Oz Leigh Creek, China New Energy Sign Term Sheet

Australia’s Leigh Creek Energy (LCK) and China New Energy (CNE) have signed a binding term sheet outlining the terms and conditions of a joint venture agreement for in-situ gasification (ISG) operations in China, Leigh said on April 20.

“CNE has large commercial interests in significant underground coal resources in northern China’s Shanxi province and it is the joint venture’s intention to develop these interests as well as third party coal interests in China,” Leigh Creek said. CNE will own 65% in the joint venture while Leigh Creek will own 35%.

The joint venture is structured to outline Leigh Creek’s major responsibilities in three stages for each ISG project - to evaluate the suitability of sites for their ISG potential, conduct a pre-commercial demonstration (PCD) at selected sites and deliver a 2P reserve for each targeted resource, the company said. 

Leigh Creek said it will receive remuneration for each stage depending on its nature. Consulting fees in the initial evaluation phase, mix of capital returns and fees in the PCD phase, and capital returns and royalties once a targeted reserve has been developed, it said.

“It is expected that substantive work on ISG will start in 2020 as some project evaluation has already taken place in locations in China. However, given the Covid 19 situation it is very difficult for LCK to be able to predict when LCK staff will be allowed to travel and return to Australia from China and as such timing remains fluid,” Leigh Creek managing director Phil Staveley said.