From Intersuisse Morning Notes:
GulfX Limited GLX Thursday, 31 July 2008
Early drill results encouraging for coal gasification project
Recommendation Speculative Buy
Overview
GLX is currently progressing a pre-feasibility study on its Syngas Project which aims to use commercially proven coal gasification and associated technologies to produce 30,000 barrels per day of low-sulphur high quality automotive diesel, as well as 120,000 tonnes per annum of sulphur for sale in the industrial marketplace and 250 MW of power for supply into the national grid.
The company holds two granted tenements covering a total of
421 sq km within an approximate 140 km radius of Adelaide. The focus of current activity is on E3896 that covers 288 sq km and is located north of Port Wakefield and about 140 km north west of Adelaide.
E3896 contains known lignite deposits within the Northern St Vincent Basin. These deposits are Tertiary in age and were drilled in the 1970s during the time of the oil crisis.
GLX is currently conducting a PQ diamond drilling program of up to 37 holes on three separate areas: Clinton, Beaufort and Whitwarta. Previous drilling, consisting of 96 drill holes, had outlined measured, indicated and inferred resources (non JORC) totalling 1.4 billion tonnes for these three areas. The aim of the current program is to provide JORC compliant resource estimates and to determine coal properties and suitability for the coal gasification process.
Early drilling at the Clinton area encountered coal at depths of approximately 60 metres through to the coal seam base depths of approximately 90 metres from surface. Two main seams had been encountered, ranging from between 3 metres and 10 metres each, separated by sandstone, siltstone and mudstone.
Initial coal quality results completed by the company’s analytical services provider, HRL Technology, showed the coal from Clinton to have a calorific value (MJ/kg) of 10.4 which is approximately ten percent higher than reported from past work. In addition the samples showed significantly lower ash content (5%) and sulphur content (1.2%) than previously reported in South Australian government publications.
Coal gasification has been in commercial use globally for over 60 years with operating plants located in South Africa, Asia, Europe and North America. In 2005 a total of 390 plants were operational or at various stages of planning. Over five percent of these (20)are fed or will be fed lignite. Under the gasification process lignite is fed into a high pressure, high temperature reactor containing steam and a limited supply of oxygen where
partial not full combustion occurs. The resulting syngas is then cleaned of particulates,trace elements and sulphur. This process produces a premium diesel product, contributing to a reduction in carbon dioxide emissions.
GLX envisages that 95% of the project revenue would accrue from the production of premium diesel. Production costs of between US$35 to US$45 per barrel are expected compared to the long term USGS crude oil price of US$54 per barrel. In addition premium diesel receives a US$5 to US$10 higher price per barrel than crude oil.
The project area is well served by sealed roads, rail and ports. Early scoping work together with the recognition of recent material and labour costs escalations indicates a capital cost for the Syngas Project in the order of A$1.5 to A$2 billion dollars.
Prior to the end of 2008 the company is seeking to have conditional offtake agreements in place for premium diesel, sulphur and power. The pre-feasibility study includes plant scale and technology, more detailed financial analysis, preliminary designs, carbon dioxide
management options and water and energy balances.
GLX’s other Syngas tenement covers 143 sq km and is located south east of Adelaide within the Murray Basin. It covers the Moorlands coal deposit where previous drilling has outlined a potential 32 million tonnes. The company also holds rights to earn interests in four gas projects in the Gulf of Mexico.