Red Hill Energy Inc.

Red Hill Energy Inc.

June 15, 2009 18:01 ET

Red Hill Enters Agreement on Ulaan Ovoo Coal Property, Mongolia

Falcon to Advance Property to Production

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 15, 2009) - Red Hill Energy (TSX VENTURE:RH) announced today that it has signed an agreement with Falcon Mining AG of Zug, Switzerland whereby Falcon Mining will acquire a 100% interest in Red Hill Mongolia LLC, a wholly owned subsidiary of Red Hill Energy, which owns a 100% interest in Red Hill's Ulaan Ovoo coal project in northern Mongolia. Hereafter Falcon Mining LLC will assume operational activities and incur 100% of all costs pertaining to pre-production, coal mine development and managing all coal production activities at Ulaan Ovoo. Launching of the Ulaan Ovoo coal project by Falcon Mining will facilitate the supply of coal to support Mongolia's economy in addition to realizing export opportunities to Russia and beyond. The project is located within 120 km (75 miles) of Mongolia's central railroad.

The Mongolian government has granted the Ulaan Ovoo coal project the major pre-requisite approvals required prior to commencing with coal mining operations in Mongolia including approval of the Company's Detailed Environmental Impact Assessment (DEIA) as well as the issuance of a long term, fully transferable mining license. Red Hill Energy will offer assistance to Falcon Mining in the procurement of a permit to mine at Ulaan Ovoo, at which point Falcon Mining will commence with pre-production and production activities.

Under the terms of the agreement Falcon Mining has agreed to pay Red Hill Energy US$30,000,000 with the first US$3,000,000 due within 14 days of Red Hill Energy receiving both shareholder and TSX-V regulatory approval. Eight months thereafter an additional payment of US$7,000,000 will be made, followed by a further US$10,000,000 within 12 months and finally, three annual payments of US$3,333,333 totaling US$10,000,000. Pursuant to the agreement, the shares of Red Hill Mongolia LLC will be transferred to Falcon Mining following receipt by Red Hill of US$10,000,000 of the purchase price, but will be held in escrow, along with other documentation, until such time as the full $30,000,000 has been paid. All payments are non-refundable once made, provided however that in the event Red Hill is unable to complete the transfer of the shares upon the date Falcon Mining is to pay the US$7,000,000 payment due to certain specific circumstances, Red Hill will refund the US$3,000,000 cash payment previously made by Falcon Mining or will grant to Falcon Mining a 2% net smelter return royalty over the Ulaan Ovoo project, which may be purchased by Red Hill at any time for US$3,000,000. In conjunction with the aforementioned transaction, Red Hill Energy has secured an option to purchase the outstanding NSR for a period of 90 days from the NSR holder for a price of US $1.350 million. No finder's fees are payable in respect of the transaction and the transaction is at arm's length.

Ranjeet Sundher, President of Red Hill, stated today that:

"We are very happy to have Falcon Mining advance Ulaan Ovoo to production for the benefit of all Mongolians."

The Ulaan Ovoo / Falcon transaction represents less than 20% of Red Hill Energy's combined measured and indicated tonnes of thermal coal (see Red Hill news October 25, 2007). Red Hill Energy retains in 100% ownership of both the Chandgana Tal and Chandgana Khavtgai coal projects, located in the Nyalga Coal Basin, central Mongolia. Red Hill's Nyalga Coal Basin projects contain a combined total of 819.7 million tonnes (measured and indicated) thermal coal and an additional 440 million tonnes inferred (see Red Hill news October 25, 2007). Both projects are contiguous to the massive coal project held by Companhia Vale do Rio Dolce of Brazil, the world's 5th largest mining company. The Nyalga Coal Basin is located within 160 km (99 miles) of Mongolia's central railroad, offering direct access to multiple markets including Mongolia, China, Russia and other international markets. Red Hill's Nyalga Basin coal is of low ash, low sulfur content and is contained within coal seams averaging thicknesses of 45 metres with stripping ratios averaging 0.53:1 at Chandgana Tal and 2.1:1 at Chandgana Khavtgai. Despite being in close proximity to rail access, the Chandgana Tal and Chandgana Khavtgai coal projects are conducive to a mine mouth power plant with a high voltage power line link to China (in addition to Mongolian markets). The Nyalga Coal Basin projects are also conducive to a coal to liquids operation.

The following tables outline the individual tonnage and quality of remaining Red Hill Energy coal including average stripping ratios and seam thicknesses.


CHANDGANA 141.3 million (none) 141.3 million (none)

CHANDGANA 188.7 million 489.7 million 678.4 million 440 million

TOTAL 330.0 million(i) 489.7 million(i) 819.7 million(i) 440 million(i)

PROJECT ASH (%) SULFUR (%) BTU/lb Kcal/kg (Avg) (Avg)

CHANDGANA TAL 12.49 0.68 7,628 4,238 0.53:1 40 metres

CHANDGANA 10.34% 0.53% 7,645 4,358 2.1:1 45.4 metres

(i) NI 43-101 mineral resources on Red Hill Energy's coal were previously
reported/published as follows: Ulaan Ovoo - please see September 06, 2006
Red Hill press release & subsequent October, 2006 SEDAR Filing: "Red Hill
Energy, Inc. Scoping Study Ulaan Ovoo Coal Deposit" / Chandgana Tal -
please see September 10, 2007 Red Hill press release & subsequent
September 11, 2007 SEDAR filing: "Technical Report on the Coal Resources
of the Chandgana Tal Coal Project Khentii Aimag (Province) Mongolia" /
Chandgana Khavtgai - please see October 5, 2007 Red Hill press release &
subsequent January 09, 2008 SEDAR filing: "Technical Report on The Coal
Resources of The Chandgana Khavtgai Coal Resource Area, Khentii Aimag,
Mongolia" - The Company reminds shareholders that all Red Hill coal is
classified as "Resources" and not "Reserves" under N1 43-101 reporting
requirements, and specifically that mineral resources that are not mineral
reserves do not have demonstrated economic viability.

Falcon Mining has indicated that it fully intends to continue supporting initiatives of Mongolian communities and projects sponsored and assisted by Red Hill Energy including the Dolma Ling Community Centre which provides medical services, meals, education and other vital services to an impoverished neighborhood of Ulaanbaatar, Mongolia.

Red Hill Energy remains active in Mongolia on current projects and is currently reviewing several new opportunities in Mongolia and in other regions of the world.

Shareholder approval for Falcon Mining transaction will be sought during the Company's forthcoming Annual and Special General Meeting.

Glenn S. Griesbach (P.Geo.), Geologist, is the Company's qualified person as defined by National Instrument 43-101 and has reviewed and approved the technical information contained in this press release.


Red Hill Energy Inc. is a junior resource company trading on the TSX-Venture Exchange under the trading symbol RH. The Company is advancing over one billion tonnes of 100% owned coal from two Mongolian coal basins towards production. Red Hill has a full-time office in Mongolia's capital, Ulaanbaatar.

Red Hill Energy Inc.

G. Arnold Armstrong - Chairman and CEO

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information