Probable). Previously estimated Coal Reserves at 31 December 2010 were 442Mt (16Mt Proved and 426Mt Probable). The small reduction in overall Coal Reserves is primarily due to:

  • a reduction in the long-term Newcastle coal price for Coal Reserve estimation purposes from Free on Board US$95 per tonne to USD$70 per tonne; and

  • relinquishment and exclusion of licence areas as detailed in the preceding highlight point.

• The significant improvement in the Coal Reserves proved to probable ratio (32%:68% versus 4%:96%) is primarily due to the radius of influence of drilling on the adjacent PT. Bayan Resources Tbk ("Bayan") concessions.

• Updated Coal Resources and Coal Reserves estimates have been independently prepared by mining consultant, PT. RungePincockMinarco ("RPM").

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1. INTRODUCTION

   Kangaroo Resources Limited (ASX: KRL) ("KRL" or the "Company") is pleased to announce that it has undertaken the necessary geological assessments and studies required to update the estimated Coal Resources and Coal Reserves for each of PT. Tiwa Abadi ("TA"), PT. Tanur Jaya ("TJ") and PT. Dermaga Energi ("DE") (collectively "Pakar North") as well as each of PT. Cahaya Alam ("CA"), PT. Bara Sejati ("BS") and PT. Sumber Api ("SA") (collectively "Pakar South"1) thermal coal projects in Indonesia (in which the Company currently holds or has contractual rights to 99% interest) which are reported in accordance with the reporting guidelines of the 2012 Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists, and Minerals Council of Australia ("JORC Code 20122").

   There has been no new drilling on the Pakar North and Pakar South areas since 2009 and the primary reason for the independent update of the Coal Resources and Coal Reserves is to bring the Company's reporting in line with the JORC Code 2012 as the Company gets closer to considering development options on its core projects. However, drilling and mining success at the adjacent Bayan concessions has had a positive impact on the updated estimation of the Coal Resources and Coal Reserves. RPM was engaged by the Company to complete independent estimates (the "Statements") of the Open Cut Coal Resources and Coal Reserves within Pakar North and Pakar South coal concessions located in East Kalimantan, Indonesia. The Statements report the following Coal Resources and Coal Reserves as at 31 December 2016:

2. total Coal Resources (inclusive of Coal Reserves) for Pakar North and Pakar South have been estimated at 1,090 Mt (191Mt Measured, 533Mt Indicated and 366Mt Inferred); and

3. total Coal Reserves for Pakar North and Pakar South have been estimated at 399Mt (127Mt Proved and 272Mt Probable)

4. The Coal Resources and Coal Reserves estimate supersedes the prior estimate as at December 2010 and reveals a decrease in Coal Resources of 1,929Mt (80Mt increase in Measured, 559Mt decrease in Indicated and 1,450Mt decrease in Inferred categories) and a decrease in Coal Reserves of 43Mt (111Mt increase in Proved and 154Mt decrease in Probable categories). Further details of the change over this time period are included in Appendix 1.

   Coal Resources and Coal Reserves are quoted on a 100% basis.

   1 Pakar South also includes PT. Apira Utama and PT. Silau Kencana however RPM determined that these do not have any Coal Resources or Coal Reserves as a result of the concession relinquishments announced previously.

   2 In addition to the JORC Code 2012, the 2014 Australian Guidelines for the Estimation and Classification of Coal Resources was also used by RPM in determining the Coal Resources.

   Due to the differentiation in geology, geography and coal quality, Pakar North and Pakar South are considered as separate material mining projects.

   The Company has rights to utilize 30% of Bayan's haul road and barge loading capacity at Senyiur through an Access Agreement. Bayan's haul road passes either through or near to the majority of the Company's mining concessions in North and Pakar South.

   Picture 1 - Geographic Location Picture 2 - Site Location