TMK and Terra will work together to execute an exploration program with drilling and seismic costs to be shared between the parties on a 50/50 basis. Pic via Getty Images.
Mining
Talon’s operating partner at the Gurvantes XXXV CSG project will cooperate with Terra Energy to accelerate exploration of the highly prospective coal seam gas play.
The Gurvantes XXXV project (TMK Energy 67%, Talon Energy 33%) covers an area of 8,400km2 and is situated in one of the most prospective coal seam gas basins globally.
Situated less than 20km from the Chinese-Mongolian border, it is also close to several large-scale mining operations and is ideally placed to satisfy both local Mongolian, as well as Chinese energy requirements.
Terra Energy, an experienced coal mining operator, owns and operates the Baruun Noyon Uul Coal Mine within the Gurvantes XXXV project area.
Talon Energy (ASX:TPD) notes that under the new exploration agreement, its partner TMK Energy (ASX:TMK) and Terra plan to cooperate on exploration activities within the overlapping licence areas, which will drive significant cost savings for both parties.
So far, the exploration program includes a minimum of four fully cored exploration wells to be drilled and tested for CSG in this already well-defined coal bearing deposit.
The two companies will work together to execute the exploration program with drilling and seismic costs to be shared between the parties on a 50/50 basis.
Additional costs associated with testing specifically associated with coal seam gas (CSG) exploration will be borne 100% by the Gurvantes Project partners, while any other testing work required for the coal mining operations will be borne 100% by Terra.
Whilst Talon is not currently involved in this specific agreement with Terra, any acceleration of exploration over the broader project area will still benefit Talon and its shareholders as it would able to tap into the expanded knowledge base.
By cooperating with Terra and sharing costs on exploring the eastern portion of the Gurvantes Project, TMK will be able to acquire critical CSG-related data quickly and economically, as well as further develop relationship with other mining operators in the project area.
A recently commenced drilling program is currently utilising contractors already engaged by Terra.
While the term of the agreement is two years, this initial exploration program is only expected to take approximately two months.
Further exploration activities may follow and if the activities are mutually beneficial, will be governed by the same agreement.
Pilot testing at the Gurvantes XXXV project recently achieved continuous gas flow ahead of expectations at the Lucky Fox-1, Lucky Fox-2 and Lucky Fox-3 wells.
This proves that the targeted gassy coal seams at the project are capable of producing gas.
Terra executive director Matthew Crawford said the potential discovery of commercial CSG methane deposits within its mining licenses may offer strategic benefits to Mongolia and for Terra, the ability to expand coal production and lower operating costs in the years ahead by replacing diesel consumption with locally sourced methane gas.
Meanwhile, the Boards of both Strike Energy (ASX:STX) and Talon Energy continue to unanimously recommended their shareholders support the proposed merger, announced earlier this month.
Strike will acquire all the issued shares in Talon Energy and its Perth Basin assets if the proposed transaction proceeds. TPD shareholders could also benefit from a spinout of the CSG assets.
The implied offer price is A$0.212 per Talon share based on Strike Energy’s closing price of $0.440 per share on 11 August, representing a 21.4% premium on Talon’s (ASX:TPD) closing share price as at 11 August 2023 and a 29.3% premium to the 30 day VWAP.
As a result of the transaction, Talon shareholders will own approximately ~11% of Strike Energy.
Plus, subject to successfully executing a spin-out of the Gurvantes XXXV coal seam gas project in Mongolia, Talon shareholders will have a separate shareholding in an entity with exposure to a 33% interest in the exciting Mongolian project.
This article was developed in collaboration with Talon Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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