Churchill Mining will use a UK£10 million capital raising to expand the drilling program at its East Kutai Coal project in Kalimantan, Indonesia.

The 10,000 metre coal drilling programme will be expanded up to 65,000 metres.

Churchill's managing director Paul Mazak says: "The results from the first 4000 metres of the initial 10,000 metre programme have been very encouraging and this has led directors to seek additional funds to upgrade the programme.

"The aim is to define a JORC-compliant mining reserve of 100 million tonnes of coal by the end of 2008 with an additional 400 million tonnes of resource for continued drilling and upgrading.

"Assuming that the targeted mining reserve is reached by the end of 2008, then Churchill should be in a position to advise a mine development schedule thereafter."

Funds from the capital raising will also be used for evaluation studies on Churchill's coal bed methane project at Sendawar, Kalimantan.

Directors believe East Kutai is an exciting project as it lies about 55km from a major coal discovery at Pakar, which has a JORC-compliant reserve of 270 million tonnes. Drilling results have been positive with more than 250 coal outcrops mapped and the first coal volume calculations are expected shortly.

Churchill intends to undertake feasibility studies this year in order to take the next step of mine development in 2009 if drilling and reserve calculations are successful. The company has a field team of more than 100, including drilling contractor staff, 12 geologists, community liaison and local development officers, logistical support and locally sourced non-skilled personnel working on the project.

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