Drilling Report

FOR:  HOMELAND ENERGY GROUP LTD.



TSX SYMBOL:  HEG



July 16, 2008



Homeland Energy Group's Kendal Mine Produces First Coal



- Approximately 8,000 tonnes of coal has been blasted at Kendal Mine, South Africa, since start of July 2008



- Ramp up to full production rate of 150,000 tonnes/month anticipated by early first quarter 2009



- First sales of Kendal coal are expected in August



TORONTO, ONTARIO--(EMWNews - July 16, 2008) - Homeland Energy Group Ltd. (TSX:HEG) ('Homeland' or 'the

Company') is pleased to announce first coal production from its Kendal Mine in the Witbank area of South

Africa, approximately 50km east of Johannesburg. To date, approximately 8,000 tonnes of coal has been mined

from the first of three open pit areas. Processing of the coal through the Company's Parnaby wash plant on site

should begin this week. Following additional pre-stripping of overburden, currently in progress, Homeland

estimates that more than 13,000 tonnes will have been mined by the last week of July 2008, at which time it is

expected that the target #2 seam - the coal seam closest to the surface - will have been reached.



"Moving from the development phase to the production phase at Kendal is a significant milestone for Homeland

Energy and one we're very proud to have reached," commented Stephen Coates, President and CEO. "While this is

just the beginning of production at Kendal, it signifies the culmination of a great deal of management's time,

effort and energy. Our dedicated operations team in South Africa, along with the competent on-site mining and

processing contractors, have moved all aspects of this project from site preparation through the construction

of a plant, application and receipt of a mining licence, initial boxcut in preparation for mining to actual

production over the course of 15 months. They have all done an exceptional job."



The Kendal Mine



The Kendal Mine will be managed by Mr. Hilton Papenfus, General Manager, Operations, who joined Homeland in

April 2008. Mr. Papenfus is a mining engineer who has over 26 years of experience in the management of opencast

and underground coal operations and related projects with such companies as Anglo Coal, Eyesizwe and Exxaro,

all of South Africa. Mr. Papenfus will oversee the mining, contracted out to Moolman Mining, South Africa and

is responsible for overseeing the processing plant, run by mineral processing firm Fraser Alexander.



The Company is currently in coal sales contract discussions with several parties and anticipates initial

contracts for sales by early September. Until that time, the coal produced at Kendal will be sold into the

local spot market at current market prices. Cash operating costs for washed coal are expected to be less than

US$30/tonne, based on saleable tonnage. Kendal Mine is budgeted to produce 1.8 million run-of-mine tonnes per

year (150,000 tonnes per month), resulting in more than 850,000 tonnes per annum of saleable washed coal with

the balance being Raw and Discard product.



Homeland, through its South African subsidiary Homeland Mining & Energy South Africa ("HMESA"), operates the

Kendal Mine and maintains a 66.6 percent interest. The Company's strategic local partner owns 26 percent and

7.4 percent is attributable to GMR Energy of Bangalore, India by way of GMR's ownership interest in HMESA. The

Kendal Mine consists of largely thermal coal.



An independent 43-101 compliant technical report was prepared by SRK Consulting of Johannesburg dated October

5, 2007 which may be found in the "Core Assets" section of the Homeland Energy website at

www.homelandenergygroup.com.



Homeland Project Update



Homeland is also making significant progress on several of its other projects. Homeland's half-billion tonne

resource, the Eloff Mining Project, near Delmas, South Africa, has completed the initial round of public

meetings leading toward the submission of an environmental management program report. This process moves

Homeland closer to completing the requirements for a mining permit. A pre-feasibility study is currently

underway for the Eloff Mining Project and the Company anticipates completion of this study by September 2008.

Following this pre-feasibility study, Homeland intends to move directly into a full Bankable Feasibility Study

for Eloff.



In early June 2008, Homeland also announced that it had a letter of agreement giving the Company an exclusive

right to negotiate a binding 'purchase and sale agreement' for the purchase of a producing coal operation

located in the Central Appalachian Coal Basin of the eastern United States. Homeland is currently conducting

full due diligence on the property and continuing the process to complete a binding purchase and sale

agreement. The letter of agreement gives Homeland 90 days from inception of this agreement - with an option for

an additional 90 days - to complete the due diligence and will issue public information when this process has

been brought to a close.



Part of Homeland's southern Africa strategy has always been to acquire prospecting licences in the coal-rich

areas of Botswana and continues to pursue opportunities moving the Company closer to success with this

objective.



Exploration and mine development programs are carried out under the supervision of Mr. Mike Nell, Chief

Operating Officer, Homeland Energy Group Ltd. Mr. Nell, a professional mining engineer and "Qualified Person"

as defined under National Instrument 43-101, has reviewed and verified the technical content of this press

release.



Homeland Energy Group Ltd. is a producing coal company, traded on the Toronto Stock Exchange under the symbol

"HEG". The company is focused on energy exploration and development in Southern Africa. Homeland owns two

producing operations - the Kendal Mine near Witbank, South Africa and the Northfield site reclamation project

near Dundee, South Africa - an advanced development coal project in South Africa (Eloff coal mining project)

and a number of early-stage exploration properties in the provinces of Mpumalanga and Kwa-Zulu Natal. The

Company is currently negotiating to acquire interests in a number of additional coal properties in eastern

South Africa and neighbouring countries. Homeland is also a significant shareholder in Homeland Uranium Inc., a

Canadian uranium exploration and development company focused on projects in Niger and the United States, and

has several other global strategic investments. Homeland Energy Group Ltd. began trading on the Toronto Stock

Exchange on March 5, 2008 and has 150,079,642 common shares issued and outstanding.



For an aerial photo view of the Kendal Mine, please visit the following link:

http://file.EMWNews.com/release/kendal.jpg.





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FOR FURTHER INFORMATION PLEASE CONTACT:



Homeland Energy Group Ltd.

Naomi Nemeth

Vice President, Investor Relations

(416) 506-1979

Email: [email protected]



OR



Homeland Energy Group Ltd.

Stephen Coates

President and Chief Executive Officer

+44 20 7 399 4390

Email: [email protected]

Website: www.homelandenergygroup.com



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