Kangaroo updates Indonesian coal projects

EXECUTIVE SUMMARY
Pakar Thermal Coal Project & Strategic Alliance with PT Bayan Resources Tbk

The June 2011 Quarter marked a significant turning point for Kangaroo Resources Limited with its transformational transaction with leading Indonesian coal producer PT Bayan Resources Tbk (?Bayan?).

As part of this transaction, KRL acquires a 99% interest in the world-class Pakar Thermal Coal Project in East Kalimantan (?Pakar?) in return for issuing a total of 2,305 million new shares to Bayan and other parties related to the acquisition. The Iwo companies have also established a Strategic Alliance covering KRL?s existing coal operations in Indonesia.

The transaction was overwhelmingly approved by both KRL and Bayan shareholders in June 2011. The two companies are now awaiting final government sign-off on the Pakar Project equity component of the transaction for the deal to be formally finalised.

Bayan has commenced works at Pakar and is integrating the Project with Bayan?s adjacent Tabang Project, aiming to develop and prepare both projects for initial production. Work to date has included the commencement of mine plans and studies, off-take discussions, and preliminary work requirements in preparation for the start of operations.

As part of the off-take considerations, Bayan has signed a conditional sales and purchase agreement with Universal Crescent Power Ltd, a subsidiary of Universal Success Ltd, to supply 100 million tonnes of coal to India, with the Pakar (North) Project forming a strategic component of Bayan?s overall supply strategy.

KRL and Bayan will continue working closely together to further integrate their operations and activities for all of KRL?s existing coal projects in Indonesia.

Completion of the transaction and acquisition of the Pakar Coal Project will put KRL firmly on track to become one of Indonesia?s leading coal producers.

Updated JORC Resource Estimate
During the Quarter, the Company completed a major upgrade to the JORC Code Total Coal Resource and Reserve Statements for each of the Company?s key assets - the Pakar, Mamahak and GPK Coal Projects.

The revised estimates will provide KRL with total JORC Code compliant Coal Resources of 3,146Mt# across the three projects, with a variety of coal types ranging from low-rank thermal coal to coking coal, comprising:
? Pakar Project - Total Coal Resources of 3,019 million tonnesl* comprising average coal quality with CV 3,209kcal/kg (gar), including Total Open Cut Coal Reserves of 442 million tonnes1? comprising average coal quality with CV 3,35okcal/kg (gar);
? Mamahak Project - Updated Total Coal Resources of 10.49 million tonnes2* comprising average coal quality with CV range of 6,877-7,698kcal/kg (gar);
? GPK Project - Updated Total Coal Resources of 117 million tonnes3* comprising average coal quality with CV 3,88lkcal/kg (gar).

Mamahak Coal Project
Coal mining operations continued during the Quarter at the Company?s 100%-owned Mamahak Project, with the implementation of a revised mine plan resulting in an increased mining area.

Together with Bayan, KRL has prepared a tender pack for sub-contractors, with a number of site visits conducted during the Quarter. KRL is targeting the appointment and initial mobilisation of sub-contractors by year-end, with additional necessary construction works to commence thereafter.

Relevant forestry permits have been issued to the Company for the initial mining areas, whilst preparing to lodge additional forestry permit applications to cover, further mining and exploration areas at Mamahak.

Total coal sales of 30,301 tonnes were recorded from Mamahak during the June Quarter. An additional 10,857 tonnes have been delivered to the port stockpile to-date, and coal sale part-payments have been invoiced according to the coal sales contract with Bayan.

Coal revenues during the Quarter were restricted due to low river levels during the current dry season, with barging suspended since late-May. However, Bayan is working on a longer-term solution involving the construction of a longer haul road to lower parts of the Mahakam River that are accessible year-round for barging and a full bathymetric survey of this part of the river has been completed for this purpose. The Company will continue mining and producing coal at Mamahak during the dry season, as according to the coal sales contract with Bayan, Mamahak coal is sold at a market price FOB Mamahak jetty, with .Bayan pre-funding a substantial majority on arrival at Mamahak port stockpile and the balance upon completion of loading onto barges for shipment.

Works have commenced to plan the route and design of this haul road, which is fully supported by Bayan, who will fund the infrastructure development through infernal sources.

Kangaroo and Bayan have also commenced the design and planning of an exploration program targeting a further expansion of the updated JORC Code resource estimate at Mamahak. This exploration program is targeted to commence during the forthcoming semester and will aim to increase the Mamahak coal resource and provide the basis for the definition of a Coal Reserve.

GPK Coal Project
At the GPK Project, KRL is moving to acquire direct foreign ownership of the asset by converting PT GPK to an Indonesian PMA company (a foreign investment company) and transferring 85% of the shares in PT GPK directly to KRL.

The Principal Forest Permit (Izin Prinsip) for the initial GPK mining areas was issued during the quarter.

The Company is also continuing with exploration planning and is seeking to obtain the required permits and approvals to conduct further drilling at GPK. Drilling will target specific areas within the project concession with the aim of increasing the level of confidence in the geological model used for the current JORC Resource Statement and subsequently preparing a JORC Reserve Statement to support the planned development of mining operations.

CORPORATE
During the Quarter, the Company announced the appointment of four experienced coal executives to its Board as Non-Executive Directors.

All four new Directors - Darcy Wentworth, Alastair McLeod, Russell Neil, and David Low Yi Ngo - are nominees of Bayan Resources, which is now KRL?s largest shareholder with a holding of - 56%.

As part of the new board structure, Trevor Butcher is now a Non-Executive Director and Galih Kartasasmita resigned as a Director during the Quarter.

Cash at bank at the end of the June Quarter was -$2 million, with US$18 million due to be received during the 3Q 2011, once the project equity component of Pakar transaction has been finalised. In addition, -US$2.6 million is due to be received from trade debtors for coal sale payments made during the June Quarter.

KEY OBJECTIVES FOR SEPTEMBER 2011 QUARTER
? Completing the regulatory process and obtaining government sign-off for the Pakar Project equity to be transferred to KRL?s Indonesian PMA company (a foreign investment company), for KRL to acquire direct foreign ownership of the asset.
? Evaluation of Mamahak contract mining tender and negotiations with mining contractors.
? Continuing to work with Bayan Resources to enhance the operational management of Kangaroo?s ?coal projects and integrating the operating activities and management of the two companies. (end of release)