10 June 2013 – South African resources group Exxaro has increased its exposure to the potential of underground coal gasification (UCG) after signing formal agreements for the joint development of UCG projects in sub-Saharan Africa with Linc Energy. Linc Energy in turn gains the option to obtain up to a 49% equity position in all Exxaro’s UCG projects in sub-saharan Africa.

To gain access to Linc’s UCG technologies Exxaro will pay an AU$20 million upfront licence fee. A further fee of AU$7 million will be payable on the initial Exxaro UCG project passing agreed performance tests, which is expected to occur in 2017. Royalties will also be payable for the synthesis gas produced and sold.

Linc Energy will hold a minimum of 15% equity in the first project and have the option to participate up to a 49% equity position in all UCG projects which Exxaro develops.

The formal agreements are the culmination of joint concept studies conducted by Exxaro and Linc Energy over the past 18 months. The parties will implement a business model which optimally combines Exxaro’s strategic interests to expand its coal beneficiation opportunities with Linc Energy’s unique position as a world leader in UCG and downstream process integration know-how.

In completing the formal agreements, the companies reconfirmed the importance of their relationship which targets a vast part of the coal-rich African continent for UCG commercialisation.

Exxaro CEO, Sipho Nkosi, says, “Exxaro is pleased with this progress in the relationship and the ground-breaking work with Linc Energy, which furthers our strategy of pursuing energy-related opportunities. Reaching this milestone opens the door for the teams to commence with the detailed project work to monetise the inherent value we believe is contained in this clean coal technology.”

Linc Energy CEO, Peter Bond, says, “This is a substantial strategic move by Linc Energy to add Africa to its global portfolio to roll-out UCG as an alternative and complementary energy solution.” Linc Energy owns and operates what it refers to as the world’s only commercial UCG operation, in Uzbekistan, which supplies syngas to a nearby power station.