Coal

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The coal interests of Aquila Resources Limited are comprised of joint venture and wholly-owned projects in the Bowen Basin region of central Queensland in Australia, together with wholly-owned projects in Southern Africa.

Bowen Basin - Queensland, Australia

In 2002 the Company identified and successfully applied for a series of coal exploration tenements in the north-central Bowen Basin region of Queensland. After a further period of exploration and evaluation, these tenements formed the basis of a joint venture with American Metals and Coal Industries (AMCI), whereby AMCI agreed to acquire a 50% interest in the joint venture in return for sole funding $10 million on exploration.

Following a successful exploration program and the acquisition of additional exploration rights from Exxaro Resources Limited (formerly Kumba Resources Limited), the Company and AMCI agreed in July 2005 to develop the Isaac Plains Coal Mine, near the town of Moranbah. The mine has commenced operations and is expected to ultimately produce approximately 2.8 Mt of coal product for export each year.

Additionally, exploration has continued on a number of prospective projects also identified by the joint venture, including the Belvedere Coal Underground Project and the Peak Downs East Underground Coal Project.

The Belvedere Coal Underground Project is the subject of a detailed Exploration Study by Companhia Vale do Rio Doce (CVRD) into the potential for the establishment of an 11-12 Mtpa longwall operation.

Exploration drilling and testing at the Peak Downs East Underground Coal Project (located adjacent to the BHP Billiton Mitsubishi Alliance Peak Downs Mine) has identified hard coking coal over a number of seams and is the continued focus of resource drilling programs and an initial mining study.

CVRD announced in February 2007, that as part of a broader transaction with AMCI, it has acquired the 50% joint venture interests previously held by AMCI in the Isaac Plains Coal Mine, the Peak Downs East Underground Coal Project and various other exploration projects. It is expected that the Company's joint venture interests will benefit from the technical and financial capability demonstrated in CVRD's extensive mining interests around the world.

Apart from its joint venture interests, Aquila Resources Limited is also conducting exploration and evaluation activities on its wholly-owned Bowen Basin tenement portfolio, the most advanced of which is the Washpool project, where drilling and coal quality tests demonstrate the potential for an economic resource of metallurgical and thermal coal.

Southern Africa

The Company is also active in Southern Africa, where it has been exploring for coal in both Mozambique and Botswana, through wholly-owned projects managed by an experienced exploration team based at its recently established offices in South Africa.