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.
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.
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.”
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.
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