Highlight of Herald Resources? March quarterly report

DAIRI ZINC/LEAD PROJECT

Bankable feasibility study (BFS)

Most components of the BFS, based on the high grade Anjing Hitam deposit, are in progress and the drilling is near to completion apart from some additional holes which may be drilled to follow up on possible extensions to the resource. The individual components are summarized below:

Mining Studies: being carried out by AMC Consultants who propose a dual mining system of open stopping in the footwall section and drift and fill in the hanging wall section with cemented paste tailings backfill. Final planning and scheduling are waiting on resource modeling.

Site Geotechnical Studies: by civil engineers Knight Piesold Pty Ltd who have completed site drilling and test pitting for roads, plantsite and the small tailings dam, with laboratory results pending.

Environmental Impact Assessment (known as K-Amdal): by PT URS Indonesia who have completed preliminary studies, drawn up terms of reference and presented these to the committee of local government and community representatives ? now pending completion of the mine, plant and infrastructure layout before final reporting to Government.

Transportation Studies: by CEIS Pty Ptd / PT Petrosea (roads and ports) in conjunction with Maunsell Australia Pty Ltd (pipeline), ports have been short-listed to Belawan via Medan and the closer west coast port ? Singkil Baru for road concentrate trucking, although a preliminary slurry pipeline assessment has indicated that an 90km installation to the latter would have cost benefits over the life of mine and certainly for future deposits, although requiring and additional initial capital investment.

Metallurgical Testwork: substantial testwork is underway at the Perth and Burnie, Tasmania laboratories of AMMTEC Ltd on broadly representative drillcore composites, the Burnie Lab being the same as used in the past two successful flotation campaigns which pointed to good concentrate grades and recoveries ? it is hoped to optimize these further. Orway Pty Ltd have been engaged to analyze comminution testwork results and advise on the optimal crushing/grinding combination.

Concentrator and Pasteplant design: this component is shortly to be assigned and activity is hoped to commence early in May.

Geology and Resource Estimation: CSA Australia Pty Ltd geological consultants have been engaged to provide independent assessment of the Anjing Hitam geological model and initial site studies have been carried out. This will lead to resource modeling to be assigned to an independent consultant (TBA) later in May.

Drilling: up to end March a total of about 7100m had been drilled in the Anjing Hitam program designed for resource blocking out, mine geotech study, metallurgical bulk sampling and hydrological study. A further 2000m or so is intended to be drilled as part of the original program, for follow-up infill and extension drilling although the resource modeling and estimation will be carried out before completion.

A pattern is emerging of the Main Minealization Horizon (MMH) tending to taper out in a vein-like manner at the updip and downdip extremities which enables a clearer overall appreciation of the geometry of the mineral body. In an area in the NW part of the deposit this veining, as well as massive sulphide, is particularly lead rich with enhanced silver values also.

An extension is currently being traced in the NW of the deposit with significant massive sulphides intercepts in three holes to date and one thick gossan.

MELUAK GOLD PROJECT

Exploration

A field program undertaken during January ? February concentrated on completion of mapping over the Siongal-Ongal grid area and this was followed by the compilation of plans and an annual report.

At the completion of the present phase of mapping and sampling, besides the soil sampling results previously depicted, the sampling of locally derived mineralized float material can be summarized as follows:

1) Gajah Mas (Golden Elephant) overall: 205 samples assayed with average grade 0.89g/t Au including 51>1g/t Au and highest value 18.8g/t;

2) Of this elephant head and trunk: 1400mx200m, 52 samples average 1.52g/t;

3) Siongal-Ongal: 6 other zones at lower grade

It is still difficult to visualize the precise nature of the deposits ? although it is believed to be some kind of diatreme breccia with later gold rich hydrothermal pulses resulting in the significant gold grades in part of the overall silicified, pyritised volcanics. There is one significant riverbank exposure of clay/pyrite matrix supported silica breccia at Gajah Mas but only weakly auriferous at this locality.

The SIPP exploration permit has been renewed by the Regent of Gayo Lues for a further year but the program has been put on temporary hold pending the hoped for termination of the state of martial law in May, and awaiting the final outcome of the recent parliamentary elections.

The Regent and the local parliamentary representatives visited the area in late March and expressed their satisfaction in the work and trust that we will shortly be able to resume activities

An IP geophysical program is planned, to be followed by an RC/diamond drilling program. (*)