Talon Energy Limited (Talon) is pleased to advise that it has received formal notification from Telmen Resource JSC (Telmen) that the Gurvantes XXXV coal bed methane (CBM) Production Sharing Agreement (PSA) with Telmen was approved at a meeting of the Mongolian Cabinet on 7 July 2021. The
Mineral Resources and Petroleum Authority of Mongolia (MRPAM) has been instructed by the Ministry of Mining
and Heavy Industry to formally execute and issue the PSA, and this is expected to occur in the coming weeks.
The receipt of Cabinet approval had been delayed by the ongoing COVID-19 situation in Mongolia, which as in most countries, has been prioritised by the Mongolian government. As a result of these delays, and as consideration for Telmen agreeing to extend the exclusivity period relating to Talon’s farm-in, Talon has agreed
to issue Telmen 100,000,000 options to acquire Talon shares at an exercise price of $0.01 each upon the formal
issuance of the PSA. Further details of the terms of the options are set out below.
Gurvantes XXXV Overview
The Gurvantes XXXV PSA covers a significant area of 8,400km2 and is in, what is considered one of the most
prospective coal seam gas basins globally. Gurvantes XXXV is situated less than 20km from the Chinese Mongolian border and close the extensive Northern China gas transmission and distribution network. It is also proximate to several large-scale mining operations with high energy needs. Gurvantes is therefore ideally placed for future gas sales to satisfy both local Mongolian, as well as Chinese, energy requirements.
Commenting on the approval of the PSA, Talon’s Managing Director, David Casey said: “We are very pleased
to be moving forward with our partner Telmen Resource JSC in Mongolia. Planning for initial exploration work
on Gurvantes XXXV is well underway, as is preparation of an independently certified Prospective Resource, where we expect to see multi-TCF potential. Alongside the Operator, Telmen, we look forward to undertaking our first exploration work with a view to booking Mongolia’s largest gas Contingent Resource.
Finally, we would like to thank Telmen and the Mongolian authorities for continuing to manage the challenges
associated with ongoing COVID restrictions and lockdowns to get us to this point, and the start of what we
believe will be a significant 12 months for the Gurvantes XXXV Project and more broadly, the emerging Mongolian Coal Bed Methane Industry.”
Exploration work to commence as soon as possible
Under the terms of the proposed Farm-in Agreement with Telmen, Talon will have an option to earn a 33%
participating interest in Gurvantes XXXV by paying 100% of the costs of an agreed budget for an initial exploration
work program (including the drilling of at least 4 core holes) of up to an amount of US$1,500,000 (Initial Work
Program). Work on the Initial Work Program is expected to commence shortly, upon the formal issuance of the PSA.
Key terms of Options to be issued to Telmen
1. Grant: On execution of a Farm-in and Joint Operating Agreement, and Formal Issue of the
Gurvantes XXXV PSA
2. Number of Options: 100,000,000
3. Exercise price: $0.01 each
4. Expiry date: 3 years from the date of grant
5. Vesting condition: Options vest (that is, be capable of being exercised and converted into shares) on
completion of the Initial Work Program