Bandanna Energy Limited (ASX:BND) Announce Resource Update On South Galilee Project Joint Venture

Brisbane, Feb 8, 2011 AEST (ABN Newswire) - Bandanna Energy Limited (ASX:BND) (Bandanna), is pleased to release an independent evaluation of the resources for the South Galilee Project (SGP) Joint Venture following completion of Prefeasibility drilling during the 2010 field season. The attached Coal Resource Statement, prepared by Collective Experience Pty Limited, relates to the D1 and D2 coal seams which comprise the most prospective mining targets with the SGP area. A total JORC Resource of 1,178 Mt is now delineated including 206.3 Mt of Indicated (up 244% from 60Mt) and 166.6 Mt of Measured Resource (previously nil). The Resources pertain only to the northern portion of EPC 1049 covering a strike length of 15 km, primarily in an area where previous Concept Study results indicated was most suitable for open cut development.

Managing Director Dr Ray Shaw said that "this resource increase and the conversions to Measured and Indicated status are a significant milestone for the JV and the development of the South Galilee Project overall".

The extensive coal quality data base that the JV has now acquired highlights the superior quality of coal development in this portion of the Galilee Basin. "With the exception of one ply (D1U) all of the coal has raw ash content of approximately 20% or less with some 390 Mt at less than 12%". These results are also very pertinent as the industry tries to value Galilee Basin projects in the light of the recent Adani - Linc transaction and a mooted sale of Kevin's Corner", Dr Shaw added.

The SGP Joint Venture involves EPC 1048, EPC 1049, EPC 1079, and EPC 1080. AMCI is operator and will earn up to a 50% stake in the JV via the expenditure of up to A$25 million. The current Coal Resource Statement is part of a Prefeasibility Study which is due for completion by the end of Q1 2011. The SGP was given "Significant Project Status" by the Queensland Government in March 2010. Concept Study mine development scenarios envisaged a 15-20 Mtpa output for a nominal mine life of 43 years.

The South Galilee resources for the D2 Seam are shown in Figure 1 (see link at the bottom of the release).

The inclusion of these new resource figures now increases the total JORC compliant resource inventory held by Bandanna (assuming AMCI earns its 50% in the SGP) to 1,484 Million Tonnes. Table 1 (see link at the bottom of the release) shows Bandanna Energy resources and reserves by project.

About the Galilee Basin

The SGP is located at the southern end of the Galilee Basin and is adjacent to Waratah Coal's China First Project, which is expected to deliver 40 Mtpa of steaming coal from a combined open cut and underground mine development. Similarly, Hancock Mining is proposing combined open cut and underground operations in its two projects, Alpha and Kevin's Corner, located to the north of Waratah. Both Waratah and Hancock are proposing a 500 km heavy duty standard gauge rail link to haul coal from their respective Galilee Basin mines to the port of Abbot Point. The Queensland Government has assured Galilee Basin proponents that such railway will be subject to third party user provisions.

In the past two weeks there has been considerable press speculation concerning the possible sale of Hancock's Kevin's Corner Project and of Clive Palmer's intention to float portion of the China First Project through a Hong Kong based IPO. GVK Infrastructure (India) is mooted to have offered A$2 Billion for controlling interest in Hancock's Kevin's Corner tenement where 30mtpa is to be produced.

In 2010 Adani Energy purchased Linc Resources Galilee Basin interests in the first significant arms length coal transaction in the basin. The Adani - Link transaction involved a A$500m upfront payment plus a A$2 per tonne royalty on production of 20 - 40 mtpa for the first 20 years of operation for the purchase of Link's Galilee Basin tenement.

The full version of the South Galilee Resource Statement can be viewed at Bandanna's website.

For the complete Bandanna Energy Limited announcement including tables and figures, please refer to the following link:

http://www.abnnewswire.net/media/en/docs/65172-ASX-BND-181732.pdf

Contact

Ray Shaw Managing Director Tel: +61-7-3041-4400 http://www.bandannaenergy.com.au