Elixir Energy Ltd has entered into two farmout agreements for its Mongolian natural gas and renewable energy assets, effectively outsourcing operational and funding resources as the company focuses its attention on the Grands Gas Project in Queensland, Australia.
Read: Elixir Energy maiden Grandis deep coal contingent resource adds 245 billion cubic feet of 2C gas
The first farm-out agreement will establish an incorporated joint venture (IJV) the holds Elixir’s Mongolian coal bed methane (CBM) assets, primarily the Nomgon CBM PSC and related equipment and facilities.
The farm-in partner, a UK registered company controlled by Mongolian business interests well known to Elixir, will acquire a 51% interest in both IVJs and free carry Elixir through all costs to a final investment decision (FID) on gas or renewable development.
The second agreement will cover Elixir’s renewable energy business, specifically the Solar Ilch pre-development solar farm, wind/solar monitoring equipment and all data and intellectual property.
Concentrating resource on Grandis
“This farmout deal facilitates the ever-greater focus of Elixir upon its Grandis project in Queensland, as the farminee party will cover all costs for the company’s Mongolian businesses up to FID,” Elixir Energy managing director Neil Young said.
“The deal also provides a pathway to potentially exit in due course on pre-agreed terms which are highly valuable to Elixir, with possibly payments totalling A$56 million (at current exchange rates).”
Both farm-out agreements also contain conditional put and call options that can be exercised upon an FID being reached.
For the gas deal, those options include an exit price of US$0.30 per gigajoule of 2P booked reserves, capped at US$30 million.
For the renewables business, the options include a US$2 million payments and US$20,000 per megawatt of installed solar capacity up to a maximum of 50 megawatts, for a maximum payment of US$3 million and US$1 million and US$10,000 per megawatt of installed wind capacity up to a maximum of US$3 million for a 200-megawatt farm.