Red Hill Energy Inc.

Red Hill Energy Inc.

January 11, 2007 09:00 ET

Red Hill to Advance Ulaan Ovoo and Chandgana Tal Coal Projects; Manager of Coal Exploration Hired

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 11, 2007) - Red Hill Energy Inc. (TSX VENTURE:RH) ("Red Hill" or the "Company") announced today its advancement plans for its Ulaan Ovoo and Chandgana Tal coal projects in Mongolia.

The Ulaan Ovoo Coal Project

By successfully acquiring a 100% interest in mineral licenses contiguous to and entirely surrounding Red Hill's Ulaan Ovoo Coal Project, the Company is now in control of all known structural basins within the vicinity of Ulaan Ovoo's 208.8 million tonne coal resource. Three basins in particular are considered by Red Hill to be particularly promising, with each having the potential to host coal deposits similar or greater in size than the Ulaan Ovoo deposit.

The 2006 Scoping Study on the Ulaan Ovoo coal deposit completed by Behre Dolbear (USA) Ltd. of Denver, CO, suggests the deposit has an Economically Recoverable Demonstrated Coal Resource of 208.8 million tonnes sufficient to support a 34-40 year mining operation. The Study concludes that the project is capable of simultaneously producing coal to supply both a mine mouth power plant while also producing coal for transport to international and domestic markets. At current tonnage, the base case project has a Net Present Value (5% discount rate) of US $225.5 million.

After results of the Scoping Study were published on November 9, 2006, a number of large to mid-size international power generation companies plus several regional and international coal producing companies and international coal brokers, have expressed strong interest in discussing strategic alliance opportunities with Red Hill Energy. Confidentiality agreements have been signed with several third parties.

Mr. Ranjeet Sundher, President of Red Hill Energy, adds that:

"We are considering several strategic alliance opportunities for Red Hill while simultaneously moving ahead development on key assets. Red Hill's priorities remain the same: continue to maximize shareholder value through project advancement while operating in an environmentally responsible manner and continue with hiring policies that favour Mongolian workers."

Red Hill has planned 2007 exploration programs that include extensive drilling in the structural basins that surround the coal-bearing Ulaan Ovoo basin. The life of the future Ulaan Ovoo coal operation could be greatly increased beyond the currently anticipated 34-40 year mine life should any of these surrounding basins be proven to contain significant coal accumulations. Drilling of the most promising surrounding basins is expected to start in the first quarter of this year. Details of this planned drill program will be included in a subsequent news release.

The Ulaan Ovoo coal deposit and outlying structural basins are located in the territory of Tushig soum, a sub-province of Selenge aimag (province) in northern Mongolia. The area is approximately 8 kilometres (km) west of the central village of Tushig soum and approximately 17 km away from the Mongolian-Russian border. Project infrastructure includes electricity, water and quality road links to both Russia and Mongolia's central railroads.

Chandgana Tal Coal Project

Red Hill Energy is preparing to advance its 100% owned Chandgana Tal Coal Project in the first quarter of 2007. Exploration is planned to define and advance historical Russian resource estimates to N1-43-101 and JORC compliant standards. Previous work done on the project by a joint Russian-Mongolian operation was too limited and too shallow to have properly defined the full lateral extent of Chandgana's five known coal seams. The historical work defined an estimated coal resource of 133 million tonnes which, using the original Russian resource categories, consists of 31 million tonnes classified as categories A and B, 59 million tonnes classified as category C1 and 43 million tonnes classified as category C2. According to recent published articles, such as that by S. Henley in the April 20, 2004, issue of the Mining Journal, Russian resource categories A and B can generally be considered roughly equivalent to the "measured" resource category recognized by JORC, category C1 is roughly equivalent to "indicated" and C2 to "inferred".

Nearly all of the historical resource is confined to a single, near surface flat-lying coal seam from 30m to 50m thick. This thick shallow seam is overlain by no more than 34 m of overburden, presenting a favorable situation for a potential future large-scale low stripping ratio open-pit operation. Exploration is planned to define this shallow seam in detail in order to advance the historical resource estimate to NI-43-101 and JORC compliant standards and to explore three other coal seams known to occur at depth beneath the shallow seam. These three seams appear not to have been included in prior tonnage estimates.

Mr. Ranjeet Sundher President of Red Hill Energy, adds that:

"Our approach to the Chandgana Tal Coal Project will be similar to the successful approach we took at Ulaan Ovoo where it was thought to contain no more than 78 million tonnes when we acquired it. In just 24 months we increased the Ulaan Ovoo project by over 125 million additional tonnes, commissioned a successful scoping study and acquired additional promising basins in the region."

Chandgana Tal's proximity to China makes it particularly attractive for a potential near term very economic mining operation. Further, the deposit occurs in a large oval-shaped synclinal basin, approximately 5 km x 7 km in size, which has not been explored in detail. This suggests that with successful further exploration Chandgana Tal could become a very long-life operation.

Coal Exploration Manager Hired

To assist with Red Hill's coal exploration activities in the Ulaan Ovoo region and elsewhere in Mongolia, the Company is pleased to announce that it has hired an experienced coal geologist, Eric Robeck, who is relocating from Utah, USA, to Red Hill's office in Ulaanbataar, Mongolia. Mr. Robeck holds BSc and MSc degrees in geology from Brigham Young University and is a member of the Geological Society of America. Recently he has prepared complete, multi-seam geologic models and databases for three new underground and surface coal mines in Colorado, Utah and Wyoming, USA. Mr. Robeck managed the 2006 drilling program in Ulaan Ovoo and looks forward to returning with Red Hill for another exciting field season.


Red Hill Energy Inc. is a junior resource company trading on the TSX-Venture Exchange under the trading symbol "RH". In addition to developing the 208.8 million tonne Ulaan Ovoo Coal Project and the Chandgana Tal Coal Project the Company has 14 uranium properties located throughout Mongolia. Red Hill has a strategic alliance with Mega Uranium Ltd. to jointly develop its uranium assets and has a full time office in Mongolia's capital, Ulaanbaatar.

Red Hill Energy Inc.

G. Arnold Armstrong - Chairman and CEO

Ranjeet Sundher - President

Forward-Looking Statements: Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the Corporation's periodic filings with Canadian Securities Regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The companies do not assume the obligation to update any forward-looking statement.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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