PROJECT LOCATION AND TENEMENTS (ASX:CNX)
Perth, April 1, 2009 AEST (ABN Newswire) - Carbon Energy Limited (ASX:CNX)(PINK:CNXAF) has executed a Heads of Agreement with Eneabba Gas Limited (ENB) and its fully-owned subsidiary, Eneabba Mining Pty Ltd (EMPL) to acquire EMPL's granted coal tenements of over 1,000 km2 and develop an Underground Coal Gasification syngas supply for the planned ENB owned Centauri 1 Power Station near Dongara in Western Australia.
When completed, the Heads of Agreement will result in:
1. Carbon Energy acquiring a substantial coal exploration area in Western Australia including at least 300Mt JORC inferred resource;
2. A long-term Gas Sale Agreement for 5.5 - 16.5 PJ per annum of UCG syngas for the Centauri 1 Power Station; and
3. Issue of 30,000,000 fully paid Ordinary Carbon Energy shares to Eneabba Gas Limited in exchange for the Sargon Group of coal tenements.
"Following successful exploration, Carbon Energy will supply UCG syngas to power the proposed Centauri 1 Power Station, 8 kilometres east of Dongara in Western Australia," said Managing Director of Carbon Energy, Andrew Dash.
"Our target was to secure an additional coal resource within Australia by the end of 2009, in line with our strategy to build a national resource availability to support the development of commercial energy projects, based on Carbon Energy's world leading UCG technology."
"We anticipate this transaction will be unconditional by the middle of 2009, well ahead of our target."
"This agreement sees Carbon Energy increase its coal resources by 45% to at least 968Mt and hold major resources on both the East Coast and West Coast of Australia, close to growing demand centres for both power generation and natural gas."
"The location of the Sargon Group of coal tenements in the mid-west of Western Australia, are well placed for such a development. They are adjacent to major infrastructure, particularly the port of Geraldton and the planned deepwater Oakajee port both of which are within 70 kilometres."
The opportunity to bring reasonably priced power generation to mid-west Western Australia will assist in the establishment of iron ore mines and provide the power for the planned Oakajee port, which will support the State Government's development plans for the region.
The resource is also well placed to produce synthetic natural gas for supply to existing gas pipelines that service Perth.
"The agreement is made possible by Carbon Energy's world leading UCG technology and our ability to apply our technology to any suitable coal seam anywhere in the world," said Managing Director Andrew Dash.
"We are aiming to replicate our Australian East Coast strategy in Western Australia and to be a major contributor to the State's power and gas needs.
"While Western Australia has abundant reserves of natural gas, most of these are earmarked for LNG production and export overseas. This has resulted in record gas prices being achieved for domestic natural gas sales in recent times."
"Carbon Energy has the potential to supply an additional source of gas and power into the Western Australian market at lower cost to industry and mining operations. In addition, this potential new source of energy will also improve the State's energy security."
Under the Heads of Agreement, ENB will work exclusively with Carbon Energy to conduct exploration drilling, at ENB's cost, to indentify a coal resource of at least 300 Mt (JORC inferred), that is suitable for UCG and to negotiate a Share Sale Agreement and a Gas Sale Agreement to give effect to the transaction.
These agreements are also subject to the completion of acquisition due diligence by both parties. Satisfaction of these conditions and completion of documentation is anticipated to be achieved by the middle of this year, with first gas sales targeted to be available approximately 18 months later in December 2010.
ABOUT ENEABBA GAS LIMITED
Eneabba Gas Limited is focused on the development of the 168MW gas-fired Centauri 1 power station on Company-owned land 8km east of Dongara in the Mid West of Western Australia. Its Centauri 1 Power Station project now has all the necessary regulatory approvals for development. Eneabba Gas proposes to market power from Centauri 1 to the fast growing Mid West region of Western Australia.
About Carbon Energy Limited
Carbon Energy (ASX:CNX) (OTCMKTS:CNXAY) is building a gas business, utilising its unique keyseam technology.
The Company is committed to providing industrial gas users with an affordable and secure source of high quality feedstock, as gas prices remain strong, through increased demand across our key markets.
Carbon Energy is the only company to complete a full-lifecycle, commercial scalable underground gasification trial. The Company's keyseam technology has successfully accomplished all the recommendations outlined by the Queensland government's Independent Scientific Panel (ISP) which included intense, independent environmental scrutiny.
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