Australian energy company Linc Energy Ltd. (LNC.AX) said Wednesday evening that it has signed a letter of intent with China's Xinwen Mining Group to develop Underground Coal Gasification and Gas to Liquids projects in China. The companies have agreed to negotiate the terms of a deal to form a joint stock company for developing the fields. Linc's stock is currently up more than 2% in trading on the Australian Securities Exchange.
Linc said that the deal covers the Yinan and Yibei coalfields in the Yining Mining Area owned by Xinwen, that have a reported 15.37 billion tonnes of coal and an exploration target of an additional 14.87 billion tonnes through further drilling.
Under letter of intent, the two companies have agreed to negotiate the terms of a formal deal to form a joint stock company to develop the Underground Coal Gasification, or UCG fields to produce gas for transport directly to Shanghai through the "West to East" pipeline project and to provide the feedstock for a Gas to Liquids, or GTL facility to produce liquids to be transported to the Dushanzi Oil Refinery.
The companies expect all negotiations and the establishment of the joint stock company to be finalized by the end of 2008.
Peter Bond, the CEO of Linc Energy said," This is an exciting development as Xinwen already has government approval for Underground Coal Gasification. This means that once commercial terms are finalized, Linc Energy and its partner Xinwen can move directly into commercialization of UCG and GTL to very quickly monetize stranded coal in China, on the back of the considerable work already completed by Linc Energy at Chinchilla in Queensland."
Earlier this month, Linc said that it has agreed to sell its Teresa coal exploration permits to Xinwen Mining for A$1.5 billion.
Linc aims to become a major player in the production of higher quality and ultra-clean liquid fuels through the unique combination of two proven production processes known as Underground Coal Gasification, or UCG clean coal technology and Coal To Liquids technology, or CTL.
Xinwen Mining produces over 35 million tons of coal per year and has over 30 billion tons of coal reserves. On the Australian Securities Exchange on Thursday, LNC.AX is currently trading at A$4.25, up A$0.11 or 2.66% on a volume of 0.85 million shares.
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