QUARTERLY REPORT

QUARTERLY REPORT: Three months ending 30 September 2006

MAJOR POINTS

Cibaliung Gold Project - Indonesia

• Construction of the Gold Processing Plant by PT Petrosea Tbk is advancing in accordance with schedule;
• The decline development has not advanced at a satisfactory rate and accordingly, subject to remedial action, first gold pour will be delayed;
• A further US$3.3 m in cost increases have been identified. Pre-production capital expenditure (assuming a May 2007 first gold pour) now stands at US$56m (including financing costs and a US$2m contingency which is currently unutilised) of which US$27.6m had been incurred as at 30 September 2006;
• An alternate mining plan is being investigated to permit early access to the ore body with limited hand held mining operations to commence during the first quarter 2007 while decline development continues. If implemented and successful, gold, albeit at lower quantum than contemplated under the current mining plan, could be poured at the end of the first quarter 2007;
• The Company is seeking additional debt and equity financing;
• Diamond drilling at Cibaliung commenced during the quarter with the object of identifying additional resources.

Project Generation - Indonesia

• Encouraging results were received from continuous-chip sampling at Trenggalek Project in East Java. Some prospects are now ready for drill testing in early 2007;
• Mapping and sampling was undertaken at Pekalongan in Central Java;
• Anglo commenced diamond drilling program at the Aisasjur Project in Papua in which ARX holds a 20% joint venture interest.

Management Changes

It was announced on 3 August 2006 that the Board accepted the resignation of the Company's Managing Director, Mr Ian Price, effective immediately from that date.

On 1 August 2006 Mr Hermani Soeprapto was appointed Chief Operating Officer of the Company. Mr. Soeprapto, a mining engineer, has had a career spanning over 30 years with the Freeport-McMoRan group, mostly in Indonesia.

Expenditure

Total exploration and development expenditure in Indonesia during the quarter amounted to A$12.55 million.

CIBALIUNG GOLD PROJECT - INDONESIA (89.75% as at 31 Dec 2005)

The Cibaliung Gold Project is operated by PT. Cibaliung Sumberdaya, a joint venture company established between the Company and PT. Antam Tbk ("Antam").

Cibaliung is located in Banten Province near the western tip of the island of Java, 150km south west of Jakarta. The Company's interest in the Cibaliung Project as at 31 December 2005 stood at 89.75%.

Capital Expenditure

On 25 August 2006 the Company reported that further investigation into the total project cost had been undertaken and independently reviewed by Behre Dolbear Australia. The process identified that additional expenditure of approximately US$15.2 million (inclusive of new contingency of US$2.0 million and some operating expenses during the construction period) would be necessary to complete the project.

Costs have been primarily impacted by an initial underestimate in the process plant re-erection cost, a re-rating of seismic factors throughout the region, poorer than expected ground conditions in the process plant area and additional costs associated with engineering, earthworks, steelwork and process plant foundations. The higher cost of fuel together with higher projected levels of fuel consumption and increases in construction materials have also had a significant impact on the project overall. Higher engineering costs, manpower and consultant rates have affected the industry worldwide.

Since 25 August 2006 additional project delivery, dewatering, travel, geotechnical, site preparation, equipment, transport and camp costs have been identified amounting to approximately US$1.9 million.

There are additional holding costs, finance costs, project delivery costs and decline development costs pre-production which arise in this May 2007 gold pour case amounting to approximately US$1.4 million.

The decline development has not advanced at a satisfactory rate. Delays in decline development result in a deferral of revenue from the sale of gold while fixed costs continue to be incurred. While steps are now underway to address delays in the development of the decline and an alternate plan is being investigated to carry out limited mining operations at the earliest opportunity, the Company's revised Base Case Financial Model, which is now under review by the ANZ Bank, contemplates first gold pour in May 2007.

The total pre-production capital expenditure now equates to US$56 m (including financing costs associated with the project debt facilities and an unutilised provision of US$2.0m for contingencies). Operating costs during the pre-production period have also increased.

As previously advised, the Company is currently working to finalise arrangements for additional debt and equity finance to complete the development of the Cibaliung Gold Project.

It is likely that the Company will be required to partially restructure its existing hedging arrangements with the ANZ Bank. Currently the Company has hedged 185,000 ounces of gold on a fixed flat (par) forward basis at a price US$651/oz. The restructuring of the hedge book may involve an upfront premium cost or alternatively a reduction in the overall hedge price. The Company's silver production from Cibaliung is totally unhedged.

Decline Development - Roadheader

Decline development commenced on 17 July 2006. Progress to date has been slower than anticipated under the original mining plan and slower than required for the Company to meet its original target of a first gold pour by the end of the First Quarter of 2007.

The original mining plan called for a decline development of 1,400m before the ore body could be accessed to allow for mining at a rate sufficient to generate a large enough stockpile to facilitate continuous processing.

The decline progress to date has been slow due to a variety of reasons:-

• delayed mobilisation of contractor to site;
• adverse ground conditions initially necessitating the erection of steel sets in order to properly support the opening. This is a slow process;
• the "sticky" nature of the material encountered has had the effect of clogging the roadheader's conveyor system. As a result the roadheader is required to cease operation while it is periodically cleaned. In this respect, the contractor has now modified the roadheader to partially overcome this issue;
• Insufficient skilled labour and supervision to achieve efficient operations.

In order to achieve the 1,400 metre mark by 28 February 2007 (for gold production to occur by the end of the first quarter 2007 as originally anticipated) decline development had to occur at a rate of 6.2 metres per day. The road header is capable, in ideal ground conditions, of advancing at a rate in excess of 10 metres a day however this has not been achieved and the roadheader has advanced at best at a rate of 4.5 metres per day to date. Based upon experience to date a rate of 10 metres a day may not be achieved despite the design capacity of the roadheader being used.

Table 1 below sets out by calendar month the actual rate of progression from commencement of the decline to date. It can be seen that the initial rate of progression was slow, and this was anticipated given the operation had only commenced, and included the need for the crew to set up and proceed with caution as familiarity with the process and working at this particular site needed to be obtained. However, it can also be seen that the rate of development has only increased to a limited extent each month.

Table 1

As at 30 October the decline had advanced to the 105.5 metre mark. While conditions underground are inherently uncertain in all mines, it is possible to apply an average rate of progress per day to the desired development target. Table 2 below sets out the date at which the 1,400 metre mark will be achieved for a range of daily development rates. The Company believes that it is reasonable to expect the rate of development to continue to build up over time to 7 or 8 metres per day provided that ground conditions do not deteriorate. The Company is doing everything that it can to support the decline contractor to consistently increase the daily development rate.

Table 2

On 29 October the roadheader advanced a total of 3.5 metres. On 30 October the latest data available confirms that the roadheader had advanced 4.4 metres with the daily rate likely to exceed 5 metres for the first time. This improved performance over the last few days supports the view that a build up over time to 7 or 8 metres per day is achievable.

Alternate Mining Plan to achieve earlier gold production

In parallel with the development of the decline, the Company is currently investigating an alternate mining plan which may enable earlier access to ore bodies so that first gold pour may be accelerated in advance of the date dictated by the current decline development.

The plan is based on the development of a drive off the main decline by traditional drill and blast methods to access ore which can then be mined by hand held methods.

Subject to approval of this plan and further satisfactory decline development, the alternate drive could commence in late December 2006. The initial ore block to be accessed would provide approximately 2,500 tonnes of relatively low grade ore which could be utilised during initial phases of the treatment plant commissioning. Under the plan development would continue to the main ore body from where mechanised mining could commence. Pursuant to this plan ore would be stockpiled to permit gold production to commence towards the end of the first quarter of 2007 and to then continue at a limited rate until such time as the decline has been sufficiently developed to permit continuous mining at the originally anticipated rate of 220,000 tonnes per annum.

While this plan, if adopted, may result in the pouring of gold towards the end or shortly after the first quarter of 2007, the amount of ore to be processed will be limited and likely to be at a relatively low grade.

Subject to confirming the plan's technical merit, the Company anticipates that this plan will generate revenue for the Company from gold sales at an earlier date while the roadheader development of the decline continues. Implementation of the plan will require approval from ANZ Bank as the project financier.

Site Development and Erection of Gold Processing Plant

The erection of the processing plant is proceeding according to plan and timetable. It is probable, at the current rate of progress, that it will be completed ahead of schedule. At the date of this report the status of the plant is as follows:

• Site access roads and bridges have been substantially completed
• Delivery of the plant to site has been completed
• Structural fill and foundations have been set
• Construction of CIL tanks has commenced
• Thickener tank has been constructed
• The development of ventilation shafts has commenced

Construction on site at Cibaliung

Construction of CIL and Thickener tanks on site at Cibaliung

Operating Costs

Mining One Pty Ltd was engaged by the Company to verify operating costs associated with the Cibaliung Gold Project.

As at 9 October 2006 Mining One have confirmed cash operating costs of US$215/ounce. The operating costs were calculated by Mining One applying The Gold Institute Production Cost Standard over the life of the mine.

Joint Venture - PT Antam Tbk

ARX's partner in the Cibaliung Gold Project is PT Antam Tbk. The ARX Chairman and Chief Operating Officer met with Mr Dedi Aditya Sumanagara, President Director of Antam in October 2006 in Jakarta to discuss issues relating to the development at Cibaliung. The Company's relationship with Antam remains strong and ARX has the continued support of Antam in respect of this project.

Expenditure

Expenditure in relation to development of the Cibaliung Gold Project totalled A$12.2 million during the quarter.

Conclusion

The key issue to achieving gold production in a timely manner is the rate of progress in the development of the decline.

The Company is looking at a number of ways of accelerating decline development in a cost effective and safety conscious manner.

An alternate mining plan is also being developed so that gold production can be achieved at the earliest opportunity while decline development continues.


Cibaliung Exploration

A 2,000m scout diamond drilling programme commenced about mid-way through the quarter.

These holes are targeting the Ramada, Rorah Kadal, Cijagen and Cikamancing veins located within 2km west of the Cibaliung mine development site.

Twelve holes (AC-112 to AC-123) were drilled for a total of 874m by the end of the period. The average hole depth was about 75m. Only gold results were received and silver results are awaited. The best intercepts recorded from these holes are:

• 0.4 m at 2.7g/t Au from 25.4m down-hole in AC-114 on the Ramada vein

• 1.1 m at 4.8g/t Au from 16.35m down-hole in AC-116 on the Ramada vein

• 1.5 m at 3.9g/t Au from 42.65m down-hole in AC-117 on the Ramada vein

• 3.5 m at 5.4g/t Au including 1.65m at 9.9g/t Au from 91.7m down-hole in AC-118 on the Rorah Kadal vein

The most significant result was in AC-118 on the Rorah Kadal vein where drilling is testing for a new lode. Previous drilling produced several narrow high-grade gold-silver intersections on the Rorah Kadal structure (see longitudinal projection). At least two more holes are planned for the next quarter and will test for down-plunge extension, an increase in true-width and grade on this possible new lode.

Encouraging results were received from scout drilling completed on the Ramada vein. Holes AC-114, AC-116 and AC-117 were testing for a mineralised vein-extension beneath an MMI gold-soil anomaly over cover rock on the eastern side of the prospect. Narrow mineralised vein intersections obtained in these holes show a swing in the host structure from northeast- to north-south striking. Potential for an increase in grade and vein-thickness beneath these shallow intersections is not discounted and will be followed up with ground geophysics prior to further drilling.

One or two holes are also planned testing a resistivity anomaly positioned on the Cibaliung structure and about 500m northwest of the Cikoneng lode in the next quarter.


Expenditure

Expenditure in relation to Cibaliung Exploration totalled A$198,000.

PROJECT GENERATION - INDONESIA

Java

Total Expenditure for exploration completed on the Trenggalek and Pekalongan projects totalled A$142,000 during the quarter.

Trenggalek Project, East Java (ARX - 95%)

The Trenggalek exploration area in East Java covers 17,586 Ha and is prospective for low sulphidation epithermal gold/silver deposits similar to the Company's developing gold project at Cibaliung.

Fieldwork during the quarter was primarily focussed on the Sentul, Dalangturu and Paces prospects.

Mapping and sampling were undertaken at Sentul, located in a mountainous area covered by relatively thick production pine forest in the southern part of the KP. Rock chip sampling from large vein outcrops found on the southern end of the Sentul West vein, one of two main veins in the prospect area, has produced some encouraging results from continuous-chip samples: 3.7m at 7g/t Au including 1m at 10g/t and 8m at 4.8g/t Au and 3m at 7.6g/t. The entire vein-system has a cumulative strike-length of over 2km. Drill-testing of this vein-system by the previous tenement holder, Antam, consisted of four shallow diamond holes and only one of these holes tested the Sentul West vein. This hole is located about 400m northeast of the mineralised vein outcrops reported here.

Mapping and sampling were also undertaken at Dalangturu and Paces. These prospects are located in hilly to mountainous terrain that has been completely cleared and re-planted with pine in the northern part of the KP. Evidence for the preservation of fossilised hot spring features, such as silicified eruption breccia and silica sinter, is found at Dalangturu. Silicified eruption breccia is also found on the eastern side of Paces. The potential for the preservation of a mineralised vein system with minimal post-mineralisation erosion is therefore high.

Selective chip sampling of narrow banded quartz-sulphide veins in andesite surrounding a silicified cap-rock at Dalangturu produced gold results ranging from 0.1 to 12.7g/t in 28 samples. The silicified cap-rock measures about 750m by 300m in surface area and contains negligible gold but anomalous mercury averaging 0.23ppm Hg in 26 selective chip samples. An earlier IP-resistivity survey completed by Antam highlighted a deep zone of high-chargeability and resistivity beneath the cap-rock. This target has not been previously drilled. Potential is recognised for a large mineralised stockwork or sheeted vein-system at greater depth below the mercury-bearing silicifed cap-rock.

Further mineralised vein-float was found on the western side of Paces. Two grab samples produced 4.2 and 21.1g/t Au, respectively. The distribution of gold-bearing vein-float found on soil-covered ridges at this prospect defines an area of about one square-kilometre. The sources of this float, however, are still poorly defined.

Work is in progress to obtain approval from the Department of Forestry to undertake trenching and scout diamond drilling on all three of these prospects located within forestry production areas.


Pekalongan Project, Central Java (ARX - 95%)

The Pekalongan exploration area in Central Java covers 5,618 Ha and is prospective for low sulphidation epithermal gold/silver deposits similar to the Company's developing gold project at Cibaliung.

Fieldwork during the quarter was primarily focussed on the Kuning and Mudal prospects.

Mapping and sampling were undertaken at Kuning, located in a mountainous area covered by relatively thick production pine forest and vegetable-cropped terrace areas in the eastern part of the KP. Rock chip sampling from shallow bench and pit exposures on three parallel, silicified structures in andesite has produced some encouraging results from continuous-chip samples: 7m at 3.3g/t Au including 2m at 6.7g/t and 9m at 2.6g/t Au including 3m at 6.2g/t.

Results of a recently completed ground magnetics survey demonstrated that the mineralised structures extend for at least 1km strike-length at Kuning. Previous drilling completed by Antam consisted of four diamond holes. These widely spaced holes are considered to be an insufficient test of the potential of the prospect. Further trenching and surface sampling are planned to better define the extent of gold mineralisation along the host structures.


Mudal is located 2.5km east of and about 300m higher in elevation than the Kuning Prospect. Selective chip sampling of silicified breccias exposed at this prospect produced very low gold but anomalous mercury results averaging 0.49ppm Hg in 21 samples. These rocks appear to lie on the same silicified structures hosting gold mineralisation at Kuning. Potential is recognised for gold mineralisation at greater depth beneath the mercury-bearing silicified breccias. A ground magnetics survey is proposed over Mudal and the area extending to Kuning to confirm the correlation of structures linking these prospects prior to further trenching and surface sampling.


Expenditure

Expenditure in relation to Exploration at Trenggalek and Pekalongan together during the quarter totalled A$142,000.

Papua

Aisasjur Project - Anglo Strategic Alliance (ARX - 20%)

The Company has a strategic alliance with the Anglo American Group to explore for large copper/gold porphyry deposits in Papua. The Company has a 20% joint venture interest in the Aisasjur Project while the Anglo American Group has the obligation to fund all exploration activities pursuant to the terms of the strategic alliance.

The Aisasjur Project covers an area of 9,486 hectares in the Kepala Burung area of Papua. Geologically, the project area lies within one of the Indonesia's young Tertiary volcano- plutonic arcs, which are prospective for both porphyry copper-gold and epithermal gold mineralisation styles.

A 4000m diamond drilling programme commenced late in the period at the Aisasjur Project with 492m completed by the end of the quarter.


The information in this report that relates to Exploration Results is based on information compiled by Mr. Brad Wake, who is a member of the Australian Institute of Geoscientists. Mr. Wake has sufficient experience which is relevant to the style of mineralisation and type of deposit 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.' Mr. Wake consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

MANAGEMENT CHANGES

On 3 August 2006 it was announced that the Board accepted the resignation of the Company's Managing Director, Mr Ian Price, effective immediately from that date. Since that time the Company's General Manager Projects has also left the Company.

On 1 August 2006 Mr Hermani Soeprapto was appointed Chief Operating Officer of ARX. Mr. Soeprapto, a mining engineer, has had a career spanning over 30 years with the Freeport-MacMoRan group, mostly in Indonesia. During this period, Mr Soeprapto has gained extensive experience in developing and operating major open pit and underground mines. He served for 6 years as the site based Executive Vice President and General Manager for the operation of the Grasberg open pit and underground copper gold mine and mill in Papua.

The Board is heavily focussed upon addressing the issues at Cibaliung and the Chairman is actively involved in this process.

In due course a measured executive search will be undertaken for a new CEO for the Company. No appointment is expected until 2007.


ABOUT AUSTINDO RESOURCES CORPORATION NL (ARX)

Formed in 1983, Austindo Resources Corporation NL is an Australian listed gold company focused on developing projects in Indonesia. The company's key project is Cibaliung, a high-grade epithermal gold/silver vein system located southwest of Jakarta in Banten Province, western Java. Cibaliung is expected to produce at an annual rate of 70,000 oz (gold equivalent) with an average life of mine cash operating costs of approximately US$215 per ounce.

Two key strategic alliances in Indonesia are taking Austindo closer to achieving its growth objective. In association with Anglo American Group, the Company is exploring for large porphyry copper/gold deposits in Papua. In addition the Company has a 95% joint venture interest with PT Sumber Mineral Nusantara in the Pekalongan and Trenggalek tenements located in Central and East Java respectively, areas prospective for low sulphidation epithermal gold/silver deposits similar to the Cibaliung project.

BOARD OF DIRECTORS

Bruce Watson - Chairman
George Tahija - Non-Executive Director
John Carlile - Non-Executive Director
Christopher Melloy - Non-Executive Director

For further information please contact:

Andrew J. Cooke
Company Secretary
Tel: + 61 2 9419 8044
Email: andrewcooke@arx.net.au

www.austindoresources.com.au

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Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Consolidated statement of cash flows

Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related entities

Non-cash financing and investing activities

Financing facilities available
Add notes as necessary for an understanding of the position.

Estimated cash outflows for next quarter

Reconciliation of cash

Changes in interests in mining tenements

Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.

*During 2005 the Company issued Convertible Notes for $4.0M which are convertible into ordinary fully paid shares at any time at a price of 6 cents per share.

Compliance statement

1. This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).
2. This statement does give a true and fair view of the matters disclosed.
   
   
   Sign here: ............................................................ Date: 27 October 2007
   (Company Secretary)
   
   
   
   Print name: Andrew J. Cooke
   

Notes

1. The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
2. The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
3. Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
4. The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Cash Flow Statements apply to this report.
5. Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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