THE BOWSER: Leigh Creek Energy (ASX: LCK) has signed a Heads of Agreement (HoA) to commence In-Situ Gasification (ISG) in China with China New Energy Ltd (CNE).
Leigh Creek Energy has also been invited to apply for admission as a member of the Shanghai International Energy Exchange by China Lian Cai Petroleum Investment Holdings Limited, a shareholder of the exchange.
Leigh Creek Energy said the HoA originated due to the achievement of a Pre-Commercial Demonstration (PCD) and production of large amounts of gas that ultimately led to the 2P reserve designation of 1,153 petajoules by independent third parties.
The company explained that CNE was established in China to partner with overseas companies with demonstrated growth prospects, strong project and commercial management expertise, and commercial opportunities that align with its strategic investment objective.
CNE has been the major shareholder in LCK since March 2017 and from the outset has understood the opportunity that exists in taking LCK’s ISG process to China.
This means CNE is not just an investor, but a strategic partner with aspirations to produce gas in China with LCK in the future.
Now that the PCD has demonstrated the ability to produced quality gas and the project is moving towards its commercial phase, LCK has been able to move forward on its strategy to enter the Chinese energy market.
The HoA establishes a process to develop a full commercial agreement through a joint working group to formalise documentation through to the formation of a Joint Venture company.
A major focus of the LCK and CNE Joint Venture Agreement (JVA) will be the production of hydrogen and fertiliser using ISG methods for use in China and potentially abroad.
“The HoA with CNE is exciting as it presents a huge opportunity for LCK to move into such a large energy market as China and it is my pleasure to be able to share this news with our shareholders,” Leigh Creek Energy executive chairman Justyn Peters said in the company’s announcement to the Australian Securities Exchange.
“This HoA also gives us an opportunity for a quicker path to revenue.
“CNE is a large privately-owned company with assets in mainland China.
“CNE is also our largest shareholder and this agreement shows that, not only are they investors in the company, but have actively worked with LCK to gain a strong foundation in China and positioned LCK for considerable growth.
“This was always the strategic intention when CNE became a shareholder and we are pleased that strategy is now underway.
“China is a nation that is rich in coal with large resource of stranded coal that are suitable for ISG.
“China is also rapidly moving to a ‘Hydrogen Economy’ and is spending billions of dollars on that new energy strategy.
“Leigh Creek’s ISG process has proven that it has the potential to produce massive amounts of hydrogen as a standalone commodity or to be used in the manufacture of fertiliser.
“The development of ISG in China represents a great opportunity for LCK to be a major player in these emerging and important industries.
“We are proud of our relationship with CNE and the opportunity to join the Shanghai International Energy Exchange giving us direct access to the Chinese energy market.
“I would like to thank our two China-based directors who have worked hard on seeing our China strategy coming to fruition and look forward to even bigger and better news in the near future.”