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Jade Gas (ASX:JGH) interview with MD Chris Jamieson

April 28, 2023

Jade Gas, JGH


Jade Gas (ASX:JGH)

We spoke to Jade Gas (ASX:JGH) Managing Director Chris Jamieson about the success the company has enjoyed with its Tavantolgoi XXXIII coalbed methane project in Mongolia.

Chris talked about the quality of the resource from the early wells, which suggests Jade is on track to realise significant value from the 246 BCF in unriskeded Gross Contingent Resources.

Full transcription below.

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Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our service. Joining me on the morning of the 27th of April, 2023 from Adelaide is Mr. Chris Jamieson, who’s the managing director of Jade Gas, ASX:JGH. Chris, good morning.

Chris: Good morning, Stuart. How are you?

Stuart: Adelaide is a long way from Ulaanbaatar, but you’ve had to spend a fair bit of time in the capital of Mongolia because your company maker is the Tavantolgoi XXXIII production sharing agreement with the Mongolian government looking for coal bed methane which is pretty exciting by the looks of it.

Chris: Oh, look, it’s really exciting. The company listed in October 2021. So we are relatively new, but we’ve been very active. A lot of core hole drilling that has proved up by contingent resource 2C number gross on risk of 246 Bcf. And we’re undertaking a current expiration campaign within the Tavan Tolgoi permit, and that is proving successful as well. So, we continue to uncover thick seams of coal, which are gassy, and we are doing the analysis work on those, and it’s all shoring up for potential production around this time next year.

Stuart: Right. So, I’ve been following Jay pretty much since the completion of the reverse takeover. And it seems to me that the thing that’s pleasantly surprised everyone is the thickness of those seams and the level of gas in the seams has exceeded everyone’s expectations. Is that a reasonable assumption?

Chris: Yeah. Look, it certainly has, and I like to compare it to Queensland. And if you look at where Queensland was 30 years ago, there was a lot of coal in Queensland, but no gas production. Now, Queensland’s effectively part of turning Australia into the largest exporter of LNG globally ahead of Qatar, and, you know, 23 million tons, 1.1 Tcf of gas going offshore, and a revenue stream of around $16 billion. So, when you look at where they’ve drawn their success from, a lot of us come from coal seams that are no thicker than five meters, yet we’re averaging around 60 meters in the worlds that we’ve drilled. We’ve got gas contents of 12 to 18 meters cubed per ton. And in Queensland, you know, 5 to 10 meters cubed is deemed commercial. And the composition of the gas that we’ve seen in two of our seams is 98%, and the third seam of interest is 92.5%. So, we’ve got high methane contents as well, and really, for two of the seams, it’s pipeline spec.

Stuart: Right. And if there’s one place in the world that’s a really great place to do coal bed methane right now, it’s gotta be Mongolia. The country wants its energy independence and wants to transition away from the coal it burns to generate electricity. It’s a perfect transition material. And you are so close to the Chinese border, you could almost walk across it from where you are. So you got a big market to the south of you that’s just desperate for the gas.

Chris: Also, look, the government is pushing very hard to develop new industries, and it is heavily reliant on Oyu Tolgoi. And once Oyu Tolgoi is up and running with the expansion in three years’ time or two years’ time…

Stuart: We’re talking about one of the biggest copper mines ever to be developed, right?

Chris: Yes, correct. Correct. It’ll be the third largest copper-gold deposit in the world, and it will be a third of the Mongolia’s GDP. So Mongolia, they want to develop new industries, they’re resource-rich, but it’s a nation that’s still developing very much. And, you know, from that perspective, they’re pushing hard for certainly an industry like the gas industry, which has the potential to reduce emissions internally. And as you said, it provides an independent source of energy, you know, so they won’t be reliant on electricity from China or gas from Russia. You know, the idea is to build this industry and, you know, should it get to the size that Queensland’s got to, then gas can go up to the capital Ulaanbaatar, which is the most polluted city in the world, especially during winter.

They’ve burned brown coal there for their energy. And when we talk about China to the South, yeah, China’s there for sure, but within 200 kilometers of where we are, we’ve got a roundabout what we deem to be 500 megawatts of power demand, which is [crosstalk 00:04:50].

Stuart: Including your friends at Oyu Tolgoi amongst other things, right?

Chris: Yeah, absolutely. I mean, Oyu Tolgoi itself as a mine will be consuming 330 megawatts in two years’ time. And, you know, that’s about a quarter of what Adelaide as a city consumes, you know, for that one mine. So, it’s very energy hungry. And at the moment, a lot of that energy is coming up from China. And the government, when RIO signed an agreement with the government to relieve debt and move forward, they also agreed if they could source an indigenous source of energy, they would do that. And we are 150 kilometers away from them. So, we do have the potential within our field itself to deliver gas into Oyu Tolgoi as a base load for what they want, which is a mix of gas, battery, wind, and solar.

Stuart: Right. Now, you’ve obviously gotta dewater these wells that you’ve put down, this being a coal bed methane, and that’s gonna take a while. So if we fast forward to early in 2024, we’ll be in a position to know just what the flow rates are coming out of those wells that you’ve drilled. At that point, you’re onto a definitive feasibility study that you’ve gotta submit to the government as part of your permitting requirements. Talk to us about what the rest of ’23 and into ’24 holds for you.

Chris: Yeah. So, we’re in a very exciting stage for the company. We’ve done rarely the cold drilling that’s given us the confidence now to move towards the pilot phase. As part of the pilot phase, we’ll have four horizontal wells, which will have laterals of about a kilometer in length, and they’ll be intersecting four vertical production wells. So, basically, the vertical well will produce from the horizontal. This is a technique that’s used extensively in Queensland, but it’s also used just over the border in China in a basin called the Sichuan Basin. And there’s a company called IIG there that had put 520 horizontal wells down and are producing at 40 petajoules a year, which is around $800 million of revenue in dollar terms.

So, we will be putting these four wells in and the drilling for those will start around July, or August this year. Once each well has been completed, we will start flowing them immediately. So, we’ll be drilling and flowing at the same time. So, the plan is to flow these wells for up to six months, see a commercial stabilized flow. And once we’ve seen that stabilized flow, then as you said, we’ll be moving to a definitive feasibility study, we’ll be booking reserves over the area that these wells are, and we’ll then move towards an exploitation license with the government.

Stuart: Right. So, basically, in about 18 months’ time, Jade Gas will have reached a serious point in its development of Tavantolgoi XXXIII, but that’s a relatively small area you’ve exploited. Well, in excess of 600 square kilometers in the whole permit. And we’re talking, a fraction of that is what’s involved in the wells at the moment.

Chris: Yes. And that’s the beauty of what we have, is that we’ve put a couple of three wells to the east of the permit, and Brown Hill and Vista have come up with thick intersections of gassy coal. So we’ll be doing further drilling around there. And, you know, we have effectively a 45-kilometer strike because we also have the Baruun Naran project, which is adjacent to the West. So, we’ve got optionality in terms of expanding the resource definitely and expanding this play. And we also have two large permits called Shivee and Eastern Gobi, which, you know, sizable tracks of land, sort of 90,000 square kilometers, and they sit within coal basins as well. So, once we have proven that commercial flow, we’ll certainly be looking to go after those permits to build an industry here.

Stuart: Right. So, for all these, the market’s capitalizing you at less than $100 million dollars, which I find extraordinary. What do you think is the catalyst that helps the market wake up and realize the treasure trove that you’re sitting on?

Chris: Well, I mean, we recently did a placement with uBi Metta and who’s the largest importer of gas into Mongolia, and that was $11 million. And they now have 19.9% of the company, so…

Stuart: [inaudible 00:09:23] Leaving the story, right?

Chris: Yeah. I mean, absolutely. They have a coal mine just to the South. They’re looking to develop that haulage trucks. They’re looking at two and half thousand haulage trucks to take thermal coal into China, which they want to be LNG driven. And they’re talking 400,000 tons of LNG a year for that purpose itself. So, I guess in terms of excitement, you know, you’ve got, the largest importer of gas has taken a significant stake in us. You know, that should set alarm bells ringing. We’ve also, there will be the potential for GSAs to be struck, and also MOUs with large mining companies that are around us. We’ve done an MOU with Xanadu, with a company called Monhorus that do gas-fired [inaudible 00:10:09]

Stuart: For those who don’t know those ones, Xanadu is developing what could be a billion-ton resource, a copper-gold resource in Southern Mongolia. Not far.

Chris: Yeah. And that mine will be about a third the size of Oyu Tolgoi if it’s fully developed. So, that’s a large play. They’re only 80 kilometers from us. So, within 200 kilometers, we’ve got a huge opportunity. We’re moving towards proving a commercial field here. And you know, what I say to people is, “Have a look at Queensland. If you could have invested in Queensland 30 years ago ahead of the boom that’s happened, would you do it knowing what you know now?” And the answer is unequivocally yes. And so, basically, we’re taking the playbook from Queensland, we’re taking it up to Mongolia and rolling it out. And it’s not just us, it’s Elixir, it’s Tim K, it’s Talon, it’s Gas Co. There’s a number of Australian companies up there seeing this opportunity. So, we’re looking at expanding our resource. We’re looking at proving commercial flow with the pilot wells, and also the potential for binding GSAs to secure gas sales over the sort of next 12 months.

Stuart: Right. And Chris, for investors who don’t know you very well, you were an ex-senior executive at Beach Energy going back in the day. Tell us a bit about your background coming up to Jade.

Chris: Yeah. I mean, I started early days at Normandy Mining with the team there, Robert de Crespigny in the M&A side of things. And then moved to Ernston Young and worked in transaction work in London and San Francisco.

Stuart: You’re gonna let down after all of the excitement of the Normandy days.

Chris: Yes. Yeah. Well, it was a different environment, that’s for sure. And you know, from there, basically moved to Beach and started investor relations, built the function there, and then moved onto the executive. After that, went and did some consulting with a number of companies on the sort of capital markets, IRS space. And then the opportunity came to step on into the MD, CEO role here, which, I mean, I just saw the opportunity as being huge. And like I keep saying, you know, I saw what happened in Queensland, and the ability to sort of have a supportive government, which you really don’t get here in Australia to develop new industries. And there’s not many countries in the world where you’ve seen something happen. And it happened in the US, then it moved to Australia. And Mongolia’s got similar Permian coals that have high methane levels in them.

And so, it has been done. It’s not like we’re doing anything new, and the Sichuan Basin over the board is producing from almost identical coals. So, we’re confident that this thing’s gonna work. Ad, you know, I try and employ people to sort of have a close look and get on board.

Stuart: All right. Chris Jamieson, well done on what you and your team have achieved in the last year since you came on board. Keep up the good work. And here’s to a great outcome in October 2024.

Chris: Thanks, Stuart. Appreciate it.