High Peak Royalties Ltd (ASX:HPR) has expanded its diverse royalty portfolio by entering a Memorandum of Understanding (MOU) for investment and royalty rights with ScimTek Hydrogen Ltd.
The agreement is intended to be legally binding and provides certain rights to High Peak in exchange for a purchase price of $300,000, which includes a 1% royalty on the sales of ScimTek Hydrogen products capped at $30 million.
This is a key move by High Peak in advancing its environmental, social and governance (ESG) by purchasing a royalty in emerging green hydrogen technology.
Notably, the company’s acquisition of the green hydrogen project royalty expands and diversifies the existing royalty portfolio whilst being consistent with its business strategy of acquiring royalties over quality energy projects.
"Diversify existing portfolio"
High Peak Royalties chairman Andrew Carroll said: "The board has recognised the investor interest in ESG projects and we are pleased to expand and diversify the existing portfolio to participate in this emerging and growing green hydrogen business sector.
“We are also pleased to demonstrate that royalties are a viable means of funding R&D and energy technology projects.
“We look forward to being able to announce the progress of this project in due course.”
Right of first refusal
One of the key terms of the agreement with ScimTek is the establishment of a right of first refusal (ROFR) for commercialisation whereby ScimTek must not undertake a capital raise without first providing notice to High Peak and a period of the first offer for High Peak’s consideration.
This permits the company to have future opportunities to further direct project exposure through ROFR in the funding of the overall project in both pilot and commercial-scale plant installations.
Furthermore, High Peak has a right to audit and inspection over the royalty calculations, which are to be calculated on standard accounting periods of six months ending on June 30 and December 31.
Novel catalyst
ScimTek Hydrogen was formed as a 50/50 joint venture between Scimita Ventures Pty Ltd and Kinaltek Pty Ltd.
The ScimTek project is anticipated to reduce the cost of hydrogen production via steam bio-methane reforming (SBR) and steam methane reforming (SMR) processes.
The company has advanced commercial plans to utilise the novel catalyst in the transport industry by utilising landfill gas to produce green hydrogen for fuelling buses and trucks in the transport network.
ScimTek CEO Mobin Nomvar said: “We are excited to bring on board HPR as a partner in this project.
“The development of a novel catalyst will make green hydrogen a more cost-effective product as it is used as a clean transport fuel in Australia.”
- Ephrems Joseph