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Northern Energy Corporation inks 54% increase in coal reserves at Surat Basin project

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Northern Energy Corporation Ltd (ASX: NEC) has inked a 54% increase in the marketable reserve base at its Surat Basin Elimatta Coal Project, on EPC650, in southern Queensland.

The Marketable Reserves for the Elimatta project now total 105.8 Million tonnes comprising Proven Reserves of 82.3Mt and Probable Reserves of 23.5Mt. These reserves have been delineated based on the establishment of an open cut mine producing around 5Mtpa of low ash high volatile thermal coal for more than 20 years.

NEC Managing Director Keith Barker said, “This substantial increase in the marketable reserve and increase in the proposed mine size at the Elimatta project further reinforces the value contained in NEC’s project portfolio."

Barker said, “We will now lodge a mining lease application over the Project Area as the next step towards development of the open cut mine at Elimatta. With the engineering design and planning progressing for the rail and port projects required for the Elimatta project, NEC continues along the path to becoming an emerging mining company.”

Since the completion of the initial mine assessment in December 2008 further evaluation of the Elimatta deposit has been undertaken. In particular surface hydrology and geotechnical studies have been completed and the results of these studies have been incorporated in a revised mine plan.

As a result the mine commences in lower strip ratio areas, which reduces the external overburden dump area. These changes have enabled a higher rate of production than assumed in the previous mine plan. The combination of these factors and the relaxation of the previously applied 5:1 strip ratio cut off has resulted in a larger total mine production and increase in reserves.

The Elimatta open cut mine plan is based on an excavator and truck contract mining operation feeding a 1100 tph 2 stage coal processing plant producing a nominal 5 million tonnes of product coal per annum over a mine life in excess of 20 years. The 5Mtpa mine plan extracts approximately 170Mt of the total Elimatta Resource.

The Elimatta product coal, which will be a low ash, high volatile thermal coal is intended to be shipped through Gladstone’s proposed Wiggins Island Coal Terminal via the proposed Surat Basin Rail linking Wandoan with the existing Moura to Gladstone rail. The timing of these rail and port infrastructure projects is the key determinant in the timing of any mine development at Elimatta.

NEC is also a member of the WICET consortium currently negotiating with the Queensland Government to form an industry ownership model that will take on the responsibility for planning and construction of the Wiggins Island Coal Terminal. NEC is negotiating with Surat Basin Rail for the provision of 5Mtpa capacity on the new rail.

Next Steps

The application for a Mining Lease and Environmental Approvals will include an Environmental Impact Statement the formal process for which will commence shortly. Further optimisation of mine planning and coal processing options together with finalisation of transport and other infrastructure provision will be progressed in parallel with the approval process. NEC will continue to work closely with the coal chain infrastructure providers. Current expectations are that the key projects forming the coal chain will reach financial close by mid 2010. NEC’s objective is to progress the Elimatta project to fit this timetable.

The Elimatta Project is currently 100% owned by NEC. As previously announced NEC is seeking parties interested in making a significant investment in the Elimatta project alongside NEC. This process is ongoing.

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