drp, page-24

Dex

good analysis. While I'm long on CXY I personally think that the model of startup of a 400 MW plant per year is unlikely to eventuate in less than five years. I could be wrong of course, but if UCG takes off after successful trials in coming year or so then access to the knowledge resources for site characterisation, site design and operation and so forth may be the limiting factor. Cougar will use Ergo Exergy and they have also licensed their technology to a host of others incuding Eskom, BP/Gastech, Laurus and I expect others will pop up fairly soon too. Not sure what resources Ergo have/need for each project, but this could be the bottleneck. Also, I expect scale-up will take a while at each site so I still think for a 400MW plant total time from project initiation to a 400MW plant is likely to be 5 years; in time that might reduce to say 3-4 years but its hard to imagine anything much less. There's also a likelihood that a percentage of sites will be deemed unsuitable for scale-up after the site characterisation work and a smaller percentage after first trials. So expect say 20% (my guess) of projects to be halted during the feasibility/trial process. That figure will reduce over time too, but it will take time.

If we take the Eskom trial at Majuba as an example, pre-feasibility began in 2003 and first gas was flared in January 2007. The scale-up is expected to continue out to 2012. So that process will take a total of about 8-9 years and this project doesn't require a new power station to be built to use the gas - its already there.

The Eskom trial appears to be an example of things going smoothly. Now as more projects are developed the timelines will be reduced as confidence in the methods and technology improves. But for the next few years I expect things will take time despite our desire for much faster progress...

In a way I hope I'm wrong with this analysis, but right now I just can't realistically see a new 400MW station popping up each year in the near term. However, I'm happy if others fully-value this scenario NOW, since I'll happily sell my shares at anything over $1 and probably somewhat less.

Cheers

ohh and I haven't discussed the planning and permitting issues that authorities will require; in many juristrictions those proceses are also developing along with the industry; so expect some delays from that side in some projects.