CARBON ENERGY LIMITED QUARTERLY ACTIVITIES REPORT FOR THE PERIOD ENDED 31 DECEMBER 2015
ABN 56 057 552 137
ASX Code: CNX OTCQX Code: CNXAY
Shareholders approved the formation of the JinHong Joint Venture (JV) at the Company's Annual General Meeting (AGM) held on 30 November 2015 and has begun progressing approvals for the JV's incorporation in China.
The Company appointed Mr Huihai Zhuang to the position of Non-Executive Director as nominee for Kam Lung Investment Development Company following the increase in its shareholding to 19.99% at the end of last quarter. Additionally Mr George Su, who is based in Australia, was also appointed Mr Zhuang's alternate Director and translator.
Carbon Energy has been granted renewal of its Mineral Development License (MDL) by the Department of Natural Resources and Mines (DNRM), until 31 January 2018. The renewal is based off an amended Work Plan provided by the Company to DNRM in October 2015.
Carbon Energy held its AGM of Shareholders on 30 November 2015 and all Resolutions were passed.
The Company has been served with proceedings that have been filed by Summa Resource Holdings in the United States District Court of Northern California. The Company is vigorously defending the claims and has filed motions to dismiss and to strike out a number of the allegations.
COMPANY UPDATECHINA
JinHong Joint Venture (JV)
During the Quarter Shareholders approved the establishment of the JV at the Company's Annual General Meeting on 30 November 2015. The purpose of the JV is to establish a vertically integrated gas business in China. The formation of the JV is subject to obtaining the Chinese Government approvals and the initial US$10 million capitalisation of the JV by the Company's JV partner, Beijing JinHong Investment Co., Ltd (JinHong). JinHong will contribute a total of US$30 million to the JV. The JV Agreement was executed following the increased interest to 19.99% by the Company's cornerstone investor. JinHong and the Company's cornerstone investor are controlled by Mr Zhuang.
Work has begun towards securing the approval and incorporation of the China based JV as required by the Chinese Government. Whilst approval is being obtained the JV has formed a working group which is concurrently progressing the following key actions:
Prepare and file documentation for JV approval and incorporation;
Confirm the JV launch strategy, execution plan and budget;
Secure suitable coal leases;
Establish an office in Beijing, China; and
Interview and appoint the JV management team.
JinHong will provide the initial pre-JV formation working capital which will be capitalised once the JV is incorporated.
QUEENSLAND
Blue Gum Gas Project
During the quarter the Company continued to meet and correspond with the Queensland Government regarding progress to commence a commercial project near its Bloodwood Creek trial site 30km west of Dalby in south-east Queensland (Blue Gum Gas Project).
The Company has been granted a renewal of its Mineral Development Licence (MDL) by the Queensland Department of Natural Resources and Mines (DNRM) to 31 January 2018 for the area which contains the Company's 2P Gas Reserve1earmarked for the Blue Gum Gas Project - MDL374. The application was lodged by the Company on 17 July 2012 and renewed based on an amended
Work Plan submitted in October 2015.
The renewal provides the basis for the Company to continue to progress the activities of the Work Plan for MDL374, which include the continuation of the Company's ground water monitoring program under its Environmental Authority which form part of its comprehensive Rehabilitation Plan. The Work Plan states that no further Panels will be initiated until the Government finalises its policy in relation to Underground Coal Gasification and the necessary approvals are gained to support a commercial project, which is reflected in the renewal documents.
The Company continues to engage with the Queensland Government to move the Blue Gum project forward. The project is planned for development on MDL374 and freehold land owned by the Company in the Surat Basin.
The progression of the project is currently delayed while the Company awaits response from DNRM as to its instructions for commencing an Environmental Impact Statement for the Blue Gum Gas Project. The Company is also exploring a number of mid-scale commercial opportunities which would utilise the existing infrastructure and assets at Bloodwood Creek.
The Company continues to manage its cash resources prudently and at the end of the quarter the Company had $1.93 million of cash on hand.
1 Refer to Carbon Energy Gas Reserves & Resources on page 5
LEGAL MATTERS - SUMMA SHARE SALE AGREEMENTOn 27 November 2015 the Company advised it had been served with proceedings filed by Summa Resource Holdings LLC (Summa) against it in the United States District Court for the Northern District of California (Complaint).
Carbon Energy maintains its position announced on 6 March 2013 that relevant milestones under the Agreement with Summa had not been met, notwithstanding Carbon Energy having taken all required steps and having used its best endeavours. Accordingly, Carbon Energy is not obliged to issue further tranches of shares to Summa.2
In response to Summa's Complaint, Carbon Energy filed motions to dismiss each of the eight claims in the Complaint and to strike out a number of the allegations. Carbon Energy's motions are scheduled to be heard in court in late February 2016. The Company will continue to defend the Complaint and any claims made in respect of the allegations made by Summa.
Board
Mr Huihai Zhuang was appointed to the position of Non-Executive Director as Nominee for Kam Lung Investment Development Company.
Additionally Mr Zhuang appointed Mr George Su, who is based in Australia, as his alternative Director and translator.
General Counsel
Stuart MacKenzie was appointed to the position of General Counsel on a casual, as required basis effective from 27 November 2015.
Stuart brings to the Company strong resources and legal experience having worked initially as a geologist in Canada before becoming a corporate lawyer working with both Blake Dawson Waldron (now Ashurst) and Stikeman Elliott. From 2001 Stuart served as an internal legal counsel and company secretary for Placer Dome Asia Pacific, Lihir Gold and Pacific Aluminium as well as advising Barrick Gold and is currently general counsel for Chinova Resources.
For and on behalf of the Board
Morné Engelbrecht
Managing Director & Chief Executive Officer 28 January 2016
2 See ASX Announcement 23 February 2011 and 6 March 2013.
Carbon Energy Limited issued this content on 28 January 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 28 January 2016 05:56:05 UTC
Original Document: http://www.carbonenergy.com.au/IRM/PDF/2297/QuarterlyActivitiesReportAppendix5B
