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1 31 January 2012 DIRECTORS Michael Fry Chairman Ian Prentice Managing Director Darren Misquitta Executive Director Robert Kipp Non Executive Director Matthew Driscoll Non Executive Director Suzie Foreman Company Secretary SHARE INFORMATION ASX Code: KRA Issued Capital: 70.3M Fully Paid Shares 37.0M Unlisted Options 35.5M Deferred Consideration Shares CONTACT INFORMATION Registered Office: Postal: Level 2, 79 Hay Street Subiaco WA 6008 PO Box 1424 West Perth WA 6872 T: F: ACTIVITIES REPORT DECEMBER QUARTER 2011 HIGHLIGHTS Ground based geophysics at the Belu Manganese Project was suspended in late November 2011 having only tested Target 2 due to delays in securing access to the northern concession and the impending wet season. Review of the Target 2 data indicated that the dipole dipole IP defined a generally conductive and weakly chargeable response, however with no evidence of extensive Options for testing Target 1 are being reviewed, however no field based exploration will be undertaken until the end of the wet season. Letter of Offer agreements have been executed under which Killara can acquire a 65% equity interest in two contiguous coal concessions covering a combined area of about 48,600ha in the West Papua Province of the Republic of Indonesia, with vendor payments linked to project specific milestones. Details of the transaction and the coal concessions will be reported once Memorandums of Understanding have been executed. As at 31 December 2011 the Company had a cash balance of $2.8 million and as at 28 January 2012 the Top 20 shareholders held approximately 56% of the capital of the Company. Killara Resources Limited ABN

2 Belu Manganese Project (KRA 80%) The Belu Manganese Project ( Belu ) is located approximately 35km east of Atambua, the capital of Belu Regency, West Timor, Republic of Indonesia. The project consists of three concessions (IUP s) covering a combined area of 5,934 hectares in a region of known Geological mapping and surface / rock chip sampling completed by Killara identified two broad target zones potentially prospective for primary manganese mineralisation (see Figure 1). A ground based geophysical survey consisting of widely spaced dipole dipole IP traverses commenced in mid October 2011, however failure of the geophysical equipment delayed the program until mid November Two survey lines were completed across Target 2, however delays in securing access to the northern concession and the impending wet season resulted in the suspension of the survey in late November 2011 before the survey lines to test Target 1 could be completed. Figure 1 Belu Manganese Project Target Location Plan Page 2 of 5

3 Killara s contract geophysicist, Graham Elliott, reviewed the data from the survey lines completed across Target 2, concluding that the dipole dipole IP defined a generally conductive and weakly chargeable response, however there was no evidence of extensive The Company is reviewing its options with regard to the most appropriate method for testing the Target 1 area, however no field based exploration would be expected until the end of the wet season. West Papua Killara has executed Letter of Offer agreements ( LOO s ) with an Indonesian company to acquire an interest in two coal concessions in the West Papua Province of the Republic of Indonesia. The LOO s provide in principle agreement on commercial terms under which Killara can acquire a 65% equity interest in the concessions, with vendor payments linked to project specific milestones. The two coal concessions are contiguous, cover a combined area of about 48,600ha and cover a geological sequence which is known to be coal bearing in other parts of the sedimentary basin. Full commercial terms of the acquisition are to be formally documented in Memorandums of Understanding ( MOU s ) which are being prepared by the Company s legal representative. Details of the transaction and the coal concessions will be reported once the MOU s have been executed. Ora Banda Gold Project (KRA 100%) The tenements that make up the Windanya Project, being Prospecting Licences 24/4028 to 4031 inclusive, expired during the course of the quarter. Field activities are being planned to test targets defined on the Orinda Project and the Christmas Reef Project. No field work was completed during the December 2011 quarter. Indonesian Project Pipeline Killara has been, and continues to be, offered a range of resource projects for potential acquisition and / or joint venture throughout the Republic of Indonesia. Projects being evaluated cover a range of commodities including coal, precious metals and manganese. Evaluation of these opportunities is ongoing and shareholders will be advised should a transaction progress to a more formal stage of negotiation. Corporate Killara has appointed Mr Darren Misquitta, one of the Company s Indonesian based Executives, to the Board as an Executive Director, greatly enhancing Killara s presence in Indonesia. Mr Misquitta, previously Killara s General Manager Asia Pacific and a founding Director of Killara Resources Pty Ltd, brings over 10 years commercial and banking experience working in a variety of capacities. He has studied extensively through Europe, working closely with major financial institutions on risk management policies and international finance, and has also spent time in China studying Chinese Commercial Law. Page 3 of 5

4 Further to the appointment of Mr Misquitta to the board, Mr Robert Kipp and Mr Matthew Driscoll will move to Non Executive Director positions, effective as of 1 January 2012, with continued responsibility over specific internal projects. Killara has further enhanced its Indonesian executive team with the appointment of Mr. Ridwan Zachrie to the position of Chief Executive Officer of the Company s wholly owned Indonesian subsidiary, PT Killara Resources. Mr. Ridwan Zachrie holds a Bachelor of Law, Master of Law and Master of Science in Economics from the London School of Economics and Political Science (LSE), has had roles with a range of banks and financial institutions within Indonesia and was in the Indonesian Ministry of Foreign Affairs for 10 years (postings in the United Kingdom and New Zealand). Mr. Ridwan Zachrie was previously the Managing Director of Recapital Advisors, one of the leading Investment Banking groups in the region. He is currently a Chief Advisor to the Indonesian Commission for the Supervision of Business Competition, Chairman of the Indonesian Association of Risk Management Practitioners, Member of the American Chamber of Commerce, Commissioner of PT Asuransi Jiwa Recapital, Commissioner of PT Recapital Securities and Member of the Risk Committee for PT Berau Coal Energy Tbk. As at 31 December 2011 the Company had a cash balance of $2.8 million and as at 28 January 2012 the Top 20 shareholders held approximately 56% of the capital of the Company. Yours faithfully, Ian Prentice Managing Director Tel: Fax: Web: Scientific or technical information in this news release has been prepared by Mr Ian Prentice BSc, who is a full time employee of Killara Resources Limited and a Member of the Australian Institute of Mining and Metallurgy. Mr Prentice 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 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr Prentice consents to the report being issued in the form and context in which it appears. Page 4 of 5

5 About Killara Resources Limited Killara is an Australian Securities Exchange listed exploration and development company with projects in Western Australia (Ora Banda gold) and Indonesia (Belu, West Timor manganese). Killara has owned the Ora Banda Gold project, which is located 65km north west of Kalgoorlie, since December The project, which consists of three groups of granted prospecting licences at Windanya, Orinda and Christmas Reef South, is centred within the highly prospective Ora Banda domain bounded by the Bardoc Tectonic Zone and the Zuleika Shear Zone. The Belu Manganese project is located approximately 35km east of Atambua, the capital of Belu Regency, West Timor, in the Nusa Tenggara Timur Province of the Republic of Indonesia. The project consists of three concessions (IUP s) covering a combined area of 5,934 hectares in an area of known manganese mineralisation and very limited modern day exploration. In addition Killara has a very well developed network of business contacts in the Republic of Indonesia through which it has been, and continues to be, offered a range of resource projects for potential acquisition and / or joint venture. Projects being evaluated cover a range of commodities including manganese, coal and gold. Page 5 of 5