Celsius Resources Limited — Interim / Quarterly Report 2013

Oct 30, 2013

ASX RELEASE | 31 October 2013

QUARTERLY ACTIVITIES REPORT

SEPTEMBER 2013

HIGHLIGHTS

• 2013 physical exploration programme at the Company's Uzgen Basin Coking Coal Project is now complete.
• 11 core holes drilled for a total of 4,051 linear metres, the largest drilling program undertaken by Celsius to date.
• Significant coal intersections observed at both Kargasha and Kokkia, with cumulative thicknesses of up to 16.3 metres and individual seams of up to 2.58 metres.
• Coal samples are now progressively being sent to SGS and ALS labs for coal quality testing.
• Additional environmental and geotechnical data was collected to further mine plan studies.
• Near-surface results at Kokkia highlight additional open-pit / auger potential.
• Celsius Executive Chairman, Alex Molyneux, to join Blumont Group as Shareholder-Chairman
• All work programmes fully funded

Exploration and Development (Uzgen Project)

At the Company's 80% owned flagship Uzgen Basin Coking Coal Project ('Uzgen Project'), the Company has a JORC resource of 255Mt (Inferred), which comprises 230Mt at Kargasha and 25Mt at Kokkia.

The Uzgen Project is ideally located to supply the expanding steel industry in Xinjiang Province, Western China. Xinjiang Province has been highlighted as a special case for economic development. Kashgar, Xinjiang's second city, has been designated as a new Special Economic Zone as a trade gateway to Central Asia.

During the quarter the company commenced the field exploration programme for the 2013 season. This work was ultimately completed early in October and samples taken from the drilling works are now progressively being sent to the laboratory. The laboratory work will comprise coal assaying and analysis of coking properties

to determine coal quality parameters. In addition desktop studies will focus on interpretation of drilling results, modelling of geology and correlation of coal seams.

This year's exploration work also included a number of larger diameter PQ drill holes, which provide larger cores and subsequent increased mass of samples for the labs. This will facilitate testing of all coking properties including Coke Strength after Reaction (CSR).

The first drilling by the Company in the Kokkia area of the Uzgen Basin was undertaken during this season. The initial inferred JORC resource of 25Mt for Kokkia was based on interpretation and correlation of historical Soviet era geological records. Celsius has already observed some encouraging results in the 2013 drilling programme based on visual inspection of the core. A summary of the drilling results for Kargasha and Kokkia is detailed below:

KARGASHA

• HQ diamond core from drill holes DDTK008 to DDTK012 and PQ drill hole DDTK013 have now been logged and sampled, with a significant cumulative coal thickness of 13.63m and 14.13m intersected in DDTK0011 and DDTK0013 respectively.
• The results of DDTK012 show that coal seams continue in the east of the license area, where no drilling had previously been carried out.
• Results from intersections in DDTK0010, 011 & 013 confirm predictions made during the 2012 resource modeling that the coal seams thicken in the north of the Kargasha area, where coal is generally closer to surface as can be seen from the intersections in DDTK0010 (first coal at 55.69m), DDTK0011 (first coal at 29.52m), & DDTK0013 (first coal at 56.33m), as well as the presence of outcrops in the Kargasha Valley.
• Validation work on Soviet-era drill holes and adits was completed with a number of drill holes and adits having been located using modern survey techniques to help confirm the accuracy and location of the historical data.

Drill hole	Coal seam intercepts thicker than 0.5m	Total coal thickness
DDTK008	2.08m & 1.80m	4.48m
DDTK009	1.64m	2.45m
DDTK010	1.67m, 1.00m, 0.52m, 0.91m, 0.73m 0.82m & 0.90m	8.79m
DDTK011	0.71m, 1.62m, 0.57m, 1.54m, 1.22m, 0.65m, 1.79m, 0.60m & 0.78m	13.63m
DDTK012	1.14m, 0.73m, 1.56m, 0.67m, 0.56m & 0.56m	8.86m
DDTK013	0.51m, 2.58m, 0.91m, 0.54, 0.68m, 0.73, 1.51m, 1.37m, 0.63m, 1.17m, 0.57m, 0.56m, 0.92m, 0.73m & 0.68m	14.13m

Seam intersections observed at Kargasha are as follows:

Note: Intervals and thicknesses are estimated based on drilling depths as logs are yet to be corrected to geophysics log data

KOKKIA

• The focus of Kokkia drilling in 2013 was to better define the coal Resource for this area of the project and determine the coal quality characteristics.
• Drilling at Kokkia intersected significant thicknesses of coal near surface with a maximum cumulative coal thickness of 16.28m** in drill hole DDKK004. This is very significant given the intersections are near surface, providing open-pit potential, and that there has been no prior drilling in the area.
• SRK Consulting completed a structural mapping program to compliment ongoing coal exploration. This work located previously unidentified coal bearing strata at Kokkia.

Drill hole	Coal seam intercepts thicker than 0.3m	Total coal thickness
DDKK001	0.88m, 0.7m, 1.29m, 1.06m, 0.33m, 0.91m, 0.73m, 1.34m & 0.40m	9.20m
DDKK002	0.37m & 0.64m	1.69m
DDKK003	0.47m, 0.38m, 0.44m, 1.13m, 1.89m, 0.91m, 0.33m, 1.02m, 0.79m, 0.66m,0.56m, 1.18m, 0.37m & 0.62m	11.75m
DDKK004	1.33m, 1.67m, 0.39m, 0.65m, 0.37m, 0.71m, 1.07m, 0.59m, 1.91m, 0.36, 0.98m, 0.48m, 1.94m ,0.56m & 0.31m	16.28m**
DDKK005	0.59m, 0.59m, 1.00m, 1.81m, 1.53m, 0.43, 0.96m, 0.78m, 0.79m ,0.61m & 0.72m	10.30m

Seam intersections observed at Kokkia are as follows:

Note: Intervals and thicknesses are estimated based on drilling depths as logs are yet to be corrected to geophysics log data.

** In the ASX Release dated October 1st, 2013, a total figure of 16.5m was quoted. This has been revised to 16.28m following review and further detailed logging.

TESTING PROGRAMME

• Samples from diamond drill holes DDTK008, DDTK009, DDTK010, DDTK011, DDTK012, DDKK001, DDKK002, DDKK003 and DDKK005 have been received at the internationally accredited SGS laboratory in Novokuznetsk (Russia) and testing has commenced.
• Coal samples from PQ diamond drill holes DDKK004 and DDTK013 are being sent to ALS Australia for coking coal specification determination and advanced product analysis.
• Geotechnical data for mine design purposes was collected, with 283 samples across the 2 project areas. To complement this point-load testing was conducted on all HQ drill holes across both deposits with a total of 837 samples.
• Celsius' focus is now on progressing as quickly as possible to revised resource statements for both Kargasha and Kokkia, and then to the completion of mine studies. This will include the continued assessment of augers / high wall miners for rapid production start-up. In addition we will be seeking to establish an off-take agreement with potential Chinese customers.

For further details regarding the 2013 exploration programme please refer to the Company's ASX Release dated October 24th, 2013.

To complement the drilling works the Company also collected additional environmental and geotechnical data to be used to further mine plan studies. The mine plan study initiated is a high level concept study to help define target start-up areas and mining methods. This study is still in progress. In brief the study is considering a combination of open-cut, underground and auger mining methods. The goal of this study is to compare the relative costs and recoveries of different mining methods and to highlight areas of the resource that could be expected to provide the best return for mining operations.

Celsius remains fully funded for the 2013 exploration programme post completion of the physical drilling works.

Figure 1: Coal intersection from drill hole DDKK0004.

Corporate

On October 9th, 2013, the Company announced that it's Executive Chairman, Mr Alex Molyneux, in cooperation with Pacific Advisers Pte Ltd ("Pacific Advisers"), had conditionally agreed to acquire 135,000,000 Blumont Group ("Blumont") shares, representing approximately 5.2% of the total outstanding issued shares of Blumont, post rights issue.

Mr. Molyneux also agreed, subject to completion of the share purchase, to join Blumont as its Chairman. Blumont views this proposed appointment as a crucial step in fast-tracking its evolution as a major diversified natural resources company. In the interim, Mr Molyneux will become a consultant to and Chairman-designate of Blumont and will formally assume the role as Chairman upon completion of the share purchase transaction. The transaction is subject to a number of conditions and is not expected to close until early to mid November.

Celsius' Board welcomes the strengthening of ties between Celsius and Blumont (Celsius' major shareholder with a current holding of 11.4%). As Celsius' major shareholder, Blumont has provided support through recent market uncertainties and continues to be actively involved in assisting Celsius progress towards production at its Uzgen Basin Projects. Mr Molyneux's increased involvement with Blumont will allow Celsius to work more closely with Blumont to enable its work programmes to remain fully funded.

At the end of the quarter, Celsius had cash of \$2.3 million, and access to a further \$3.0 million pursuant to a convertible note with its major shareholder. Importantly, the convertible note can be converted to equity at Celsius' election 12 months after draw-down with a floor price of 2.5 cents (see ASX announcement 7 Feb 2013 - Celsius Secures A\$10m in Strategic Funding from Blumont).

Mining – Sary Mogol (Alai Range Project)

During the quarter the company decided to idle mine operations at the Sary Mogul site. This decision was taken after efforts to secure sales contracts at positive cash margins were not successful. An internal review determined that there was currently insufficient demand for the coal products from Sary Mogul, which in turn created a negative cash margin for coal sales. As management were unable to determine a future period where this market environment may change to produce a positive economic outcome for Sary Mogul a decision has been made to place the site on care and maintenance and to impair the assets associated with this license.

Infrastructure

Celsius continues to monitor the progress of the Trans-Asia Railway, which is currently anticipated to be completed by the end of 2016. The current mapped route comes within 10 kilometers of Celsius' Uzgen Basin Coking Coal Project (Figure 3) and will connect to the existing Chinese railway network at Kashgar (Kashi) in Xinjiang.

Celsius plans to undertake a more detailed study of the existing transport options to facilitate coal export prior to completion of the Trans-Asia Railway. For the Uzgen Basin coking coal projects, the Company has identified a route for export to China via Osh and then the Irkeshtam border crossing between the Kyrgyz Republic and China which uses generally paved and rehabilitated roads (Figure 3). This route is approximately 385km in length and the Company has estimated a transport cost of approximately \$10 per tonne to the Kyrgyz Republic-China border utilizing this route. A more detailed transport study will provide more exact costings and identify potential bottlenecks on the route.

Figure 3 – Location of Celsius' projects and export routes including the proposed Trans-Asia Railway

Carnilya Hill Joint Venture

Celsius (through View Nickel Pty Ltd) owns a 30% joint venture interest in the Carnilya Hill Joint Venture in Western Australia with Mincor Resources NL (Joint Venture). Mincor Resources NL (Mincor, ASX:MCR) is the operator of the Carnilya Hill JV. The tenements covered by the Camilya Hill Joint Venture (JV) include Mining Licences M26/47, M26/48, M26/49 and M26/453.

The Carnilya Hill site is currently on care and maintenance. The Joint Venture will incur nominal running costs to ensure the site is kept secure, safe and well maintained. Exploration continues on the tenements comprising the Joint Venture, and is managed by Mincor as the Operator of the Joint Venture. Results from exploration programmes will be released as they become available.

West Australian Regional Nickel Exploration

The Company continues to compile all data relevant to E39/1641 and E39/1684 in the Eastern Goldfields region of Western Australia. The tenements are located near to Minara Resources' Murrin Murrin mine and the NiWest operation currently under development by GME Resources Ltd and are believed to have potential for both nickel laterite and nickel sulphide mineralisation. In due course, the Company may consider divesting its nickel interests, either through a partial or outright sale, or by spinning out the assets into a new public vehicle.

Competent Person's Statement

The information in this announcement that relates to resource estimates initially reported to the ASX on 15th March 2013 (Celsius Establishes Maiden JORC Resource at Uzgen Basin) is based on information compiled by Dr Gavin Springbett, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy. Dr Springbett is acting as a consultant to Celsius Coal Limited and is an employee of G&S Resources. Dr Springbett has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Springbett consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

Further the company confirms it is not aware of any new information, or data which materially affects the original announcement and that all material assumptions and technical parameters underpinning the resource estimates are unchanged. In addition the company confirms that the form and context in which the CP's findings are presented have not been materially modified.

ABOUT CELSIUS COAL

Celsius Coal Ltd is focused on developing coking and thermal coal deposits in the Kyrgyz Republic.

Celsius owns 80% of its Uzgen Basin Coking Coal Project (comprising: Kargasha; Kokkia; and Min Teke), which cover an established Soviet-era coking coal resource. It also owns 90% of its Alai Range Projects (comprising: Sary Mogol and Bel Alma).

For more information, please visit www.celsiuscoal.com.au or contact Mr Ranko Matic, Company Secretary on +61 (08) 9226 4500.