What is it really worth?, page-88

A little bit of digging to understand the soon to be released 2P

Currently, the Leigh Creek resource is classified to 2C and will be shortly upgraded to 2P.

The following chart indicates the classification system…

 

 

2C explained
The “2” number indicates the range of uncertainty, where 2indicates middle of the range (middle of the LOW case and HIGH case) and the “C”indicates “contingent” case.

Contingent resources are defined as those resources estimated at a certain date as potentially recoverable from known accumulations, but which are not currently considered commercially recoverable.

Upgrading to 2P
Once the resource is tapped into (i.e. via a Pre-Commercial-Demonstration Facility (or PCD) as is the case at LCK, additional data is available to provide metrics needed to upgrade the resource from a “C” to “P”classification where “P” indicates “prospective” and the “2” indicates “Proven and Probable”

Here’s the tricky bit.

The classifications are always a statistical model, not until all the gas has been extracted and the resource is exhausted can you be100% certain what the resource size was.

Part of the statistical model has associated with it two critical components…

• Geological risk
• Process risk.

Resource risk: is a percentage discount that tries to estimate the percentage of the coal that can be converted to gas. Clearly, it’s not possible to set-up gasification chambers that join (ending-up with one big chamber) – there has to be some material between them; that’s one area for discounting.

Process risk: there will some losses during the processing stages i.e.not all gas vented from below ground will be converted to usable gas.

The data from the PCD trial becomes ‘Exhibit A’ in helping to determine what these percentage discounts will be, and to some extent the 3^rdparty consultant providing the resource estimate makes a professional judgment based on (among other things) result sets from other similar gasification operations.

However, in the future new data might be available that increases the coal resource measured under the ground, that may lead to a higher starting point.LCK have spoken about revising the JORC estimate for the coal resource itself.

A critical element in estimating the Prospective resource is the final use to which the resource will be used.

i.e. Fertilizer, Hydrogen, Carbon Dioxide, Methane etc. and the process used to convert the feed gas into final product.

JORC Estimate of coal reserves
The current 2C is based on “LOBE B” of PEL650 (i.e. only a portion of the entire PEL650 license area (page 8 Leigh Creek Energy Geological Modelling Report JORC Resource Estimate Project Assessment – part of ASX release 8 DEC 2015) which comprises 377 Million Tonnes of Coal). Even though LCK has rights to other parts within PEL650 and other PEL's located nearby (haven't heard any mention of the company's intention regarding these areas).

Applying the 2C estimate…

377 Million Tonnes  X  65% Geo Risk  X  80% Process Risk and 15.2GJ syngas per tonne of coal = c. 3000 Pjoules

In fact…

Low Estimate 1 C = 2,747.7 PJ

Best Case 2C = 2,963.9 PJ

High Estimate 3C = 3,303.1 PJ

The Geo Risk and Process Risk percentages have been applied already to the 2C estimate and although they will be revised for the 2P estimate, they are not adiscount on top of the risks already applied.

Three coal seams

The 377 Milllion Tonnes is based on 3 coal seams.
Because the PCD is currently operating in 1 of 3 coal seams that comprise LOBE B of the Leigh Creek PEL (Petroleum Exploration Licence) it is only possible for that seam to be upgraded to 2P. No PCD data is available for the other 2seams.

The 3 seams are designated…

1.     Upper seam

2.     Main seam -

3.     Lower seam

The main seam stretches from near ground level down to roughly 650 metres.

It is my assumption the PCD USG chamber is located at the bottom of the Main Seam.

I am assuming the main seam is larger than the other two seams.

It is entirely possible that the Geological Risk and Process Risk factors may be improved upon due to the favorable outcomes of the PCD trial.

One would have thought that issues such as spacing between underground chambers would have been considered in the original 2C estimate.

It is also possible that the estimate of 15.2GJ syngas per tonne of coal could also be improved upon given the recent announcement of "achieving an unaudited gas heating value (energy) of 6.6 MJ/Sm3, which is one of the highest for air-blown syngas achieved anywhere in the world."

Anyways, we shall know soon enough.

IMO
DYOR