Talon Energy Ltd (ASX:TPD) has received firm commitments for a share placement raising $12 million to fund its next phase of growth and, more specifically, a 33% share in the Gurvantes XXXV coal seam gas (CSG) project in southern Mongolia.
The placement has been well supported by new and existing institutional and sophisticated investors, to the point Talon was required to scale back applications due to strong interest.
Talon Energy intends to issue about 85.7 million shares at an offer price of $0.14 per share, representing a 20.4% discount to the 10-day volume weighted average price (VWAP).
Placement to fund CSG joint venture
“With the success of the placement, the company has been able to elect to take a 33% participating interest in the Gurvantes XXXV Joint Venture (JV), where our election to commit to the JV required the company to commit to fund the first US$3.15 million of expenditure of the Stage 2 Pilot Well program,” Talon Energy managing director Colby Hauser said.
The company has also agreed to supply 33% of ongoing expenditure at Gurvantes, as well as pay an additional US$809,333 to TMK Energy, based on the recently announced 1.2-trillion-cubic-foot 2C contingent resource for Gurvantes.
“The placement has also removed the uncertainty around funding for the coming months as the company works towards finalising negotiations to secure a debt facility to fund the development at Walyering, which will only become available to draw on following the achievement of near-term project milestones,” Hauser continued.
“The board would like to take this opportunity to thank our existing shareholders who have supported the company to date and to welcome the new investors who took part in the placement.
“We would also like to take this opportunity to thank Canaccord, Chieftain Securities and Bell Potter Securities who assisted the company to execute the placement.”
One of the largest CSG resources in Mongolia
Talon has lauded the initial exploration programs at the Gurvantes XXXV Project as an “enormous success”, describing the generation of a 1.2-trillion-cubic-foot 2C contingent resource from just US$1.85 million in capex as “simply extraordinary”.
“Gurvantes XXXV is by far the largest contingent resource for a Mongolian coal seam gas project operated by any ASX listed entity and sits proximate to important gas transport pipeline infrastructure just inside the border with China, one of the most significant consumers of gas in the world,” Hauser said.
“Along with our JV partner, TMK, we look forward to continuing to advance the Gurvantes XXXV project as the joint venture continues planning activities for the initial Pilot Well Program scheduled for the early part of next year.
“The success at our Mongolian project caps a landmark year for Talon in 2022, with our Walyering Project in the Perth Basin, Western Australia, taking a final investment decision (FID) and moving rapidly towards production which will see Talon earning significant cashflows in the new year.
“Next year will see Talon both cement and build from the success in 2022 at our two flagship projects.”