News 16 July 2009

69% Increase in Salmon Gums JORC Reported Resource

Spitfire Oil Limited (“Spitfire” or the “Company”) is very pleased to announce an increase for its 100% owned Salmon Gums lignite deposit in the south-east of Western Australia. The reported Resource of lignite (at 4m coal thickness & 45% ashdb cut-off) is estimated to be:

This new resource represents a 69% increase over the 519 million tonnes (at 5m thickness & 30% ashdb cut-off) Inferred Resource of lignite which supported the Company’s admission on AIM in July 2007. This substantial resource is the result of a 1 ½ year drilling campaign involving 420 new drilled and cored holes for a total of 12,624 metres. The estimate in accordance with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (The JORC Code, 2004) was generated through a thorough definition, audit and verification process managed by independent geological consultants G&S Resources.

Further, on 6 July 2009, the Company applied for 4 mining leases in addition to the 2 leases applied for in July 2008, bringing the total area under application for mining leases to 27,660 hectares. The applications for extensive mining leases covering the resource are an important milestone on the path to transforming the Salmon Gums project into commercial production.

In addition, if the current oil yields achieved with the test reactors in the Curtin University laboratory can be maintained at an industrial scale, then the reported Resource of lignite would correspond to an in-situ pyrolysis oil resource in the range of 330 to 420 million barrels, an increase in the range of 65% to 110% over the 200 million barrels in-situ oil volumes which supported the company’s admission onto AIM.

The Company intends, over the next three quarters, to focus its efforts on completing its technology definition work with emphasis now shifting from the generation of oil to the upgrading of the pyrolysis oil into its maximum saleable form and completing its pre-feasibility studies.

Chairman Mladen Ninkov commented “We are delighted with the sustained increase in the resource at Salmon Gums which continues to exceed our initial expectations. The current plans to produce approximately 20,000 barrels of oil per day for 25 years with the previously defined 400 million tonnes lignite resource will be significantly improved by this huge increase in the resource, reported according to JORC standards, which, at first glance, allows for a much longer life project with higher long term production rates. We could not be more pleased at this stage.”


Summary of Resources, Salmon Gums Lignite Project as prepared by G&S Resources: Summary of Coal Resources, Salmon Gums Lignite Project.

Resource Block Seam Interval Seam Resource Class Average Seam Thickness (m) Average Density gm/cc Average Ash (%db) Average Oil Yield (l/t) LTOM15C Average Total Moisture (% ar) Average Volatile Matter (% db) Area (m2 *103) Indicated Resource (Million tonnes) Inferred Resource (Million tonnes)
Far North Cumulative coal thickness >4m GL4 Inferred 7.3 1.20 26.1 107 58.4 41.5 19173.5 168.2
GL2 Inferred 0.6 1.23 30.6 102 58.6 38.3 2354.2 1.8
Minshull Cumulative coal thickness >4m GL4 Indicated 7.7 1.21 27.6 123 57.4 42.0 18472.2 171.6
GL4 Indicated 2.6 1.21 26.9 121 57.2 42.1 14268.2 45.0
GL4 Inferred 6.5 1.20 26.7 114 57.6 41.9 7443.5 58.1
GL2 Inferred 1.8 1.20 25.2 126 57.6 42.6 2156.1 4.6
GL1 Inferred 1.0 1.21 - - - - 1452.0 1.7
Collison Cumulative coal thickness >4m GL4 Indicated 8.5 1.22 29.2 107 53.5 39.6 16349.1 169.4
GL2 Indicated 2.0 1.22 29.8 119 50.6 40.2 8310.8 20.1
GL4 Inferred 6.3 1.22 29.1 111 55.0 40.0 4227.9 32.8
GL2 Inferred 1.3 1.23 31.2 124 51.7 40.3 1721.5 2.8
GL1 Inferred 1.0 1.21 - - - - 940.6 1.2
Pixie Cumulative coal thickness >4m GL4 Inferred 7.1 1.20 25.2 128 53.3 42.4 21616.1 183.2
GL2 Inferred 1.3 1.23 31.2 115 52.3 39.6 9146.4 14.9
Total 406.1 470

Date: July 2009

Nota Bene:

  1. This table forms part of the G&S Resources July 2009 – Statement of Coal Resources for the Salmon Gums Lignite Project. Tenement status, the status of geological data (type, reliability, relevance and density), geological data evaluation procedures (databases, management, correlation and modelling) and the resource estimation criteria and procedures, are presented in detail in the resource statement. The contents of the above table should be considered with respect to the entire resource statement.
  2. Inferred Resources are estimated from the geological model and are presented “as estimated” for individual resource block / seam combinations, then rounded for reporting within the total (of all resource blocks) row. Inferred Resources reflect a lower level of confident than Indicated Resources and use of similar significant figures for reporting individual resource block / seam combinations in the above table, should not be taken to imply a similar confidence with respect to resource estimates.

Resource estimation of the Salmon Gums Lignite Project was limited by the various geological considerations and boundary criteria referred to in the July 2009, statement of coal resources.

Within the Salmon Gums Lignite Project area (limited by the currently inferred Eocene palaeochannel boundary and the extent of exploration drilling) the deposit is estimated to contain Indicated Resources for the GL4 and GL2 Seams of 406.1 million tonnes (Mt). A further 470 Mt of Inferred Resources have been estimated to be present in the GL4, GL2 and GL1 Seams.

The July 2009 resource estimate for the Indicated and Inferred Resources are not directly compatible with those of the 2002 estimation because of changed cut-off criteria (i.e. ash content, coal thickness) and differing regional extents. However, as a gross comparison within the Collison, Minshull and Pixie areas, the 2002 estimate of 519 Mt, has been increased to approximately 705 Mt. Increased resources can be attributed largely to extensive exploration drilling in 2007-2008, leading to considerable extension of the resource area, in combination with other unquantified factors including changes in cut-off criteria and varying density estimation and modelling methodologies.

GLOSSARY OF TECHNICAL TERMS

“ash”
The inorganic residue after the incineration of the coal to constant mass under Standard Conditions
“Indicated Resource”
That part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
“Inferred Resource”
That part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.
“JORC Code”
The Australasian Code for Reporting of Exploration Results , Mineral Resources and Ore Reserves, - The JORC Code- 2004 Edition. Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC)
“Lignite”
A term for low rank coal in which only minor coalification has occurred. The term is synonymous with brown coal