Under the terms of a Memorandum of Understanding (MoU) signed today, Incitec Pivot Ltd. (IPL), a global Australia-based fertilizer and chemical company, will take a 10.5% stake in Metex Resources Limited. The two plan to establish a joint venture company upon the successful conclusion of Metex’s planned underground coal gasification (UCG) trial for the demonstration of commercial scale syngas at Bloodwood Creek, in southeast Queensland.
IPL will hold a minimum 10.5% stake in Metex, joining the Australia’s Commonwealth Scientific and Industrial Research Organization (CSIRO) as a major shareholder in Metex. Last year, Metex reached agreement to take full ownership from CSIRO of their 50/50 Joint Venture company, Carbon Energy Pty Ltd (CEPL) for a combination of cash and shares.
CEPL owns the entirety of CSIRO’s underground coal gasification technology. The Bloodwood Creek site has a suitable coal resource of more than 100 million tonnes. CEPL has begun an A$20 million demonstration of a standard 1 petejoule (PJ) per year UCG syngas module.
Under the terms of the MOU, IPL will be granted exclusive global rights to the use of CEPL’s UCG technology to produce syngas for ammonia and ammonia derived product manufacture, either within or outside of a joint venture with CEPL, by way of Technology Licence Agreements.
IPL and CEPL intend to jointly pursue opportunities to exploit UCG technology via new manufacturing facilities for ammonia and provision of UCG syngas to existing ammonia and ammonia derived product manufacturing facilities, with Metex retaining the right to use syngas from UCG for all other products such as Coal-to-Liquids, power generation and other high-value petrochemicals.
The parties will cooperate to investigate the viability of a 1,000 tonne per day ammonia plant, in respect of which IPL will have off-take rights, based on syngas production from the Bloodwood Creek Coal deposit.
Metex and CEPL also announced that a Heads of Agreement (HOA) has been executed with Queensland drilling company Constellation Energy&mjdash;part of the Mitchell Drilling Group, with expertise in onshore directional drilling for the coal bed methane industry.
Under the HOA, Constellation Energy has agreed to provide drilling services for the Bloodwood Creek Trial and have agreed to accept 15 million Metex shares as consideration for these services. Under the HOA Constellation and Metex have also agreed to a strategic alliance for ongoing commercial development of UCG Projects in Australia.
Incitec Pivot is Australia’s largest manufacturer and distributor of fertilizer products supplying Australian farmers with over three million tonnes of fertilizer per year. On 11 March 2008, IPL announced the signing of an agreement with Dyno Nobel Limited under which IPL proposes to acquire all of the ordinary shares in Dyno Nobel not held by IPL, via a scheme of arrangement.