Kinetiko Energy Ltd (ASX:KKO) has continued to advance the development and operational activities at its Amersfoort Project and adjacent exploration rights in South Africa during the June 2021 quarter.
The activities are conducted through Afro Energy, a company jointly owned by Kinetiko (49%) and Badimo Gas (51%) of South Africa.
Proposed acquisition of Badimo by Kinetiko
Kinetiko has executed a binding terms sheet with Badimo to acquire the remaining 51% of Afro Energy.
Upon completion of the proposed acquisition, Kinetiko will become the sole owner of Afro Energy, which holds 100% interest in the exploration rights and the sample gas production permit in South Africa.
The proposed acquisition significantly de-risks the development of the South African projects and brings together all the experience and expertise of the historical joint venture parties.
Once finalised, the proposed acquisition will streamline the exploration and development of nearly 7,000 square kilometres of exploration rights and application to exploration rights.
The respective boards and major shareholders of both Badimo and Kinetiko are supportive of the acquisition and have been working together to complete the satisfaction of the conditions to the merger where good progress has been made and the parties to the merger transaction believe it can be complete this year.
Funding
Kinetiko successfully completed a sophisticated placement in June 2021 that raised $2.8 million and intends to undertake an SPP to raise up to a further $2 million in the next 4 weeks.
The company is debt-free and has the cash to commence approved exploration and gas drilling programs immediately.
These achievements and the ongoing merger of the Afro Energy joint venture have elicited a number of positive responses from potential funding institutions both inside South Africa and abroad to fund and participate in the Amersfoort Project development and in particular the potential development of a pilot production field.
Afro energy remains in discussions with a number of interested funding parties.
Exploration - drilling
Kinetiko is preparing to mobilise drilling activities to approved and known gassy site locations wells adjacent to existing pilot production wells on Amersfoort Project ER56.
The new wells will be the first drilled on the project in over 6 years and the deployment of updated technology and geological data represents an exciting new exploration phase for the company.
Several suitable drilling companies have rigs and teams available and an engagement process is currently underway.
Exploration - aeromagnetic surveys
In addition to drilling, Kinetiko will continue to fly aeromagnetic surveys on newly granted exploration rights ER 270 and ER 272 for the purpose of targeting further gas compartments.
These flown surveys are anticipated to be undertaken next month and data procured about one month later.
Production
Gas sales and purchase agreement under bulk sampling permit
Afro Energy is in advanced negotiations with potential gas off-takers for small and intermittent gas production from Well KA-03PTR and possibly well KA-03PT2, where they will purchase gas at an on-site transfer point, compress the gas to a required pressure utilizing their own compression equipment and feed gas to their CNG trailers for transportation to existing gas-based customers in the Johannesburg and Witbank regions.
Following the successful capital raising Afro Energy is reviewing the potential to drill further interval test wells that may be transformed into pilot production wells adjacent to the existing producing wells.
If successful, this could form a cluster of producing wells that could enhance off-take commercial scenarios.
Pilot production field development
Afro Energy has modelled a 15-20 well pilot production field on ER56 which it has been seeking institutional funding to develop.
Positive responses have been received from potential funding institutions both inside South Africa and abroad to fund and participate in the development of a pilot production field.
One of the potential investors has proceeded to a ‘decision to invest’ stage having undertaken successful due diligence and it is anticipated that a final decision will be made in the very near future.