D'Aguilar Gold Limited (ASX:DGR) Subsidiary Armour Energy To Focus On Northern Gas Province

Brisbane, Oct 11, 2010 AEST (ABN Newswire) - Further to the announcements to the ASX on 28 May and 26 July 2010, D'Aguilar Gold Limited (ASX:DGR) are pleased to provide an update on activities of its subsidiary Armour Energy formed to focus on gas opportunities in northern Australia.

New province identified - extensive area applied for

Armour is dedicated to the discovery and development of world class gas resources in an extensive new province in the Northern Territory. The area currently under application covers 118,814km2 of the McArthur, South Nicholson and Georgina Basins. The area is host to numerous shows of gas, condensate, oil and bitumen in the proterozoic aged McArthur Group and Roper Group sediments as encountered by previous explorers including Amoco in the 1980s.

The area is also prospective for large shale gas resources which are expected to be comparable to or rival shale gas resources contained within known shale gas basins in the USA.

Armour has identified a core target area located within and adjacent to the fault bounded trough structure known as the Batten Trough. The target sediments are the thickened sections of the gas rich Barney Creek Shale which has scope to host up to 40 TCF of gas in the area. Armour Energy is targeting 20TCF, equivalent to 21,100 Peta Joules (PJ), of shale gas in the Batten Trough.

Tenement review processes necessary prior to grant are well under way by Armour, with a focus on progressing Native Title discussions and negotiations with Traditional Owners.

Market opportunities identified

Several short term and lower volume market domestic industrial and power generation opportunities have been identified in and near to the exploration area, or adjacent pipeline infrastructure. Early exploration targets and ultimately reserve definition and production plans have been selected to address these opportunities.

The project area is well positioned to service the Northern Economic Triangle of Queensland and local markets in the Northern Territory. "The Northern Economic Triangle (NET) is a commitment by the Queensland Government to foster sustainable economic, social and community growth through the emergence of Mount Isa, Townsville and Bowen as a triangle of mining, mineral processing and industrial development." (*Source QLD Government Website)

US shale gas exploration and development techniques to be applied

Shale gas technology developed in the USA and commercially applied by a number of companies and operators in Texas, Wyoming, Oklahoma, Louisiana, Arkansas, North Dakota as well as Saskatchewan and British Columbia in Canada will be applied in the exploration of the area.

The geology of the Northern Territory target area demonstrates extensive target shale units with total organic carbon content, thermal maturity levels and thicknesses presenting comparable targets to the currently producing Haynesville, Barnett, Marcellus and Bakken Shales that are currently yielding high volume gas production in the USA.

Shale gas development and production relies on the production of gas from artificially fractured low permeability gas bearing shales which are penetrated by radiating horizontal lateral holes drilled off a vertical centre well. Armour's well depths are targeted at between 500 and 1500 metres within the project area.

On the basis of available information and an Australian operating environment, Armour Energy is targeting overall exploration and development costs of $1.40 per GJ.

Shale gas importance

Shale gas production in 2008 supplied approximately 2TCF of gas per year into the US gas market being equivalent to 9.1% of total US marketed gas production of 21.9TCF. In 2008 US shale gas production exceeded US coal bed methane production.* (*Source: US Energy Information Administration Website)

In 2009, total Queensland gas production was estimated to be 232 PJ. Production from the expanding coal seam methane industry was estimated at 151 PJ having overtaken conventional gas production to now account for 65% of Queensland gas production.* (*Source: Queensland Government Website)

Gas resource targets onshore in the NT have not previously attracted major commercial exploration efforts, owing to historic low gas prices, lack of available markets and a focus on conventional reservoir styles which were perceived to be limited in size potential.

Armour Energy's strategy relies, as with the emergence of the coal seam gas industry in Queensland 10 years ago, on the discovery of very large unconventional gas resources extractable with proven, but as yet untried methods in this area, along with the generation of high volume downstream industrial, power generation and export markets.

Armour Energy is targeting similar development of shale gas production in the Northern Territory and believes that shale gas production in the Northern Territory will ultimately provide a significant adjunct to energy supplies in both the Northern Territory and Northern Queensland.

Early gas flow potential in conventional targets

In its Northern Territory project areas, Armour Energy has identified potential for shale gas plays in the Barney Creek Shale and potential to discover conventional gas accumulations in the Coxco Dolomite abutting the Barney Creek Shale along the Emu Fault Zone both North and South of the McArthur River Zinc Mine. A mineral exploration hole drilled at the Glyde River prospect in this area by Amoco in 1979 flowed gas and condensates at 140psi for 6 months before it was sealed at the surface.

Mineral exploration drill holes in the area frequently encountered bitumen, residual oil, gas shows and gas flows further substantiating the presence of a mature petroleum system in the area. Armour has identified several targets adjacent to the Emu Fault Zone near both Glyde and Caranbirini along with other anticline related targets adjacent to the Abner Range. These targets provide immediate potential for approximately 200 Billion cubic feet or approximately 210 PJ of gas with further potential to be identified in similar trap sites.

Relatively low land use, social and environmental conflicts.

Armour is encouraged by the project's location in areas of manageable environmental and social impact with expected negligible impact on groundwater due to depth along with minimal land use conflict.

Capital raisings and ASX listing planned

Armour has planned underwritten capital raisings in the current quarter, followed by an IPO and ASX listing in February 2011.

Experienced Board and management in major projects and gas exploration

Armour's CEO, Mr Phil McNamara is highly experienced in the field of major project feasibility and development having recently headed the feasibility study and then successful negotiations with major Chinese constructors, financiers and customers for Waratah Coal. His previous appointments also saw him managing large coal development projects for Yanzhou Coal Australia (SHA:600188) (NYSE:YZC) (HKG:1171), and prior to that Xstrata Coal.

Armour is well supported by a team of highly experienced and successful petroleum exploration experts and consultants and draws relevantly on the coal seam methane experience of its chairman and D'Aguilar CEO, Mr Nicholas Mather, who was instrumental in the early business development strategy, project acquisition and exploration programs for Arrow Energy Limited (ASX:AOE) and Bow Energy Limited (ASX:BOW) (PINK:BOWYF). He is currently a Non Executive Director of Bow Energy.

Mr Bill Stubbs, Chairman of D'Aguilar was also Chairman of Arrow Energy between 1998 and 2005, during its emergence as a major coal seam methane company, and his experience will be particularly relevant to the emergence of Armour Energy as a major gas company.

Contact

Mr Nicholas Mather Managing Director D'Aguilar Gold Limited Ph: +61-7-3303-0680 Mob: +61-0417-880-448 Mr Mark Dugmore CEO Navaho Gold Pty Ltd Ph: +61-7-3303-0680 Mob: +61-0407-132-975 Karl Schlobohm Company Secretary D'Aguilar Gold Limited Ph: +61-7-3303-0680