News blog
Altona Resources
- BY: Andrew Hore |
- POSTED: 24/08/2007 |
- COMMENTS: Add yours
Altona Resources has a potential coal project in South Australia where generating capacity is already in short supply.
Electricity demand is increasing in South Australia and new metals mines in the area will need even more power. Altona wants to mine coal at its Arckaringa project and then put it through a coal to liquid process that will turn it into diesel where the CO2 has been removed in the process. A part of the system will be a combined cycle power plant which could increase South Australia’s generating capacity by more than 10% based on the current plans.
This is an ambitious project which will cost $3.2bn (mine $500m and coal to liquids plant $2.7bn). Altona will need a rich partner to fund this. It is working with BP Australia on evaluating the fuel and power generation part of the project but the oil company has no firm commitment to the project.
Altona is still drilling the Wintinna coal deposit in order to increase the measured resource, which already stands at 1.15bn tonnes of coal. It will probably take until the end of 2009 to get the planning permissions and do the appropriate studies. It would then take another 4.5 years to construct the mine and the plant.
Based on the company’s assumptions of $60/barrel and production of 10m barrels/year then the diesel and other fuels generated could be worth $600m a year. The power generated could earn another $150m. The cost, offset by power revenues, would be $35/barrel including depreciation on project expenditure or $20/barrel just for operating expenditure. That suggests that it could generate $400m of cash from the diesel at $60/barrel. There are also other by-products that can be sold such as sulphur. These figures can only be a guide because the prices are likely to fluctuate prior to the plant coming on stream.
There is £1.2m in the bank. When Altona needs to raise more cash it would make sense for it to consider an ASX listing to go with its Aim quotation. Australian investors would be interested in this type of project and would understand the need for additional fuel and electricity in their country so it could help the share price.
Altona will end up with a minority stake in the Arckaringa project assuming it goes ahead but even so it could still be worth a significant sum. It will take a long time to reach that point, though.
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