Lachlan Star Limited — M&A Activity 2008

Jul 17, 2008

==> picture [123 x 44] intentionally omitted <==

18 July 2008

LACHLAN STAR LIMITED ENTERS INTO AGREEMENT TO ACQUIRE ALEXANDER COAL PROJECT, SOUTH AFRICA

Summary

Lachlan Star has identified the South African coal industry as presenting significant opportunities to enhance shareholder value. The Company is therefore pleased to announce that it has reached agreement with Universal Pulse Trading 132 (Pty) Ltd to purchase up to 74% of the Alexander Coal Project.

The Alexander Coal Project is situated in the traditional coal mining area of Mpumalanga, approximately 120 km east of Johannesburg and 56km south of Witbank. The project is near the Kriel and Matla power stations as shown in Figure 1.

==> picture [268 x 333] intentionally omitted <==

Figure 1 - Location of Alexander Coal Project

The Alexander Coal Project is 15.5km north-east of the Holfontein Coal Project (which the Company has an agreement to purchase) and comprises the same 4 and 5 Seam coal present at Holfontein. The Alexander Coal Project covers an area of 760 hectares and the coal mineralisation is expected to be of a similar tonnage to the Holfontein Coal Project. The Project is particularly suited to the production of steaming coal for power generation, although some of

==> picture [502 x 8] intentionally omitted <==

==> picture [123 x 44] intentionally omitted <==

5 Seam may be suitable for coking coal production, subject to the completion of economic studies. The potential exists to exploit a portion of the mineralisation utilising open cast mining methods and it is envisaged that access to an underground mine will be gained from the open cast workings.

There are four power stations within 35km of the Alexander Coal Project and there is excellent road access to the site. The proximity of the Alexander and Holfontein Coal Projects will enable both projects to be progressed using the same management team with one geographic focus.

Lachlan Star is currently updating the resource statement for the Alexander Coal Project, and will announce a JORC Code compliant resource estimate as it becomes available.

Transaction Summary

The initial consideration for the purchase of 51% of the Alexander Coal Project is:

• A$5 million paid on transfer of the asset into a Joint Venture company.

Subsequent to the initial consideration, two other payments are required:

• A$5 million, paid as either cash or LSA shares issued at the 30 day volume weighted average price (or a combination of both), on granting of the New Order Mining Right. The split of cash and shares will be at LSA’s discretion, but subject to the requirements of the foreign exchange controls of the Reserve Bank of South Africa.

• A$5 million paid eighteen (18) months from the granting of the New Order Mining Right, subject to deductions via a loan agreement to fund the development of the project.

As part of the agreement, Lachlan Star has agreed to fund the development of the project via a loan agreement with the vendor. The final consideration payment will be subjected to repayment of the development loan, which will consist of the vendor’s 49% of the Project’s development cost.

Integral to the sale agreement, Lachlan Star also has the exclusive option to purchase a further 23% of the Alexander Project, guaranteeing the Company the right to increase its share to 74% of the Project.

The following conditions precedent apply to the transaction:

• Lachlan Star completing due diligence investigations to determine that Universal Pulse Trading 132 (Pty) Ltd holds unfettered title to the Alexander Project;

• Transfer of the Prospecting Right into a Joint Venture Company;

• The Joint Venture company having Black Economic Empowerment (BEE) accreditation;

• Approvals as required from regulatory bodies in South Africa, including the DME and the Reserve Bank; and

• Shareholder approval for the raising of capital and the issue of LSA shares if required.

==> picture [502 x 8] intentionally omitted <==

==> picture [123 x 44] intentionally omitted <==

There have been well publicised shortages of thermal coal in South Africa and the Company views this as a ready market for the 4 Seam products. The Company plans to advance the Alexander Coal Project as quickly as possible to enable a development decision to be taken.

Recent coal price increases have significantly enhanced the potential economic returns from the Alexander Coal Project. Thermal coal prices for domestic supply are lower than international benchmarks (recent settlements of US$130/t); however these prices are increasing rapidly to ensure adequate coal supply for power generation. The Company considers the underlying supply-demand fundamentals to be excellent for the foreseeable future and intends to continue expanding in the South African coal industry.

The Company plans to continue the stated strategy of developing the Holfontein and Alexander Coal Projects whilst continuing exploration at the Bushranger Copper Project. Company growth through further acquisitions within the resource sector, with a strategic focus in the bulk commodities (coal), copper and gold sectors is central to this strategy.

For further information please contact:

Declan Franzmann, Managing Director, 0438 758 960 declan.franzmann@lachlanstar.com.au

About Lachlan Star Limited

Lachlan Star Limited is an emerging minerals exploration and development company headquartered in Perth, Western Australia. The company is focused on acquiring and developing assets within the gold, copper and bulk commodities sectors within Australia and overseas. The company has a board of directors and management team with an impressive track record of advancing resource projects through to production.

Lachlan Star’s current projects include the Bushranger copper and gold project in NSW and the Princhester magnesite deposit in QLD. The Company has an agreement to acquire the Holfontein Coal Project (100%) and the Alexander Coal Project (up to 74%) in South Africa.

For more information visit: www.lachlanstar.com.au

==> picture [502 x 8] intentionally omitted <==