HIGHLIGHTS
Gas transportation agreement (MOU) executed with APA Group (ASX: APA).
MOU contemplates APA investigating the developmentof a new ~152km gas pipeline to supply the GVP.
APA’s proposed greenfields pipeline provides a more cost-effective and efficient energy supply solution for the project than originally included in the DFS.
Location of new gas pipeline enhances opportunity to secure gas supply from the rapidly emerging Perth Basin.
TMT has agreed to an exclusivity period on negotiation of gas transportation services for the term of the MOU.
The parties will now proceed to negotiate the transaction documents, with APA progressing any initial works insupport of the new gas pipeline.
BACKGROUND
Technology Metals Australia Limited (ASX: TMT) (“Technology Metals” or the “Company”) is pleased to announce that it has entered into a nonbinding Memorandum of Understanding (“MOU”) with APA Group (“APA”) under which TMT and APA have agreed a commercial framework to investigate the provision of gas transportation services along a new gas pipeline (“New Pipeline”) to be developed by APA from the south to supply gas to the Gabanintha Vanadium Project (“Project” or “GVP”). In return TMT would enter into a take or pay tariff over an agreed period linked to the life of the Project.
The proposed New Pipeline is shorter than the gas pipeline contemplated in the Definitive Feasibility Study (“DFS”) on the development of the GVP and is therefore expected to deliver material operating cost savings from lower gas transportation charges than those included in the DFS. TMT and APA have agreed to an exclusivity period on negotiation of the gas transportation services for the term of the MOU during which they will negotiate and endeavour to agree the transaction documents. Managing Director Ian Prentice commented: “We are very pleased to have entered into this agreement with APA on the development of a proposed new gas pipeline; providing low risk delivery of gas to the Project, cost reductions compared to the DFS as well as the opportunity to source gas from the significantly closer emerging Perth basin gas fields. APA is a leading Australian energy infrastructure business with 20 years’ experience in building, owning and operating gas pipelines. We will be working together to develop a reliable energy solution for the GVP. This represents another key milestone as we progress the development of this lowest cost quartile, large scale, long-life world-class vanadium project”.
The DFS for the GVP proposes to use natural gas as the heating energy in the roasting kiln and other parts of the process circuit and for electricity generation. The GVP’s expected maximum and average daily consumption of natural gas is 10.67 and 6.28 Terajoules respectively. The proposed New Pipeline, which is designed to come from a point to the east of Mt Magnet and extend approximately 152km north to the GVP, is less than half the length of the gas pipeline proposed in the DFS. This is expected to result in lower gas transportation charges than included in the DFS, thereby delivering reduced operating costs compared to those contemplated in the DFS.
The location of the proposed New Pipeline will also enhance the opportunity for TMT to secure cost competitive gas supply from the rapidly emerging Perth Basin, with potential to further reduce gas transportation charges for the Project.
The key terms included in the non-binding MOU are:
• agree a commercial framework for provision of gas transportation services and an initial work plan to finalise and execute the transaction documents,
• a term of the earlier of two (2) years or the parties entering into transaction documents,
• the transaction documents will include a Gas Transportation Agreement, a Development
Agreement under which APA will design and construct the proposed New Pipeline and any necessary Access Licences required for the route of the proposed New Pipeline,
• indicative tariff(s) based on maximum gas transportation of 10.7TJ/day and either a 15 year or 20 year term,
• an exclusivity period during the term of the MOU in which TMT must not negotiate or enter into
an agreement with any third party in relation to the proposed gas transportation services, and
• conditions precedent customary for an agreement of this nature including completion of due diligence into the proposed transaction, approval of respective Board of Directors and any third party consents.
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