Arc Exploration: Update on development of Cibaliung Gold Project and gold hedge book closed out

(2 October 2008)-Arc Exploration Limited advises that it has reached agreement with ANZ Bank to close out the hedge book which was originally put in place in 2006 in conjunction with a project financing on the company?s Cibaliung Gold Project located in Banten province, Java, Indonesia.

As a result, the commitment to deliver 141,796 ounces of gold at US$651.15 and 43,595 ounces of gold at US$658 per ounce has been extinguished and the project debt has increased from US$20 million to US$60 million.

Closing of the hedge book means that all of the gold to be produced from the Cibaliung Gold Project will be sold at prevailing spot gold prices and the project revenues will have a true exposure to the gold price.

PROJECT FUNDING

As previously advised, the company is continuing its discussion with a number of parties to earn a direct interest in the project by funding the remaining development expenditure through to positive cash flow.

The company is also in ongoing discussion with ANZ Bank regarding existing debt facilities and has accepted an additional cost overrun facilities in the amount of US$4million offered by ANZ Bank. The company is now proceeding with various conditions precedent to permit drawdown of this facility at the earliest opportunity.

ABOUT ARC EXPLORATION LIMITED (ARX)

Formed in 1983, Arc Exploration Limited is an Australian listed exploration company focused on exploring Indonesia.

The Company has a 95% joint venture interest with PT Sumber Mineral Nusantara in the Trenggalek and Pekalongan and tenements located in East and Central Java respectively, areas prospective for high-grade epithermal gold/silver deposits. The Company also holds a 95% joint venture interest in the Bima prospect in East Sumbawa which is prospective for high-grade epithermal gold-silver and bulk tonnage porphyry-style gold-base metal deposits.

In addition, the Company has a strategic alliance with the Anglo American Group to explore for large porphyry copper/gold deposits in Papua.

The Company also retains a 95% interest in the Cibaliung Gold Project, a high-grade epithermal gold/silver vein system located southwest of Jakarta in Banten Province, western Java. Cibaliung is expected to produce at an overall annual rate of 70,000 oz (gold equivalent). (end of announcement)