QGX Receives Positive Pre-Feasibility Study Result for the Baruun Naran Coking and
Thermal Coal Project, Southern Mongolia
NPV @ 10% (after tax): US$499 million

January 23, 2008 (Waterdown, Ontario). QGX Ltd. (TSX: QGX) is pleased to announce a positive, NI 43-101 compliant, pre-feasibility study ("PFS") for the Company's 100%-owned Baruun Naran coal project ("the Project") located in southern Mongolia.  Minarco-MineConsult of Sydney, Australia, an independent mining consultant, prepared the PFS on QGX's behalf.

The PFS defines a conventional, truck-and-shovel, open-cut mining operation with coal processed on site using a wash plant to produce both coking and thermal coal products.  The coal products are assumed to be delivered to markets by rail starting in 2011.  The PFS concludes that the Project is financially robust with an estimated after-tax NPV @ 10% of US$499 million and a discounted cash flow-internal rate of return (DCF-IRR) of 33%. Project highlights are summarized in Table 1 below.

Table 1.  Project Production and Financial Highlights

* For periods with sales revenue;  ** From start of mine construction;  Mtpa = million metric tonnes per year;
   mt = metric tonne;  ROM = run of mine

Paul Zweng, President and CEO of QGX Ltd., commented as follows:

"We are pleased that the positive results of the Baruun Naran pre-feasibility study confirm and substantiate the findings of the preliminary economic assessment announced last July.  The new study includes a more rigorous assessment of the capital costs required to build the coal operation.  We take comfort in the knowledge that these capital costs have been well vetted by a series of mining experts with experience in Asia.  As well, the study provides updated price forecasts on coking and thermal coal in the world's greatest coal market-China.  The demand for both coking and thermal coal in China continues to soar.  Recent announcements by some of the world's largest coal companies suggest that the prices for coking and thermal coal will settle at all-time highs this year.  The fundamentals have never been better for putting a new coalfield into production and we remain very bullish on the outlook for this project.  &n bsp;

We are also gratified by the value that this project should create for our shareholders.  Equally important, the development of Baruun Naran should provide substantial benefits for years to come to the people of Mongolia through taxes, jobs, and infrastructure."

Introduction

QGX commissioned Minarco-MineConsult ("MMC") to prepare a pre-feasibility study ("PFS") of their 100%-owned Baruun Naran coal project ("the Project") located in southernmost Mongolia. This PFS follows from the Project's preliminary economic assessment (PEA), also prepared by MMC, that was filed on SEDAR on September 4, 2007. The report is based on the recently completed geological model by McElroy Bryan Geological Services ("MBGS") (Sydney, Australia) which identified 252.9 Mt of NI 43-101 compliant measured and indicated geological resources (see press release of June 13^th, 2007).  In addition, A&B Mylec (Brisbane, Australia) updated the coal-quality and indicative market specifications for the two Baruun Naran coal products as well as processing information.  Shanxi Fenwei Energy Consulting (Taiyuan, Shanxi, PR China) supplied a 20-year price forecast for Baruun Naran's product coals, based on CFR delivered prices into various marke ts in PR China.  Shanxi Fenwei also supplied rail freight rates and distances as part of the market analysis.  QCC Resources ("QCC") (Brisbane, Australia) supplied coke and thermal wash-plant yields along with various wash plant designs.  P.E.A.T. (Aust) Pty Ltd (Process Engineering and Technology) of Queensland Australia provided capital and operating costs for the wash plant.  Parsons Brinckerhoff Australia (Sydney, Australia), estimated mine infrastructure costs as well as capital and operating costs related to mine-site power generation.  MMC completed the mine planning and prepared an economic model based on the contributions of the other consultants.  MMC also documented all results in a report which will be filed at a later date on SEDAR. 

Mine Development Strategy

The PFS defines an open-cut mining operation using conventional truck-and-shovel equipment, using haulback mining to maximize in-pit dumping and minimize environmental disturbance.  Coal processing will be done on site using a wash plant to produce both coking and thermal coal products.  Coal products are delivered to markets by a third-party owned and operated rail line, starting in 2011.  The total project life is 23 years, comprising a 2-year construction phase (2009 to 2010) followed by a 20-year mining period with site reclamation in the final year.  The initial construction phase involves site preparation, infrastructure construction, and waste pre-striping and stockpiling of coal.  Major infrastructure to be constructed on site includes a wash plant (capacity of 10 Mtpa ROM), coal stockpiles and handling equipment, mine offices, equipment workshops, and a staff camp facility.  The main mining phase from 2011 will be a larg e-scale mine washing all ROM coal to yield coking and thermal coal products.  All coking and thermal coal has been assumed to be marketed and sold in China, transported by rail from mine to various Chinese cities and steel-making centres.
 
Coal Resource

QGX first announced a NI 43-101 compliant resource estimate completed by MBGS on June 7^th, 2006.  MBGS later updated the resource estimate on June 13^th, 2007.  The current resource estimate is shown in Table 2.

Table 2.  Summary of Coal Resources, Baruun Naran, Mongolia

Potential Mineable Coal

The quantity of open-pit mineable coal was estimated at 193 Mt of run-of-mine (ROM) coal at a stripping ratio of 5.2 to 1 (waste bcm: coal ROM mt).  The saleable product was estimated at 118 Mt, comprising 70 Mt coking coal and 48 Mt thermal coal.  No inferred resources were included to calculate the potential mineable coal resource.  A summary of the mineable coal quantity is provided in Table 3. 

Table 3.  Potential Mineable Coal

Abbreviations:  ROM = run of mine; Mbcm = million bank cubic metres; Mt = million metric tonnes

Production Summary

Mining commences with the stockpiling of small amounts of ROM coal in 2010 and saleable coal production begins in 2011. ROM coal production reaches a constant 10 Mtpa in 2012, yielding an average life-of-mine annual production of saleable (washed) coal consisting of 3.5 Mtpa premium 11% ash coking coal, and 2.4 Mtpa thermal coal. 

The mine plan indicates an overall strip ratio (bcm/ROM mt) of 5.2:1.  The strip ratio remains at an average 5:1 for 13 years before increasing to 6.5:1 for several years late in the mine life.

The reclamation program begins in the last year of operation, extending one year beyond final production.  Waste haulage from overburden removal will be conducted throughout the mine life to minimize end-of-mine effort to reclaim, achieve original contour, and support re-vegetation with native plant species.  The mine site will be reclaimed and facilities will be salvaged or contributed to local communities, as permitted. 

Workforce

The mining workforce requirements were estimated based on MMC's experience with similar sized projects and previous studies.  QCC and Parsons Brinckerhoff Australia provided the wash-plant and infrastructure workforce requirements, respectively.  A key assumption was that maintenance personnel for the mining equipment would be provided by the equipment suppliers under a maintenance agreement.  The remaining workforce, including sufficient staff for all levels of management, supervision, planning, and equipment operation would be directly employ by the mine.  Table 4 shows a breakdown of the total site workforce including staff and support services for a typical year.  In general, the workforce will range from 700 to 800 employees.

Table 4. Typical Estimated Mine Workforce

Mine Operating Costs

The mine operating costs reflect a typical truck-and-shovel open-pit operation with a favourable stripping ratio.  Costs are increased by coal washing because of the direct cost of the washing-and-blending process, and also because of the loss of tonnage to reject material.  This process is required to separate both the coking-coal fraction from the thermal fraction, and to lower the ash content of the saleable coal products.  Estimated cash costs are summarized in Table 5.

Table 5.  Estimated Production Cash Costs

Note:  Costs for rail transport vary by distance to associated customer locations.
Costs assume 3rd party provided services, including rail cars, in both Mongolia
and China. 

Indicative Market Specifications for Baruun Naran Coal Products

Preliminary market studies indicate that an 11%-ash coking coal product should be in high demand in the Chinese markets.  An even lower 8.5%-ash coking-coal product can also be derived from the Baruun Naran coals at the wash plant.  However, the PFS indicates that the financial results are optimized by the production of an 11%-ash coking product that maximizes the wash plant's coking-coal yield.

The Baruun Naran thermal coal product is similar to a 5500 kcal/kg Shanxi premium brand, although somewhat higher in ash.  We believe this product will be competitive in many of the northern Chinese thermal coal markets.

Product specifications for the two Baruun Naran coal products are shown in Table 6. 

Table 6.  Indicative Market Specifications for Baruun Naran Coal Products

VM = volatile matter;    CSN = crucible swelling number;  S = Sulphur;  ad = air dried;   daf = dry, ash free;    gar = gross, as received;  
34.6 MJ/kg = 8,262.5 kcal/kg

Coal Markets and Pricing Assumptions

QGX has investigated various marketing strategies for the sale of the Baruun Naran coal products into numerous potential markets.  The principal markets selected for the two Baruun Naran coal products are as follows:

• Coking coal:  Chinese steel-making centres along the railway corridor between Baotou (Inner Mongolia) and Beijing, plus the steel complexes south of Beijing in Hebei and Shandong Provinces;
• Thermal coal: Also along the railway corridor between Baotou and Beijing, to the port at Qinhuangdao, plus Shanxi, Hebei, and Shandong Provinces.

All pricing was based on the price forecast supplied by Shanxi Fenwei Energy Consulting.  This coal marketing and consulting firm applied indicative coking and thermal coal specifications derived from Baruun Naran coal-quality data, and forecast delivered (CFR) prices for 20 years into various selected market cities and steel-making centres.   The pricing was inclusive of a 13% VAT on coal sales in China, and the study assumes that VAT is unrecoverable with respect to the coal project in Mongolia. 

Pricing was forecast in RMB, and in current (nominal) terms.  As the PFS model was calculated on a constant (real) US dollar basis, the pricing forecasts were deflated by 2.5%/year to constant dollars and converted at a long-term exchange rate of 6.4 RMB/US dollar.

The long-term constant dollar coking coal pricing for these detailed (city-by-city, year-by-year) forecasts was consistent with MMC's earlier approach in the PEA of applying the AME Mineral Economics long-term forecast for semi-hard coking coal, FOB Australia, plus freight to northern China, plus Chinese VAT.  PFS pricing was stronger in the early years in constant dollar terms, softening beyond 2020.  Thermal coal pricing forecasts correlate well to current pricing data for similar coals sold in the target markets.

Transportation costs from mine to market were forecast based on existing Chinese rail freight rates and distances.  Higher rail costs were assumed between the mine and Baotou, China, to reflect the likely higher tariffs required to encourage rail construction to our minesite and South Gobi resource projects in general.  The PFS relies on a third party rail line which is anticipated, but has not yet been constructed, to deliver product to China

Table 7.  Constant Dollar Average CFR Coal Prices (inc. VAT)

Capital Expenditures

The mine development plan assumes that capital spending begins in 2008, with the majority of capital spending (equipment and facilities) occurring from 2009 to 2011.   The plan envisions initial production starting in 2011, with the mine reaching full coal production in 2012.   Initial capital expenditure was calculated through 2012, the first full production year.  Additional mining equipment continues to be purchased up to the end of 2014 as the strip ratio increases with the expanding pit. Thereafter there will be ongoing capital expenditures classified as either replacement or sustaining capital.   The components of capital spending are listed in Table 8.

Table 8.  Initial and Sustaining Capital Costs

Taxes and Revenues to Mongolia

The Project will return substantial financial benefits, estimated at just over US$1 billion, to the country of Mongolia in the form of various taxes and royalties payable on the production and sale of coal products.  The average annual life-of-mine figure for royalty and taxation is approximately US$ 50 million, or 2.5% of current Mongolian GDP.  Life-of-mine payments to the Government of Mongolia are detailed in Table 9 below.

Table 9.  Tax and Royalty Cash Flows to the Government of Mongolia

Project Financial Summary

The project generates substantial revenues and profits and delivers attractive financial returns based on the details and assumptions as set out above.  Table 10 summarizes the key financial highlights. 

Table 10.  Financial Project Highlights

*for periods with sales revenue;  **from start of mine construction

Project Sensitivities

The primary revenue generator from this project is washed coking coal, representing 72% of CFR revenue recognized over the life of the project.  As such, long-term coking coal prices are the critical variable regarding the projected financial returns for the Project.  Project sensitivities to various long-term coking coal prices are shown in Table 11 below.

Table 11.  Sensitivity of NPV (10%) to Changes in Long-Term Delivered (CFR) Coal Prices

1:  CFR coal prices delivered to China (not FOB prices) and thus includes freight charges and Chinese VAT of 13%       

Table 12 below provides information regarding the impact on the Project's NPV (10%) related to a US$5/mt change in the long-term coal prices for each of Baruun Naran's coal products.  For example, if the long-term CFR pricing assumption for the premium coking coal product increases by US$5/mt, then the NPV (10%) would increase by US$72 million to US$571 million from US$499 million (see Table 10 above).  If the long-term CFR price assumption were instead reduced by US$5/mt, then the NPV (10%) would decrease by US$72 million to US$427 million from US$499 million. 

Table 12.  NPV Impact per US$5/mt Change in Long-Term Coal Prices

Project returns are also affected by changes in operating and capital costs.  The project is not highly sensitive to changes in capital costs, but is sensitive to changes in operating cost and to wash-plant yields that determine the ratio of saleable coking coal to thermal coal tonnages.  Some of the key operating and capital sensitivities are presented in Table 13.

Table 13.  Other Key Project Sensitivities

Additional Project Opportunities

Several opportunities remain at Baruun Naran for generating additional revenues and profits, as well as for lowering costs.  These opportunities were considered outside the scope of the work, but will be addressed in the subsequent feasibility study.  These opportunities include:

• Increase the quantity of saleable coals through resource additions achieved by exploration drilling.   Additional resource drilling, if successful, could either expand the mine size or extend mine life;
• Forgo washing of high-quality coking coal from Seams H and T to reduce processing costs, recognizing this will require careful selective mining to control ash levels;
• Improve washing yields through selective mining; 
• Develop greater access to the domestic Mongolian markets, and 
• Develop possible export markets in Russia., and
• Continue to develop possible coal-to-methanol/DME opportunities to realized greater value from the thermal coal

As noted, the NI 43-101 'measured and indicated' resource only includes coal located below a 30-m minimum depth.  While the existing drilling data at present do not allow for the inclusion of the shallow coal located between the surface and the 30-m depth to be included in the NI 43-101 resource, such coal in the area is known to be marketable (un-oxidized) at depths as shallow as 5 metres.  The possibility that shallow coal resources may be included in the NI 43-101 resource in the future represents an opportunity to improve the Project's NPV (10% discount) by as much as $85 million.  Because coking coal is more susceptible to weathering at shallow depth than is thermal coal, more drilling and laboratory analyses must be conducted on the shallow coals to understand the viability of this opportunity.

Qualified Person

Mr Igor Bojanic of Minarco-MineConsult (Sydney, Australia), qualified person as defined by NI 43-101, has reviewed and approved the relevant information contained in this release.  Mr. John Thompson, Vice President Operations of QGX Ltd. and a qualified person as defined by NI 43-101, has reviewed and approved the information contained in this release.

Cautionary and Forward Looking Statement Information

All information contained in this press release relating to the contents of the PFS, are "forward looking statements" within the definition of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation.  Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "can", "could", "would", "might" or "will be taken", "occur" or "be achieved". 

The PFS was prepared to quantify broadly the project's capital and operating cost parameters and to provide guidance on the type and scale of future project engineering and development work that will be needed to ultimately define the project's likelihood of feasibility and optimal production rate. It was not prepared to be used as a valuation of the project nor should it be considered to be a feasibility study. The capital and operating cost estimates which were used have been developed only to an approximate order of magnitude based on generally understood capital-cost-to-production level relationships and they are not based on any systematic engineering studies.  The ultimate costs may vary widely from the amounts set out in the PFS. This could materially and adversely impact the projected economics of the project. As is normal at this stage of a project, data are incomplete and estimates were developed based solely on the expertise of th e individuals involved as well as the assessments of other persons who were involved with previous operators of the project. At this level of engineering, the criteria, methods and estimates are preliminary and result in a high level of subjective judgment being employed.

The following are the principal risk factors and uncertainties which, in management's opinion, are likely to most directly affect the conclusions of the PFS and the ultimate feasibility of the project. The mineralized material at the project is currently classified as resources and it is not reserves. The mineralized material in the Study is based only on the resource model developed by McElroy Bryan Geological Services ("MBGS"), a professional coal geological consultancy firm in Sydney, Australia in June 2007. Considerable additional work, including in-fill drilling, additional process tests, and other engineering and geologic work will be required to determine if the mineralized material is an economically exploitable reserve. There can be no assurance that this mineralized material can become a reserve or that the amount may be converted to a reserve or the grade thereof. Final feasibility work has not been done to confirm the mine design, min ing methods, and processing methods assumed in the PFS.  In addition, key tasks that require further work include coal-quality parameters and wash plant yield, final geotechnical design, mine planning, coal marketing, and transport.  The Project economics are sensitive to these parameters and hence until finalized deliver an inherent risk to the results.  Final feasibility could determine that the assumed mine design, mining methods, and processing methods are not correct. Construction and operation of the mine and processing facilities depends on securing environmental and other permits on a timely basis. No permits have been applied for and there can be no assurance that required permits can be secured or secured on a timely basis. Data are incomplete and cost estimates have been developed in part based on the expertise of the individuals participating in the preparation of the PFS and on costs at projects believed to be comparable, and not based on firm pri ce quotes. Costs, including design, procurement, construction, and on-going operating costs and metal recoveries could be materially different from those contained in the PFS. There can be no assurance that mining can be conducted at the rates and grades assumed in the PFS. PFS assumes specified, long-term prices levels for coking and thermal coal. Prices for these commodities are historically volatile, and QGX Ltd. has no control of or influence on those prices, all of which are determined in international markets. There can be no assurance that the prices of these commodities will continue at current levels or that they will not decline below the prices assumed in the PFS. Prices for coking and thermal coal have been below the price ranges assumed in PFS at times during the past ten years, and for extended periods of time. A key transportation assumption underlying the financial results is that a rail line will be constructed and available for use by 2011.  Should thi s not occur, transport of coal products would likely be by truck haulage at a higher operating cost relative to rail haulage.  The project capital estimate assumes a third party will build a small power plant to service the needs of the mine and CHPP facility.  The mine project financial model assumes a US$0.05/kwh power cost - a tariff that will provide adequate operating and capital returns to an independently owned, leveraged coal-fired power facility over the mine life. The project will require substantial quantities of water to service coal processing and the consumption requirements of a wash plant to produce coking coal.  The project will require major financing, probably a combination of debt and equity financing. Interest rates are at historically low levels. There can be no assurance that debt and/or equity financing will be available on acceptable terms. A significant increase in costs of capital could materially and adversely affect the value and f easibility of constructing the project. Other general risks include those ordinary to large construction projects including the general uncertainties inherent in engineering and construction cost, the need to comply with generally increasing environmental obligations, and accommodation of local and community concerns.

In addition, there are sovereign risks to the project based on it's location in Mongolia. The Mining Law of 2006 provides for government ownership of up to 34% of mining assets it considers 'strategic' in nature, and Baruun Naran may qualify as a "strategic" deposit under the government's definition.  The Mining Law also states that the government is required to obtain its interest on a "commercial basis", however there is no guidance as to how this might be calculated or implemented.  For those deposits that were discovered and developed with State funds during the Soviet period in Mongolia's history, the government has the right to secure a 50% interest.  We do not believe Baruun Naran qualifies for this higher level of government participation, but cannot be absolutely certain of this until an investment agreement is signed and specific government participation and compensation, if any,  is agreed upon. The net present valu es and rates of return calculated in the PFS do not take into account the potential impact of any government participation in the project.
About QGX

QGX is a Canadian-based company that has been exploring for mineral deposits in Mongolia since 1994.  QGX's two most advanced properties are the Baruun Naran and the Golden Hills projects.  QGX announced in June 2007 an independent NI 43-101 resource for coking and thermal coal at Baruun Naran comprised of 93.3 Mt of measured and 159.6 Mt of indicated (252.9 Mt contained in measured and indicated) resources.  QGX filed in April 2007 an independent NI 43-101 report outlining a positive preliminary economic assessment for its copper-gold-silver project at Golden Hills. Barrick Gold Corp. holds an approximate 9% equity interest in QGX as part of a strategic relationship between the two companies.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

For more information, please contact:

David Anderson, Executive Chairman       
(905) 689-9442      

or

Paul Zweng, President/CEO
(925) 855-0505
or visit our website at www.qgxgold.com

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THIS PRESS RELEASE INCLUDES CERTAIN "FORWARD-LOOKING STATEMENTS". ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, INCLUDED HEREIN, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING POTENTIAL MINERALIZATION, RESULTS AND FUTURE PLANS AND OBJECTIVES OF THE COMPANY ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE VARIOUS RISKS AND UNCERTAINTIES. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL PROVE TO BE ACCURATE AND ACTUAL RESULTS AND FUTURE EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENT.