Talon Petroleum Secures Option for Mongolian CBM Project

Source: www.gulfoilandgas.com 2/3/2021, Location: Asia

Talon Petroleum has executed a binding offer letter with Telmen Resource JSC (Telmen) in respect of a farm-in for a 33% interest in the proposed Gurvantes XXXV Production Sharing Agreement (PSA), located onshore Mongolia.

In conjunction with the transaction with Telmen, the Company has received firm commitments from new and existing institutional and sophisticated investors to raise a minimum A$4 million with A$1 million accepted in oversubscriptions to fund the work programs on the Gurvantes XXXV CBM project to earn the 33% interest in the PSA.

Overview

Telmen is the holder of a coal bed methane (CBM) Prospecting Contract over the area of the proposed PSA and has undertaken an initial prospecting work program to better understand its prospectivity. With that initial work now complete, Telmen has concludednegotiations with the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) on the commercial terms of the PSA. The PSA requires approval from the Ministry of Mining and Heavy Industry and subsequently requires approval from the Cabinet of Mongolia before formal award of the PSA can be made. Historically, negotiations and regulatory process matters between Telmen and the Mongolian government have progressed smoothly, and it is anticipated that formal award of the PSA will be forthcoming in the nextfew months.

The PSA (nominally named Gurvantes XXXV) covers a significant area of 8,400km2 and is in what is considered one of the most prospective basins for CBM globally. Gurvantes XXXVis situated less than 20km from the Chinese-Mongolian border and close to the extensive Northern China gas transmission and distribution network. Notably, it is the closest of Mongoliaís CBM projects to Chinaís West-East Gas Pipeline. Likewise, it is proximate to several large-scale mining operations with high energy needs. As such, Gurvantes XXXV is ideally placed for future gas sales to satisfy both local Mongolian, as well as Chinese, energy requirements.

Initial work program operations at Gurvantes XXXV are expected to commence as soon as possible upon formal PSA award. Work will include the drilling of at least 4 coreholes where important data will be gathered to confirm gas contents and understand permeability, which is one of the last remaining technical parameters to be understood at the project.

Under the terms of the transaction with Telmen, Talon will have the ability to terminate the farm-in at the conclusion of the initial drilling program or commit to further operations (refer to Appendix 1 of this Announcement for detail on transaction terms).

Further, Talon has secured the right to match any offer Telmen may receive in respect of the transfer or sale of an additional interest in Gurvantes XXXV.

Commenting on the farm-in and placement, Talon MD David Casey said:

'Talon is very pleased to be entering into this farm-in transaction with Telmen. This is one of the best CBM/CSG opportunities I have seen and Gurvantes XXXV represents an exceptional opportunity for the Company and its shareholders, with Talon to be at the forefront of what is an exciting emerging CBM industry in Mongolia.

The farm-in provides additional portfolio and risk diversity as well as being complementary to Talonís current onshore gas assets in the Perth Basin.

The excellent support received for the placement is a vote of confidence in the strong potential of Talonís highly prospective oil and gas exploration assets in both the Perth Basin and the UK North Sea to deliver significant value for investors. The Board thanks existing shareholders for their support and welcomes new shareholders in what is an exciting step forward for Talon.'


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