criterion rates clean global as a speculative

http://www.theaustralian.news.com.au/business/story/0,28124,26295764-23634,00.html

Clean Global Energy (CGV) 22.5c

GIVEN the torpor of yesterday's semi-official Day before Cup Day holiday, Criterion's attention was diverted from the form guide to Clean Global's declaration of a "major joint venture agreement".

Clean Global -- market cap $18 million -- has entered a $444m underground coal gasification (UCG) venture in Mongolia, which involves Clean Global taking a 35 per cent stake for an initial outlay of $388,000. The JV plans a capital raising on the Hong Kong exchange of "not less than $US120m"; and debt funding of "not more than $US280m".

Clean Global's heavyweight partners are the Beijing Yusenjiayu Environmental Protection Technology Co, the Inner Mongolia Gu Xin Mining Co and British mob Goldbridge Clean Tech Energy. The aim is to produce commercial gas from Gu Xin's 1.8 billion tonne coal deposit in Inner Mongolia, to be sold to another local company via an offtake agreement.

UCG involves burning the coal underground to create so-called syngas, which can be used for generating power or converting the hydrocarbons to diesel or avgas using gas-to-liquids methods. The "clean energy" moniker is a tad inaccurate because the process produces carbon dioxide (just not as much as burning coal above ground).

Clean Global was approached by the Chinese, the attraction being its version of extraction technology (called the controlled retractable injection point process, or CRIP). There's also a limited number of UCG specialists and Clean Global boasts two in CEO John Harkins (a former Linc Energy director) and technical director Michael Greene. Greene was instrumental in a recent successful Spanish trial of CRIP.

UCG itself is about as leading edge as a Lada, in that it was devised by the Soviets more than four decades ago. But we're not being pejorative: unlike may other "clean' alternatives, at least it's commercially proven. Linc owns 74 per cent of an Uzbekistan company called Yerostigaz, which has supplied gas to a 100 megawatt power station since 1961.

Clean Global has only just hit the boards, via a reverse merger with reformed gold explorer International Resource Holdings. Ahead of last week's relisting, the company raised $6m and underwent a one-for-four consolidation.

Clean Global is a low-cap alternative to the main Queensland-based UCG situations, Carbon Energy, Cougar Energy and Linc. The trio has had successful burns, but need crucial state environmental approval. "We have no doubt the technology is mature enough and proven enough," says Ross Paul, chief investment officer for alternative-energy research firm Bakers Investment. "But it has to be proven to a standard Australia is happy about."

It's difficult to see Anna "Masterchef" Bligh blocking such developments, some of which are oriented to LNG exports. Cougar Energy has proposed a 186MW power station near Kingaroy and Sir Joh would turn in his plot if environmental factors impeded development.

Criterion rates Clean Global as a speculative buy. Raising $US400m won't be a cinch but global investment interest in the sector suggests the Mongolian foray may not be a steppe too far.