Coalworks Limited : 26 October 2011 - Ferndale Exploration Drilling Update

COALWORKS Limited

26 October 2011

FERNDALE -EXPLORATION DRILLING STAGE 2 COMPLETED AND STAGE 3 COMMENCED

• Stage 2 drilling completed with Stage 3 drilling commenced. A total of

23 exploration drill holes have been completed to date for a total of 9,356m of drilling.

• Ferndale drilling results continue to confirm presence and continuity of Open Cut and Underground seams consistent with the Exploration Target of 350-530 Mt* (see ASX: 19 November 2010).

• Drilling to be fast tracked with a third drilling contractor due to commence drilling mid November, with up to four drill rigs planned to continue JORC Resource definition drilling.

• Following conceptual mining planning, a JORC compliant announcement for Inferred Resources is expected within 6 weeks.

• Additional 66 fully cored drill holes have been planned to target JORC Measured Resources for the Newcastle Coal Measures (Open Cut

Target) and JORC Indicated Resources for the deeper Whittingham Coal Measures (Underground Target). Boardwalk Ferndale has submitted the 66 holes drilling program for environmental review and approval by the NSW Department of Industry and Investment, to extend the current Stage 3 drilling program.

• Base line Environmental monitoring to commence with initial Ground Water Investigations planned with up to 12 ground monitoring bores to be constructed to commence ground water monitoring. Seasonal environmental ecological studies are planned to commence in the coming summer months, with a permanent weather station constructed and operating on site.

• Leading international mining engineers Minarco-MineConsult have been appointed to review the conceptual mine plan work.

COALWORKS Limited ACN 114 702 831

Level 5, 44 Miller Street, North Sydney NSW 2060 AUSTRALIA Ph: [phone]

Fax: [phone]

Email: [e-mail]

www.coalworks.com.au

COALWORKS Limited Coalworks Limited (ASX: CWK) today is pleased to announce with its Joint Venture partner, Boardwalk Resources, that it has completed its Stage 2 Drilling at Ferndale (EL

7430) and continued drilling with the commencement of Stage 3 drilling- See Figure 1.
Due to the positive drilling results from 23 exploration drill holes completed to date for a total of 9,356 metres of drilling, all confirming the presence and continuity of both resource targets in the Newcastle Coal Measures (Open Cut Target) and Whittingham Coal Measures (Underground Target) totalling 350Mt to 530Mt Coal*, an additional 66 fully cored drill holes have been designed and submitted for environmental review and approval by the NSW Department of Industry and Investment.
The continued drilling has been designed to define Open Cut mining targets to JORC Measured Status within the Newcastle Coal Measures, with additional Underground mining targets to the Middle Whittingham Coal Measures defined to JORC Indicated status, and the deeper Lower Whittingham Coal Measures defined to JORC Inferred status.
It is envisaged that maiden JORC Inferred Resources will be announced within the next six weeks, following the completion and review of conceptual mine plan work, currently being conducted by Minarco-MineConsult, required to suitably define appropriate Open Cut and Underground mining targets and validate JORC Resources.
Baseline environmental monitoring has commenced with the installation of a Weather Station and dust monitor on the tenement and in Denman. Preliminary groundwater monitoring studies are planned to commence in November with the installation of up to twelve ground water monitoring bores within the tenement. Further ecological seasonal studies are planned to commence in the summer months, including flora, fauna, and aquatic ecological studies.
Currently, Mannion Drilling Contractors and Watson Drilling Contractors are active on site completing fully cored HQ bore holes. A third drilling contractor is engaged to commence drilling in early November with an additional two coring rigs, bringing the total on site to four coring rigs. It is envisaged the third contractor will commence in parallel with the approval by the NSW Department of Industry and Investment, for an additional 66 holes, to fast track the planned program.

Cautionary Note: This release may contain forward-looking statements that are based upon management's expectations and beliefs in regards to future events. These statements are subjected to risk and uncertainties that might be out of control of Coalworks Limited and may cause actual results to differ from the release. Coalworks Limited takes no responsibility to make changes to these statements to reflect change of events or circumstances after the release.

* JORC- Exploration Target

It is common practice for a company to comment and discuss its exploration in terms of target and size type. The information in this report relating to an exploration targets should not be misunderstood or misconstrued as an estimate of Mineral Resources or Ore Reserves. The potential quantity and grade is conceptual nature, there has been insufficient work completed to define a

mineral resource and it is uncertain if further exploration will result in the determination of a mineral resource.

The following statements apply in respect of the information in this report that relates to Exploration Results and Exploration Targets. The information is based on, and accurately reflects information compiled by Mr Matt Morgan, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Morgan is a geologist employed by Coalworks Ltd. He has the relevant experience in relation to the coal deposits being reported on to qualify as a Competent Person as defined in the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Identified Mineral Resources and Ore Reserves. Mr Morgan has consented in writing to the inclusion in this report of the matters based on the information in the form and context in which it appears.

COALWORKS Limited Figure 1: EL7430 Ferndale - Completed drill holes to date. COALWORKS Limited

For further information, please contact: Nathan Bartrop
Company Secretary

Tel: [phone]

Fax: [phone]

Email: [e-mail]

www.coalworks.com.au

Coalworks has a portfolio of projects in Australia including:

1. Vickery South, Gunnedah Basin (exploration target coking/thermal coal)

# JORC Resources Increase by 15% to 58.5Mt - see ASX Announcement 18.07.2011

# ITOCHU to proceed with BFS for Vickery South - see ASX Announcement 18.05.2011

# ITOCHU signs Farm In Agreement in $11m deal - see ASX announcement 04.05.2010

# Preliminary Feasibility Study - positive with semi soft coking coal forming 83% of product - see

ASX announcement 15.06.2011

# ITOCHU Farm-in Stage 1 payment of $5m and signing of JV agreement sees Itochu acquired a 29%

interest in Vickery South - see ASX announcements 22.12.2010 and 23.2.2011

2. Ferndale Coal Project

# Coalworks includes its 92.5% owned subsidiary Loyal Coal Pty Ltd

# New Exploration Target 350Mt - 530Mt of coking/thermal coal - see ASX announcement

19.11.2010)

# Boardwalk Resources signed Farm-In and Joint Venture Agreements in $25m deal - see ASX

announcement 09.12.2010

3. Oaklands Coal Project (JORC measured, indicated and inferred 822Mt thermal coal)

- see ASX announcement 5.11. 2009;

- Strategic Alliance with Synthesis Energy Systems Inc to develop Oaklands coal-to-petrol plant announced - see ASX announcement 2.12.2009