KAL to Form Joint Venture on Graha Project

KAL Energy, Inc. (Nasdaq OTCBB: KALG.OB), a thermal coal explorer and developer, today announced the signing of a Letter of Intent with Indo Mines Ltd, an ASX listed company, to form a Joint Venture to develop KAL’s Graha concession in East Kalimantan, Indonesia.

William Bloking, Executive Chairman and President of KAL Energy, Inc. said, “We are delighted to have signed this Letter of Intent with Indo Mines, which we see as having major strategic significance for KAL. With Indo Mines, we are teaming up with a well established player in Indonesia with an excellent network of relationships and very significant and relevant experience in securing project permits. Moreover, Indo Mines is seeking to secure a large supply of Graha-quality coal for their iron sands project in Jogjakarta, so they provide market outlet as well. This will become very important as we approach a Decision to Mine and consider financing alternatives.”

Phil Welten, Managing Director of Indo Mines, added, “This outstanding project supports our growth strategy in Indonesia, targeting low production cost, large volume commodities with high domestic consumption potential. The demand for thermal coal continues to expand in Indonesia as the domestic market grows to meet increasing power demands. The advanced Graha Coal Project has the potential to supply all of the Jogjakarta Liquid Iron Project’s expected power and process needs, with additional capacity for sale to the domestic power market or to meet any increase in demand from future production expansion of the Liquid Iron Project.”

“This agreement also provides a sustainable platform for KAL going forward. Recovery of a portion of our back costs, the free carry on Graha to the construction stage, and the agreement to engage KAL on commercial terms to manage the Exploration and Development phases of the project all serve to ensure the ongoing viability of the company. Given the very tough capital market environment, we are delighted with the agreement.” added Andrew Caminschi, KAL Energy CFO.

Highlights of the Letter of Intent are:

• Indo Mines will pay KAL US$100,000 during a due diligence period, which is to commence immediately.
• Upon successful completion of due diligence, Indo Mines will pay KAL a further US$1.2 million in recognition of historical expenditures on the project. Payment of this sum will be phased over seven months.
• Indo Mines will pay 100 percent of the costs attributable to project development up to the point at which a final “Decision to Mine” is taken, thus providing KAL a “free carry” through the Exploration and Development phases of the project. Thereafter, project expenditures will be borne by the parties in accordance with their respective net working interests.
• Indo Mines will earn a 70 percent working interest in the Joint Venture, and KAL will retain a 30 percent working interest.
• Indo Mines will become Operator of the Venture but will contract with KAL on commercial terms to conduct the Graha Exploration and Development Programs on behalf of the Joint Venture.
• It is also the intention of Joint Venture participants to enter into a sale and purchase agreement with Indo Mines for the supply of 1 to 2 million tonnes of Graha coal per year at market prices for domestic consumption in Indonesia.

The Letter of Intent is subject to a satisfactory conclusion of the due diligence process being conducted by Indo Mines and any statutory approvals that may be required.

About Indo Mines Ltd.

In August, 2005, Indo Mines commenced an evaluation of a large iron sands project in Indonesia. The company plans to focus primarily on the Jogjakarta Liquid Iron Project in Indonesia as well as other potential Indonesian developments. The Directors of IDO are excited about the prospects of the Jogjakarta Liquid Iron Project in Indonesia and believe that this project has the potential to build the company into a mining house which will transform the value of shareholder interests. IDO is incorporated in Australia, and is publicly traded on the ASX.

About KAL Energy, Inc.

KAL Energy, Inc, through its wholly owned subsidiary of Thatcher Mining Pte. Ltd., has economic rights to two coal concessions near the Mahakam River in East Kalimantan, Indonesia, one of which has a JORC Compliant resource of 248 million metric tons. KAL Energy has commenced exploration programs and feasibility studies on these concessions to determine their commercial viability. The Company intends to develop and produce coal from these concessions in a socially, environmentally and economically sustainable manner, as guided by the Equator principles. End markets for KAL’s thermal coal product include local Indonesian consumers as well as export markets in India, China, North Asia, and Southeast Asia. KAL Energy is incorporated in the State of Delaware and is publicly traded on the NASDAQ OTCBB.

For further information regarding KAL Energy, Inc., please visit the website at http://www.kalenergyinc.com.