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QPM strikes gas deal for TECH

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Photo by Reuters

5th April 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – ASX-listed Queensland Pacific Metals (QPM) has struck a deal with Arrow Energy Group and AGL Energy to acquire the Moranbah gas project and the North Queensland energy joint venture.

The two projects, collectively known as the Moranbah project, will provide QPM with an established coal mine waste gas project with 240 PJ of 2P reserves and existing infrastructure with a processing capacity of up to 30 PJ/y.

The project has been in production since 2004 with current gas production sourced from approximately 100 operated wells across four petroleum leases and waste mine gas supplied from five active coal mines in the region.

Current production from Moranbah is approximately 10 PJ/y, of which 7 PJ/y is sold to ASX-listed Incitec Pivot’s subsidiary Dyno Nobel Moranbah’s ammonium nitrate plant under an existing gas supply agreement.

QPM told shareholders on Tuesday that the transaction would be transformational for the company and would provide a long-term, economically sustainable gas project for the Townsville Energy Chemicals Hub (TECH) base metals project, in Queensland, avoiding exposure to the extreme price volatility in the Eastern gas markets.

“Vertical integration of our energy supply chain for the TECH project is a significant de-risking event that cannot be underestimated. This transaction is yet another commercial arrangement that the management team of QPM has been able to orchestrate to bring us one step closer to construction of the TECH project and to deliver value for shareholders,” said QPM MD and CEO Dr Stephen Grocott.

The Stage 1 TECH project is based on a nameplate capacity of 1.05-million-tonne-a-year throughput rate, with a ramp-up time of 2.25 years and a design life of 30 years. The Stage 1 project would produce 15 992 t/y of nickel sulfate, 1 746 t/y of cobalt sulfate, 607 395 t of hematite pellets, 4 000 t/y of aluminium and 28 856 t of magnesium oxide.

The advanced feasibility study estimates that the project will require a capital investment of A$2.1-billion, with the Stage 1 operation to have a post-tax net present value of A$1.6-billion and an internal rate of return of 15%.

The study estimates that the project will generate average revenue of $1.06-billion, at an operating cost of $515-million, and earnings before interest, taxes, depreciation and amortisation of $546-million.

QPM’s TECH Project requires approximately 14 PJ/y gas to achieve its Stage 1 nameplate capacity, with the company previously having outlaid plans to use waste mine gas to meet a substantial portion of its energy requirements.

QPM said on Tuesday that the Moranbah project would be an enabler for the Stage 2 expansion of the TECH project, and would accelerate the company’s carbon abatement strategy of reducing carbon emissions by capturing waste mine gas for beneficial use in the manufacturing and electricity sectors.

“The potential of the Moranbah project and QPM Energy’s carbon abatement strategy is enormous and via our collection hubs, the Northern Bowen basin is well positioned to become a major energy supplier to Northern Australia,” said QPM Energy CEO David Wrench.

“This potential is further reinforced by the strong tailwinds we are experiencing from Australian government reform for carbon emissions reductions and the growing global need and acceptance to utilise gas to facilitate successful energy transition.”

Under the terms of the agreement, QPM will pay A$5-million to acquire the Moranbah project, and will acquire warehouse inventory related to the operations.

On completion of the transaction, QPM will receive A$35-million from the sellers as consideration for assuming obligations to supply gas under the Moranbah project contracts.

The Queensland government on Wednesday welcomed the transaction, with Resources Minister Scott Stewart saying it was exciting to see QPM take on the Moranbah project to help progress its TECH project.

“Gas continues to be a key fuel for manufacturing facilities like the Townsville Energy Chemicals Hub. The TECH project will create about 800 construction jobs, and during its operational phase there are expected to be an estimated 1 700 jobs.

“Townsville is continuing to power ahead through projects like this along with the government’s A$5-billion investment in Copperstring 2032,” said Stewart.

Edited by Creamer Media Reporter

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