Juniors Team Up for Botswana CBM Project
Denver-based Strata-X's planned farm-in to a 273,000-acre Botswana coalbed methane (CBM) project has boosted its and a partner's share prices.
The US explorer said November 14 it had entered into a Heads of Agreement with Australia-listed Magnum Gas and Power for a staged farm-in that would earn it up to 75% of the Serowe CBM project on the Kalahari Basin fairway, adding that it had secured A$2mn ($1.5mn) funding for a first-year appraisal programme following a private placement of its shares.
Both Strata-X and Magnum have tiny market capitalisations of US$2.8mn and US$4mn respectively. Strata-X climbed 25% this week to A$0.025/share on the announcement, while Botswana CBM and renewables developer Magnum’s share doubled to just A$0.002. Magnum said it raised A$1.765mn via a fully-underwritten rights issue last month.
A view of the town of Serowe in eastern Botswana (Photo credit: YouTube)
Toronto and Australia-listed Strata-X said it is to operate the project, covering two licenses spanning 273,000 acres, which has a mean estimate of 1,075 petajoules (PJ), or 27.8bn m³, recoverable prospective resource net to a 75% interest. Growing demand for power in the region, plus a 3% government royalty on produced gas, make Botswana one of the more favorable economic settings in the world, it said.
It says the proposed farm-in is in three 25% stages and that it has up to 3 years to complete all stages. Stage one will begin January 2017 and will involve analysis of 3 CBM core wells; in addition one well will be completed and production-tested.
To fund Stage 1 of the farm-in and obtain working capital, Strata-X said it has engaged Bizzell Capital Partners as lead manager which has secured firm commitments for a private placement to sophisticated investors of 40,000,000 securities at A$0.05/share for gross proceeds of A$2mn, subject to legally binding long-form agreements being entered into in respect of the farm-in to the Serowe CBM project and any necessary shareholder approvals.
It hopes that by Stage 3 that 100 PJ (2.6bn m³/ 92bn ft³) of 2P reserves will be certified for the project, enough to sign a Gas Sales Agreement to supply a 50-MW state-run power plant that may be built nearby.
This model is thus at the preliminary stages of one making much faster progress elsewhere in Botswana: Australia-listed Tlou Energy’s Lesedi CBM project has 2P reserves certified of 2.7bn ft³ but the firm plans to prove up more, in order to justify development of its own 50-MW power project.
Mark Smedley