West Perth-based oil and gas explorer GulfX Ltd will acquire South Australia-focused Syngas Energy Ltd in a scrip bid of 112 million shares, worth around $12.3 million, the company has announced.
West Perth-based oil and gas explorer GulfX Ltd will acquire South Australia-focused Syngas Energy Ltd in a scrip bid of 112 million shares, worth around $12.3 million, the company has announced.
Shares in GulfX closed at 11 cents, up 4.7 per cent on the news.
The full text of a GulfX story is pasted below
The Board of GulfX Ltd ("GulfX" or "Company") is pleased to announce that the Company has entered into an agreement to acquire a 100% interest in Syngas Energy Limited ("Syngas Energy").
Syngas Energy's focus is on achieving large scale syngas production from its large 100% controlled feedstock, using commercially proven gasification and associated technologies. It aims to produce significant quantities of power (in the form of gas as input to gas fired power stations), ultra low-sulfur high-quality automotive "Clean Premium" Diesel and native/pure Sulphur for sale in the industrial market place.
The fundamentals of Syngas Energy's business are technically similar to Australian projects which Shell (Monash Energy Limited) and BP (Hydrogen Energy Limited) have recently announced.
Syngas Energy holds two exploration licenses (one granted and one in the late stages of the granting process) covering a total of 431 km2 area within approximately 140 km of Adelaide, South Australia. Based on the results of exploration activities undertaken by the South Australian government, which have been publicly gazetted, a deposit in the size range of 1.0 to 1.5 billion tonnes of Lignite is targeted in this area (see Note 1 below).
Extensive exploration has already been undertaken, including more than 330 drill holes. Syngas Energy has commenced work on preparing a JORC compliant resource estimate for the area.
With Syngas Energy's main feedstock (Lignite deposit) located close to Adelaide and existing infrastructure (including roads, rail, shipping and labour markets and power supply), this provides:
- The potential for substantial cost benefits during the project's development and ongoing operation; and
- With approximately 40% of the power currently consumed in South Australia generated outside the state and very little Premium Diesel produced, with both domestic and industrial demand rising (including the expansion of Olympic Dam), a ready and expanding market exists for its end product.
Syngas (from synthesis gas) provides a comparatively clean fuel source (refer to Figure 1) for any gas fired power station, in terms of Greenhouse gas emissions. 'Clean' because on combustion the exhaust gases contain lower levels of sulphur dioxide, nitrous oxide and particulates (e.g. sulphur) than for a number of other power plant feedstocks.
Upon completion the current executive director of Syngas Energy, Ms Merrill Gray, will be appointed as an executive director of the Company. Ms Gray is a qualified geologist and process engineer, with over 20 years experience in the resources sector, including over 10 years with WMC, where she held a number of senior strategic planning and production management roles. Mr Derek Lenartowicz (mining engineer - ex senior executive of WMC and MD of View Resources Limited) will be appointed as a non executive director of the Company.
Commercial terms of the acquisition, which is subject to shareholder approval, includes the issue of 35 million GulfX shares at settlement, with further ordinary shares to be issued upon achievement of milestones around Independent laboratory gasification test work, JORC resources being delineated and the securing of conditional Off-take Supply Agreements (see Commercial Terms section attached for further details).
Overview of Syngas Energy Limited
Syngas Energy's focus is on achieving large scale syngas production from its 100% controlled feedstock, using commercially proven gasification and associated technologies. Ultimately producing significant quantities of Power, Clean Premium Diesel and native/pure Sulphur for sale in the industrial market place.
The Syngas Process
Syngas (from synthesis gas) is generated from the gasification of a carbon containing fuel resulting in a gaseous product which has heating value, made up of Hydrogen and Carbon oxide gases. A proven gasification technology is expected to be used to produce syngas from lignite controlled by Syngas Energy ultimately at levels generating a significant amount of gas to fuel a gas fired Power Station and produce Clean Premium Diesel.
On combustion in new technology diesel motors, Clean Premium Diesel produces lower carbon monoxide, hydrocarbon and particulate emissions than conventional oil derived diesel and distillate as well as greater fuel economy and produces more power.
The fundamentals of Syngas Energy's main project are technically similar to both:
- Monash Energy Limited's clean coal-to-liquid project located in Victoria. A joint venture between Shell and Anglo American. Which is being designed to produce around 60,000 bpd of synthetic hydrocarbon liquids using Shell's proven proprietary gasification technology. Of which 80% is expected be ultra low-sulfur high-quality automotive clean premium diesel. Commissioning of this plant is targeted for 2016; and
- Hydrogen Energy Limited's recently announced low-carbon hydrogen fuelled power generation project at Kwinana in Western Australia. Involving the gasification of locally produced coal to produce hydrogen (syngas) to fuel the power station. The feasibility study for this potentially A$2 billion BP and Rio Tinto project commenced in May 2007.
The production of Syngas involves the gasification of a carbon containing fuel (in this case Lignite) resulting in the production of a mix of Hydrogen and Carbon Oxide gases, the trace elements in the feedstock, for example sulphur, are able to be removed as part of the gasification process prior to the syngas being fed into downstream petrochemical plants or gas fired power stations or both. This "clean-up" step makes syngas a cleaner energy source than a number of other existing sources of energy resulting in:
- lower sulphur dioxide, nitrous oxide and particulate levels in exhaust emissions produced from power stations fuelled by syngas; and
- lower carbon monoxide and hydrocarbon, as well as particulate emissions produced on the burning of Clean Premium Diesel, compared to conventional oil derived diesel and distillate, with additional benefits such as greater fuel economy and more power.
Large Lignite Deposit (Feedstock)
Syngas Energy holds two exploration licenses (one granted and one in the late stages of the granting process) that cover a 431 km2 area and located approximately 140 km of Adelaide, South Australia. Based on the results of exploration activities undertaken by the South Australian government which have been publicly gazetted, a deposit in the size range of range of 1.0 to 1.5 billion tonnes of lignite is targeted in this area.
These tertiary Lignite deposits will provide the feedstock to Syngas Energy's facility. They are located within the Northern St Vincent Basin Coalfield and Murray Basins.
Considerable exploration activity has taken place across the Northern Saint Vincent Basin coalfields and the Moorlands area to date. With intensive phases of work in the 1970's, for example, associated with the oil crisis. The work completed has included drilling (rotary open hole and large diameter core), bulk sampling, gravity and aeromagnetic surveys, coal chemistry analysis, moisture content analysis, salt and sulphur content as well as trace element analysis.
In some locations ground water, overburden and preliminary mining engineering assessments have been completed. Data associated with more than 330 drill holes across the deposits held by Syngas Energy has been sourced through South Australian Government open files for use in detailed resource evaluation work/future work programs.
A program of work collating and reviewing all available data with the view to preparing a JORC compliant resource estimate is underway as part of a comprehensive program of work to progress Syngas Energy's main project post acquisition.
It should be noted that the statement referring to the potential quantum of the target is based the results of historical exploration activities undertaken by the South Australian government, including more than 330 drill holes. The potential tonnage range is conceptual in nature and insufficient work has been completed to define a Mineral Resource in compliance with the JORC Code. It is uncertain if further exploration work will result in the determination of a Mineral Resource.
Commercial Terms of Acquisition
On 9 August 2007 the Company entered into an agreement to acquire 100% of Syngas Energy Limited and 100% of Syngas Australia Pty Ltd, which hold exploration licences ELA 2007/00048 and EL 3585 and associated technical information ("Syngas Energy Group").
Consideration for the acquisition of the Syngas Energy Group consists of:
- 35 million GulfX shares at settlement;
- 30 million GulfX shares (in the form of performance shares - A Class) upon the completion of independent laboratory test work verifying that power and premium diesel production plant fed by the Syngas Energy Group lignite resource, including, but not limited to the following, within 3 years from settlement:
- Slagging characteristics;
- The calorific value of the syngas produced on gasification; and
- Syngas composition according to ASTM standards);
- 17 million GulfX shares (in the form of performance shares - B Class) upon delineation of 750 million tonnes total resource of lignite/brown coal as defined by the Coal Industry Advisory Board. The resource will be calculated/established applying appropriately the JORC Black Coal Resource/Reserve Estimation Guidelines of 2001 or an equivalent JORC guideline for Lignite / Brown Coal should it be published, within 3 ½ years from settlement; and
- 30 million GulfX shares (in the form of performance shares - C Class) upon Syngas Energy entering into one or more conditional offtake supply agreements for the supply of at least 40% of the equivalent dollar value of the Total Saleable Products generated by the Tenements for a period of not less than three years, within 4 years from settlement.
- Total Saleable Products will be based on forecast sales contained in a report prepared by external consultants, or prepared by Syngas Energy and verified by external consultants, at the usual standard and scope so that is able to be used in a Scoping Study or a Pre-Feasibility Study, whichever is applicable.
- C Class CPS can not convert into ordinary shares before the A Class CPS and B Class CPS meet the relevant milestones and convert into ordinary shares.
There are normal commercial warranties associated with the sale of mining tenements, shares in companies and the issuing of the consideration shares.
Prior to settlement GulfX will provide interim funding (amount to be agreed) to Syngas Energy to provide working capital to continue to develop its business. Should the parties not proceed with the acquisition, then the monies advanced by GulfX will only become repayable upon their being a change in control of Syngas Energy or its management or the sale or joint venturing of Syngas Energy or its projects.
Due Diligence Requirements and Settlement
Shareholders and potential investors should note that prior to the Company executing the conditional agreement with Syngas Energy and its vendors, it conducted a high level review and assessment of the information provided in respect of the projects.
GulfX will now be undertaking a more comprehensive due diligence process (including title, environmental and other risks) with respect to the acquisition of Syngas Energy, however it should be noted that the usual risks associated with start up companies undertaking exploration and development activities of large scale projects in the gasification sector will remain at completion of this due diligence process.
Shareholders and investors should also be aware that the agreement to acquire Syngas Energy is conditional on shareholder approval and due diligence (including title, environmental and other risks). Accordingly there is a risk that the transaction contemplated by this announcement may be changed or not be completed. Should the transaction not complete, the monies advanced to Syngas Energy may not be refunded.
The Company expects to issue a Notice of General Meeting in the coming weeks.
Geological Information
The information in this report that relates to Lignite deposits is based on information sourced from publicly available/open files and compiled by Mr Paul Askins. Mr Askins is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Askins is the Managing Director of Geotech International Pty Ltd, a consultant to Syngas Energy. Mr Askins 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 of Exploration Results, Mineral Resources and Ore Reserves'.
Mr Askins has consented to the inclusion in the announcement of matters based on his information in the form and context in which it appears.
