Mr .Robert A. Kadane, President of KFG Resources Ltd., reported today that the Company has returned to production the M.R. Smith #2 Well, Fayette Field, Jefferson County, Mississippi. Originally drilled in 1947, the well has been idle since 1978, and was acquired this year by the Company's subsidiary, KFG Petroleum Corporation. From perforations in the Lower Tuscaloosa Massive Sand at 9,800 feet, the well has been put back on production, flowing 20 barrels of condensate and 300,000 cubic feet of natural gas per day through a 9/64ths inch choke, flowing tubing pressure of 1,250 pounds, measuring 1,100 BTU. The Smith #2 Well previously has produced 341,000,000 cubic feet of gas and 13,000 barrels of condensate from the same zone. The Company owns a 44.375% working interest (32.8% net revenue interest) in the well and surrounding 4,000 acres.

The Company's common shares are listed on the Canadian Venture Exchange, Vancouver, B.C., trading symbol "KFG". For additional information, please contact Mr. Robert A. Kadane, President, at (303) 825- 7080.

The Canadian Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release."