Talon locks in a smooth $12m to boost its stake in high-potential Mongolian gas play to 33%

Fri 09 Dec 22, 12:16pm (AEST)
A statue of Genghis Khan located in Mongolia
Source: Unsplash

Key Points

  • Talon is now locked in to acquire a 33% interestholding in Gurvantes in 2023
  • The project is on the radar of Asian energy giant PetroChina, though, no legally binding documentation signed yet
  • Funds will also be used to develop domestic WA gasfields

Talon Energy (ASX:TPD) is set to become a 33% interest holder in TMK Energy’s (ASX:TMK) high-potential Gurvantes XXXV CSG play in the Mongolian South Gobi desert; a project in its relative infancy already on the radar of Asian energy supermajor PetroChina.

That certainty is unlocked by Talon Energy’s successful completion of a $12m raise which was oversubscribed.

The Gurvantes project is well-known among smallcap energy investors given that its Snow Leopard coal seam gas maiden drill campaign hit a 100% success rate, so far as you accept intersecting gas alone as success. 

Proximity to China

The project is located relatively nearby to the Chinese border (relative to the scale of the Gobi desert, at least,) and favourable currency conversion rates make the total AUD spend on a required pipeline desirable. 

That pipeline is really the only thing standing between a proven gasfield defined by a two-tier coal seam geology at Gurvantes, and the lucrative Chinese market. 

With China now easing its covid zero stance, increasingly esilient energy demand is likely to become more and more obvious in the coming years, bar any big reversals from the Xi Jinping government. 

All of that, of course, comes after early-stage surface infrastructure. 

Mandatory spend obligations 

To earn a 33% interest at Gurvantes, Talon must spend $4.6m to fund the development of a pilot plant gas well on-site. 

Construction begins in early 2023; drilling of the wells underpinning the pilot plant will be commenced in Q1. 

Following the $4.6m to get the pilot plant off the ground, Talon will then need to contribute “33% of ongoing expenditure.” 

Further payments; WA asset development

The company will also need to pay Mongolian TMK Energy subsidiary Telmen Resources $1.2m due to the recent successful publication of a gas resource at Gurvantes (Mongolian law requires a domestic entity to operate alongside foreign projects owners, which is fairly common.) 

Also worth noting is that Talon will use some of the funds to continue working away at its gasfield assets in Western Australia, expected to deliver the company revenues while Gurvantes gas patiently waits to fire up assets in Chinese cities over the border.

Talon Energy also partners up with Strike Energy (ASX:STX) at its WA Ocean Hill play.

Liquidity slowly creeping into Talon's charts; but with proven gas reserves and an international footprint; are investors overlooking Talon?
Liquidity slowly creeping into Talon's charts; but with proven gas reserves and an international footprint; are investors overlooking Talon?
Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Talon was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.


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Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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