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1 ` Operational Update on Indonesian drilling campaign and field survey. 3 September 2013 ASX Code: KRA PT Borneo Emas Hitam East Kalimantan Issued Capital: 120.3M Fully Paid Shares 38.0M Options (Unlisted) 31.5M Deferred Consideration Shares (Unlisted) Robert Kipp Managing Director Peter Rudd Non-Executive Chairman Matthew Driscoll Executive Director Reza Zulkarnaen Executive Director 93 drill holes completed, total 3,350 metres as at 26 August of the 93 drill holes intersected target coal seams. Drilling at Pit 4 and Pit 11 now complete. Killara s technical team now focused on mine design. Independent lab testing of coal samples indicate average coal quality of 6,867 to 7,353Calorific Value (ar) in target seams from Pit 4 and Pit 11. Management now engaged in discussions with coal off takers and traders. PT Pagun Taka Central Kalimantan Wim Zulkarnaen Non-Executive Director Darren Misquitta Non-Executive Director Leah Watson Company Secretary Level 3 North building 333 Collins Street Melbourne, VIC 3000 T: F: Field reconnaissance program completed. Killara identified coal and obtained samples from three geological formations. Field mapping identified 22 outcrops with coal seam thickness varying from 0.61m to 1.45 m. Independent lab testing of coal samples indicate average coal quality of Calorific Value 4,377 (ar), Inherent Moisture 22.31%, Ash 1.86% and Sulphur 0.33%. Management now preparing economic assessment of the mining concession before undertaking any further works. Minerals exploration in Indonesia and Australia Killara Resources Limited ABN

2 PT Borneo Emas Hitam Drilling contractor PT Reka Indo Internusa is continuing an expanded exploration program at Killara s PT Borneo Emas Hitam (BEH) coal concession in East Kalimantan. The now 120 hole (~5,050m) program is ongoing with 93 holes (~3,350m) drilled as of the 26th August, The program focuses on an additional target (East Expansion) east of the two short term production targets (Pit 11 and Pit 4) which have been subject to land compensation. Drilling at Pit 11 and Pit 4 is complete along with geological modelling. Killara is now in the process of detailed mine planning and economic assessment of these 2 targets. Current production permitting, land compensation, infrastructure, forestry classification and ongoing works should allow Killara to commence mining these priority areas within an estimated 3 months assuming positive results from mine planning and economic assessment activities. Results from drilling to date are within expectations of the Killara geological team. 86 of the 93 holes drilled have intersected target seams. Seam Interval thickness results from drilling are summarised below. All intervals are apparent thicknesses and were adjusted to geophysical log results. Further information is provided as an appendix. Table 1 - BEH average seam thickness results from the current drilling campaign Area Seam Average Thickness (m) Pit 11 Pit 4 East Expansion 11E EL E E EL E E E E E EL E EL EUU EU EM EL 0.30 Coal Quality Since the last market update, 32 samples from 9 core holes have been submitted for analysis at the PT Geoservices Balikpapan laboratory. An additional 3 outcrops were also sampled and submitted to the laboratory during recent exploration. Coal quality results from outcrop and drilling confirmed a direct shipping thermal coal product with high CV and low ash but with varying generally high sulphur levels. Page 2 of 18

3 Table 2 - BEH average coal quality results from all outcrops Total Inherent Ash Total Calorific Calorific Sample ID Moisture Moisture Sulphur Value Value % % % % cal/g cal/g ar adb adb adb adb ar All Outcrops ,890 6,651 Table 3 - BEH average coal quality results from drilling on a seam by seam basis Total Inherent Ash Total Calorific Calorific Sample ID Moisture Moisture Sulphur Value Value % % % % cal/g cal/g ar adb adb adb adb ar Seam 11E ,283 7,140 Seam 11EL ,965 6,867 Seam 6E ,557 7,353 Seam 5E ,171 6,943 Seam 4E ,070 6,932 Seam 3E ,312 7,069 Further detail is provided in the attached appendix. Geology The project covers both limbs of a south plunging syncline from the Kutai basin. Geological formations are the Balikpapan and Pulaubalang, both major sources of coal production in East Kalimantan. Dips increase away from the syncline s axis up to a maximum of 56 degrees on the eastern and western concession borders in the Pulaubalang formation. The priority areas currently being drilled are in the Pulaubalang formation on the eastern limb of the syncline where dips range up to 30 degrees. Ongoing Exploration The East Extension area is the focus of ongoing exploration at BEH. A number of additional drill targets have been identified, all with field reconnaissance completed by Killara and some subject to drilling by previous owners of the concession. These targets will be the focus of ongoing exploration, with the intention to drill them to a level of confidence required for production. Page 3 of 18

4 Figure 1 - BEH borehole locations, land compensation and mined out/dump areas Figure 2 - BEH project location Page 4 of 18

5 PT Pagun Taka Killara has completed an initial field reconnaissance program at the PT Pagun Taka (PT) concession in Central Kalimantan. The ~ 1 month field program focussed on validating geological information provided by the vendor which included field mapping, drilling, laboratory analysis and associated reports. Killara identified coal from three geological formations at PT, the Montalat, Berai and Warukin. The Montalat and Warukin formations are subject to coal mining in an adjoining concession and throughout Central Kalimantan. Field mapping identified 22 coal outcrops with true thicknesses averaging 0.61m and ranging up to 1.45m. Table 4 - PT Outcrop data Location Outcrop Strike Dip Thickness (m) Easting Northing OC ,367 9,876, E 1.45 OCBB-001-PG-BS OC ,358 9,876, E 0.86 OCBB-002-PG-BS OC ,219 9,875, E 1.28 OCBB-003-PG-BS OC004* 246,332 9,877, E 0.91 OCBB-004-PG-BS OC005* 246,307 9,877, E 1.39 OCBB-005-PG-BS OC ,839 9,875, E 0.30 OC ,100 9,878, E 0.30 OC ,452 9,878, E 0.17 OC ,454 9,878, E 0.75 OCBB-009-PG-BS OC ,519 9,878, E 0.82 OCBB-010-PG-BS OC ,418 9,878, E 0.70 OCBB-011-PG-BS OC ,121 9,882, E 0.82 OCBB-012-PG-BS OC ,396 9,881, E 0.05 OC ,837 9,875, E 0.20 OC ,585 9,878, OC ,440 9,878, E 0.57 OCBB-003-PG-JL OC ,213 9,879, E 0.49 OC ,092 9,879, E 0.50 OCBB-005-PG-JL OC ,537 9,879, E 0.73 OCBB-006-PG-JL OC ,337 9,881, W 0.30 OC ,128 9,880, E 0.30 OC ,113 9,879, E 0.23 Average 0.61 Sample Code *Outcrops OC004 and OC005 occur outside the concession boundary, however do strike into the concession 12 of the 22 coal outcrops were sampled and submitted to the PT Geoservices Balikpapan laboratory for analysis. Results confirmed a direct shipping thermal coal product with low CV, very low ash and low sulphur. Page 5 of 18

6 Table 5 - PT coal quality results Total Inherent Ash Total Calorific Calorific Sample ID Moisture Moisture Sulphur Value Value % % % % cal/g cal/g ar adb adb adb adb ar OC ,829 3,456 OC ,076 3,558 OC ,100 3,720 OC ,239 4,443 OC ,114 4,663 OC ,405 4,442 OC ,365 4,821 OC ,247 4,197 OC ,877 4,295 OC ,784 5,370 OC ,595 5,085 OC ,926 4,468 Average ,213 4,377 Geology The project occurs in the large tertiary Barito basin of Kalimantan and covers the southern limb of an east-west striking anticline. Dips decrease away from the anticline s axis and range from 50 degrees in the Berai formation to 4 degrees in the Warukin formation. Ongoing Exploration A number of drill targets have been identified by the recent field reconnaissance campaign. Killara is in the process of completing an economic assessment on the concession, the results of which will determine the nature of ongoing work at the concession. Page 6 of 18

7 Figure 3 - PT outcrop locations Figure 4 - PT Project Location Page 7 of 18

8 Leah Watson CFO and Company Secretary For Investor Information, please contact: Matthew Driscoll Head of Investor Relations Melbourne Head Office Phone: Mobile: Australian Callers: Mobile: International Callers: Web: About Killara Resources Limited Killara is an ASX listed company. Through a well-developed network of business contacts in the Republic of Indonesia, the company is offered a range of resource projects for potential acquisition and/or joint venture. Competent Persons Statement Exploration or technical information in this release has been prepared by Mr Tully Matthews Bsc, who is a full time employee of Killara Resources Limited and a Member of the Australian Institute of Mining and Metallurgy. Mr Matthews has sufficient experience which is relevant to the style of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr Matthews consents to the release being issued in the form and context in which it appears. Page 8 of 18

9 APPENDIX Table 1 - BEH borehole locations Borehole X Y Z Final Depth** Dip Azimuth P11E ,381 9,963, P11E ,332 9,963, P11E ,374 9,963, P11E003C 504,374 9,963, P11E ,323 9,963, P11E004C 504,324 9,963, P11E004R 504,323 9,963, P11E ,354 9,963, P11E ,304 9,963, P11E ,353 9,962, P11E ,315 9,962, P11E ,373 9,962, P11E009C 504,373 9,962, P11E ,326 9,962, P11E010C 504,327 9,962, P11E ,371 9,962, P11E ,328 9,962, P11E ,365 9,962, P11E ,321 9,962, P11E ,285 9,963, P11E ,273 9,963, P11E016C 504,276 9,963, P11E ,260 9,963, P11E ,276 9,962, P11E ,275 9,962, P11E019C 504,276 9,962, P11E ,409 9,962, P11E ,390 9,962, P11E ,363 9,962, P11E ,362 9,963, P11E ,300 9,963, P11E ,234 9,963, P04E ,791 9,963, P04E ,811 9,963, P04E ,771 9,963, P04E ,795 9,963, P04E004C 504,795 9,963, P04E ,772 9,963, P04E005C 504,772 9,963, P04E ,769 9,963, P04E ,799 9,962, Table continues on next page Page 9 of 18

10 P04E ,815 9,962, P04E008C 504,815 9,962, P04E ,741 9,962, P04E009C 504,741 9,962, P04E ,812 9,962, P04E ,772 9,962, P04E ,771 9,963, P04E ,777 9,962, P04E ,797 9,963, P04E ,734 9,963, P04E ,735 9,963, P04E ,759 9,963, P04E ,761 9,963, MH001* 505,049 9,962, MH002* 505,020 9,962, MH ,049 9,962, MH006C 505,048 9,962, MH ,019 9,962, MH007C 505,018 9,962, MH ,985 9,962, MH008C 504,985 9,962, MH ,950 9,962, MH009C 504,950 9,962, MH ,920 9,962, MH010C* 504,920 9,962, MH ,031 9,962, MH ,999 9,962, MH ,967 9,962, MH ,935 9,962, MH ,906 9,962, MH ,012 9,962, MH016C 505,012 9,962, MH ,975 9,962, MH017C 504,975 9,962, MH ,954 9,962, MH018C 504,949 9,962, MH ,912 9,962, MH019C 504,911 9,962, MH ,884 9,962, MH020C 504,884 9,962, MH ,985 9,962, MH ,947 9,962, MH ,924 9,962, MH ,894 9,962, MH ,861 9,962, MH026* 504,953 9,961, Table continues on next page Page 10 of 18

11 MH026C* 504,953 9,961, MH027* 504,923 9,961, MH030* 504,842 9,961, MH030C* 504,842 9,961, MH031* 504,943 9,961, * Awaiting survey, co-ordinates from GPS, ** Final depth from final geophysical log depth Table 2 - BEH borehole intervals Borehole Seam Interval (m) Thickness (m) Final Depth (m) MH001 1EU EM EL MH002 3E E EL MH006 2EL EU EM EL MH006C 2EL EU EM EL MH007 2E EL EU EM EL MH007C 2E EL EU EM EL MH008 2E EL MH008C 2E EL MH009 3E EL E EL EUU EU EM EL Table continues on next page Page 11 of 18

12 Borehole Seam Interval (m) Thickness (m) Final Depth (m) MH009C 3E E EL MH010 3E E EL EU EM EL MH010C 3E MH011 1EUU EU EM EL MH012 2E EL EUU EU EL MH013 3E E EL MH014 3E E EL MH015 33E E E E E EL MH016 2E EL MH016C 2E EL MH017 3E MH017C 3E MH018 3E MH018C 3E MH019 3E MH019C 3E MH020 3E MH020C 3E MH021 3E MH022 3E Table continues on next page Page 12 of 18

13 Borehole Seam Interval (m) Thickness (m) Final Depth (m) MH023 3E MH024 3E MH025 3E E EL MH026 3E MH026C 3E MH027 3E MH030 3E P04E001 4E P04E002 4E P04E003 5E E P04E004 6E E E P04E004C 6E E E P04E005 6E E E P04E005C 6E E E P04E006 5E EL E P04E007 4E P04E008 4E P04E008C 4E P04E009 6E E P04E009C 6E E P04E010 4E P04E011 5E E P04E012 6E E E P04E013 4E P04E014 4E P04E015 6E EL Table continues on next page Page 13 of 18

14 Borehole Seam Interval (m) Thickness (m) Final Depth (m) 5E P04E016 5E E P04E017 6E E E P04E018 5E E P11E001 11EL P11E002 11E EL P11E003 11EL P11E003C 11EL P11E004 11E EL P11E004C 11E EL P11E004R 11E EL P11E005 11EL P11E006 11E P11E007 11EL P11E008 11E P11E009 11EL P11E009C 11EL P11E010 11E P11E010C 11E P11E011 11E P11E012 11E P11E013 11E P11E014 11E P11E015 11E P11E016 11E P11E016C 11E EL P11E017 11E P11E018 11E P11E019 11E P11E019C 11E P11E020 11EL P11E021 11EL P11E022 11E P11E023 11E P11E024 11E P11E025 11E Page 14 of 18

15 Table 3 - BEH coal quality results from drilling Total Inherent Ash Total Calorific Calorific Sample ID Moisture Moisture Sulphur Value Value % % % % cal/g cal/g ar adb adb adb adb ar OC ,515 6,166 OC ,424 7,335 OC ,200 6,994 OC ,695 5,142 OC ,528 6,377 OC006L ,248 7,120 OC006U ,275 7,135 OC ,032 6,909 OC ,031 6,828 OC ,459 5,266 OC ,505 6,259 OC ,789 6,611 OC ,664 6,504 OC015L ,220 7,091 OC015U ,338 5,828 OC ,820 6,520 OC ,564 6,120 OC ,290 6,997 OC ,285 7,137 OC ,443 7,138 OC ,360 7,103 OC ,229 7,033 OC ,345 7,180 OC ,851 6,582 OC ,917 6,589 OC ,405 6,000 OC ,416 7,275 OC ,878 6,698 OC ,289 7,096 OC ,297 7,156 OC ,546 7,433 OC ,482 7,372 OC ,686 6,366 OC ,132 6,890 OC ,978 4,530 Average ,890 6,651 Page 15 of 18

16 Table 4 - BEH coal quality results from drilling Total Inherent Ash Total Calorific Calorific Sample ID Sample Interval (m) Moisture Moisture Sulphur Value Value % % % % cal/g cal/g ar adb adb adb adb ar P11E004C ,130 6, ,488 7, ,135 6,992 P11E016C ,261 6, ,197 7, ,219 7, ,965 6,867 P11E019C ,321 7, ,408 7, ,319 7,238 P11E010C ,129 6, ,440 7, ,084 6,967 P04E004C ,297 7, ,296 7, ,971 6, ,195 7, ,118 6,974 P04E005C ,546 7, ,273 7, ,374 7, ,291 7,187 P04E008C ,632 5, ,017 6,886 P04E009C ,557 7, ,120 6,778 MH018C ,390 5, ,455 7, ,806 6,242 MH019C ,225 7, ,470 7, ,837 6,557 Page 16 of 18

17 Table 5 - JORC Table for Public Reports on Exploration Results, Mineral Resources and Ore Reserves Criteria Explanation Sampling Techniques Drilling Techniques Drill Sample Recovery Logging Sub-sampling techniques and sample preparation Quality of assay data and laboratory tests Verification of sampling and assaying Location of data points Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews Section 1 Sampling Techniques and Data Rotary drilling was used to obtain core which was sampled to industry standards. Samples were prepared and analysed by PT Geoservices to ASTM standards. Sample intervals were calibrated with downhole geophysical logging results from Gamma, density and Caliper sondes 4 Jacro 175 rotary drill rigs were used to drill HQ sized holes. Average recovery from core holes was >90%. No sample bias occurred due to core losses. All chips and core was geologically logged. No geotechnical holes were drilled. All holes were subject to geophysical logging. All logging was to a standard appropriate for Mineral Resource estimation. Full core samples were taken. Samples were prepared to industry standards and appropriate for the deposit in consideration. Sample preparation and assaying was completed to ASTM standards by PT Geoservices. No duplicates or laboratory checks were undertaken by Killara. No adjustment to the assay data was made. All data and sampling was rev iewed by a senior/managing geologist. Drill locations were recorded using a GPS. These will be updated by the survey team using Topcon Total Station equipment. Outcrops were recorded with a GPS only. See Figure 1 and Figure 3 of this announcement for spacings. Samples were not composited. Data spacing and distribution is sufficient to establish the degree of geological continuity appropriate for Mineral Resource estimation. Geological sampling is considered representative of the projects geological structure. Apparent widths were reported for drill intervals and true widths reported for outcrops. Samples were taken, stored and delivered to the coal laboratory by Killara geologists. NA Section 2 Reporting of Exploration Results Mineral tenement and Production permit (Izin Usaha Pertambangan No:540/005/IUPOP/MBland tenure status PBAT/I/2011) covering a 1,002ha area in the Tenggarong district, East Kalimantan Regency, Indonesia. Expiry on the 8th January, Listed as clean and clear by the Indonesia s department of Energy and Mineral Resources. No material issues with third parties including joint ventures, parnterships, overriding royalties, native title interests, historical sites, wilderness, national park or environmental settings known. Killara 80% ownership. Exploration done by other Vendor data included 566 borehole logs, topographical mapping, coal parties analysis and associated reports. This information was validated by Killara s geologists however is not sufficient to allow for reporting of Reserves to JORC Standards. Table continues on next page Page 17 of 18

18 Geology BEH is located in the Kutai basin, East Kalimantan, Indonesia. The first phase of sedimentation in the Kutai Basin was a transgressive phase which began in the early Miocene, this was followed by a phase of regression that continues today. Sediments within the basin characteristically consist of clastic fine grain quartz sandstones, siltstones and claystones. Other sediments include intercalated siltstones, limestones and coal deposited in parallic, neritic or littoral deltaic environments grading to open marine environments. PT is located in the Barito basin, Central Kalimantan, Indonesia. The basin is an asymmetric basin, with a foredeep in the eastern part of the basin and a platform in the west approaching the Schwaner Shield. The Barito Basin commenced its development in the Late Cretaceous, following a micro-continental collision between the Paternoster and SW Borneo microcontinents. The geological formations at PT are Oligocene to Pliocene. Drill hole information See Table1, Table 2 & Table 3 from the Appendix. Data aggregation NA methods Relationship between mineralisation widths and Apparent widths were reported for drill intervals and true widths reported for outcrops. intercept depths Diagrams See Figure 1 & Figure 3. Balanced reporting NA Other substantive NA exploration data Further work Refer to the announcement. Page 18 of 18