Exxaro Resources, South African mining group, has settled to pay Linc Energy a A$20-million licence fee in exchange for the right to deploy the ASX-listed business’s underground coal gasification (UCG) technologies across sub-Saharan Africa. Official agreements, which are still subject to several situations, also give Linc Energy the choice to secure equity positions of up to 49% in all of Exxaro’s UCG projects. Linc Energy will hold a minimum of 15% in the first project, which could combine power generation and gas-to-liquids (GTL) production.

Should it be followed, the electricity-generating potential of the first plant will not be smaller than 200 MW. Any GTL facility will have a capacity of greater than 10 000 bbl/d. The bankable feasibility revision will be accomplished by mid-2015, with commissioning of the first gasifier planned for mid-2016, subject to regulatory and commercial viability.

The businesses disclose that an additional fee of A$7-million would be payable to Linc Energy on the initial project passing agreed performance tests, possibly in 2017. Royalties would also be payable for any synthesis gas produced and sold. The focus of the first plan will be to first demonstrate that UCG works in a controlled fashion on their resource, and to enhance the gasifier’s technical factors. When the quantity and quality of the synthesis gas is determined a result would be made on the power generation/GTL mix.

The agreement follows from initial joint idea studies lead over the past 18 months and will seek to blend Exxaro’s ambition to pursue coal beneficiation with Linc Energy’s UCG know-how. Exxaro, which is South Africa’s second-largest coal producer, with current production of 40-million tons a year, also has business interests in Botswana and the Republic of Congo. Linc Energy will add Africa to its plans for a global roll-out of the alternative and complementary energy solution.

All the other African projects, besides the initial development, are still at a concept stage, with further exploration drilling required to firm up the reserves. Because UCG involves sustained underground combustion, the resources being appraised are those seams with a high enough static pressure above them to facilitate a controlled burn. Such coal seams are typically 200 metres to 500 metres underneath surface and need to be relatively homogeneous, with minimum faulting and horizontal deviation.

Both companies are enthusiastic about this undertaking … which can really be a game changer for fossil fuels, and is very much in line with Exxaro’s vision of becoming a low-carbon-footprint company, utilising clean-coal technologies.