The junior expects to close the deal within Magnum by the end of the month.
The deal will reunite successful Queensland CSG hunters Ron Prefontaine and Tom Fontaine and sees Strata-X bring the one thing Magnum has long-needed: funding.
Magnum has been exploring Botswana since 2012, successfully drilling in 2013, but for the past few years it has been constrained by access to capital, and has investigated a solar project in Botswana instead.
Bizzell Capital Partners, founded by another backer of Prefontaine’s Bow Energy and Arrow Energy, Stephen Bizzell, has organised financing for $2 million.
As a sign of faith, Strata-X’s directors have agreed to subscribe for a minimum of $350,000 of the placement.
Strata-X, which has primarily been a US focused oil and gas player since listing, sees the potential for a major new power play in Botswana by replicating the growth of Queensland’s CSG sector in the African nation, and then becoming a key gas provider in energy hungry Sub-Saharan Africa.
Strata-X’s plans follow in the footsteps of another Australian, Tlou Energy, which has spent more than five years walking the same path.
Tlou’s Lesedi project is now the most advanced CSG development in the nation, and is pursing the development of a 50 megawatt power project under another Queensland CSG veteran, former Sunshine Gas head Tony Gilby.
Under the deal with Magnum Strata-X will undertake a staged program to earn 75% in 273,000 acres of the Kalahari Basin.
The Serowe project has mean estimate of 1075 petajoules of recoverable prospective resource net to Strata-X’s interest, the company estimated.
Strata-X said there was good access to its project, and the government is expected to reduce the royalty paid on gas production from 12.5% to just 3% as part of a range of initiatives to help develop the nation’s vast CSG potential.
The first stage of the farm- involves the drilling and desorption analysis of three new CSG core wells for gas resource certification and testing of a pilot well.
Estimated costs are just $1.1 million.
Assuming Strata-X can come close to replicating the promise seen at Tlou’s project, it can proceed to the optional second and third stages, which will cost a combined $5 million.
The next phase requires three more core wells and two production tests to earn 50%.
Strata-X will secure its full 75% interest with the certification of 100PJ (2P), a level sufficient to secure a gas sales agreement to supply a 50-megawatt government owned corporation power station that may be located near Serowe.
The area around the project has around 190 megawatts of demand for electricity.
The company said the coals of the basin are similar to the Walloon coal measures in Queensland where around 33,000PJ have been defined to date.
Tlou has defined a 3C contingent resource of 3200PJ, although to date it has 3P reserves of 42PJ based on work in a modest area of its licences.
Strata-X said that while explorers in Botswana are still trying to “find the recipe” to achieve commercial development the potential in Botswana is very real, and considering the exploration risk is low, the trick is merely to solve the engineering challenges, something that has been done in Queensland.
Magnum and Strata-X have also agreed to an area of mutual interest covering the whole of Botswana.
The company’s existing projects in the US and Australia’s Canning Basin will be high-graded.
Botswana is one of the oldest democracies in Africa, has an established legal system and boasts the lowest rate of corruption in Africa.
Australia’s have long been entrenched in the nation’s mining sector, and since 2008 have been working to unlock the gas potential.
