Release: Australia Oriental to acquire 30% interest in Indonesia coal operation

(2 July 2008)--The Board of Directors of Australia Oriental Minerals NL (?AOM?) is pleased to announce that the Company, together with its major shareholder, Malaysia Smelting Corporation Berhad (?MSC?), have entered into an agreement to each acquire a 30% interest in Asiatic Coal Pte Ltd (?ACPL?) which has rights in a mining concession of approximately 4,005 hectares located in the Central Kalimantan Province, Indonesia for US$6.75 million. The mining concession is located in an area of well known Indonesian coal basins and within the known region of Anthracite/High Bituminous coal in Kalimantan.

Preliminary drilling and exploration has been undertaken in an area of approximately 200 hectares within the mining concession, with drilling encountering coal seam intersections of anthracite and high bituminous coal that has high calorific value in the range of 7,500 to 8,300 kcal per kilogram, low ash averaging 6%, high carbon content averaging 80.6% and low average moisture at 8.5%.

The current market price of anthracitic coal of this type is in the range of US$180 to US$260 per tonne with typical specifications approximating those identified in the preliminary drilling.

Based on the preliminary drilling results, production is expected to commence in the fourth quarter of 2008 and the project will require approximately US$6.2 million to commence coal mining operations. AOM?s share at 30% will be US$1.86 million. Local contractors will be used for the mining and transport operations.

A further drilling program, with an estimated budget of US$500,000 is planned by ACPL for the next six months to delineate a coal resource in accordance with the JORC standard. The exploration target for this drilling programme, based on preliminary results, is 7 million tonnes to 10 million tonnes. This target estimate has been based on the preliminary drilling results and is conceptual in nature as there has been insufficient exploration to define a mineral resource in accordance with the JORC standard. It is uncertain if further exploration will result in the determination of a mineral resource in accordance with the JORC standard.

The initial payment of US$6.75 million entitles AOM to a 30% share of profits arising from the mining operations of the first 1.5 million tonnes of coal mined.

Subject to the results of the proposed drilling programme, AOM has an option to acquire any JORC compliant resource delineated within the mining concession in excess of 1.5 million tonnes by paying its share of 30% of the agreed consideration of US$15 per tonne.

AOM is proposing to fund its payment of US$6.75 million and it share of the exploration and development costs (US$1.86 million) through a rights issue. Details of the rights issue are currently being finalised, and are expected to be announced within two weeks.

In the interim, AOM has arranged for a short-term loan facility for AU$5 million. The facility will be repaid out of the proceeds of the rights issue. (end of release)