Here's my 2c worthThis is a very significant announcement by...

Here's my 2c worth

This is a very significant announcement by MIN. I have been pondering and waiting for MIN to declare what their intentions might be with regards to energy post the significant discovery of LD-1. It is now very clear from their AGM presentation exactly what their energy strategy is, but more importantly, it is more significant than I had envisioned. The impact of this on NWE should not be underestimated.

I'm not convinced the market has realised what this news means to lil ol' NWE. The level of E&P activity planned in the short to medium term is significant. I believe some investors may understand this could require an imminent and potentially large raising of capital. And hence the CR anticipation may be killing any chance of SP appreciation.

On the flipside, as every day goes by is one step closer to the production testing. And this testing could very well surprise the market to the upside and be an event for a significant SP re-rate. After this testing I suspect NWE will move to raise capital - possibly $20m or more... which will not be very dilutionary if NWE is sitting at 7c-10c or a circa $500m MC. STX did exactly this (CR) post their successful flow test of WE-2 in 2019.

But yes, if it is indeed 5 wells planned for next year, that is very big plans indeed. I do find it odd that MIN has released such market sensitive plans for the NWE/MIN JV yet no such news from NWE. I am sure Iain or their IR firm is fielding a few interested queries today...

Back to MIN's energy strategy, well IMO it is pretty much going the whole 9 yards. And they ain't wasting any time by committing to some pretty aggressive seismic and drilling campaigns (both appraisal and exploration). MIN know they are potentially sitting on 10+TCF and this could feed a very profitable energy business. And IMO they will already have locked away a suitable rig...or be in very advanced discussion... unlikely you would be so forthcoming on your strategy and not have the rig to deliver on it... and end up looking like a goose.

So to recap they are planning:

• PB gas to allow them to ditch dirty diesel for all their own 100% mining operations (Li and IO)
• PB gas to be used also for all their JV mining operations (i.e. the massive Wodinga Li mine JV with Albemarle and other JVs)
• Offer PB gas energy solutions to their extensive mining services clients in WA (we all know every company in WA will be looking to decarbonise. 64% of gas consumption in WA is used for Mining or Mineral Processing and with more mines and plants being planned or constructed demand will only increase)
• Supplying PB gas to downstream plants such as Ammonia & Urea (looking at you STX and WPL, to name just 2 players. You could also throw in blue hydrogen plants too... as a transition until green hydrogen is economically viable in Aus).
• Modular LNG - this is huge... it's a far more cost effective way to produce LNG domestically with smaller 1-2m tpa modular plants... rather than the NWS massive 17m tpa plant with very high capex costs. LNG export is extremely lucrative... figures quoted are $14 a GJ over an above the WA domestic gas price of circa $5.50 GJ. Big margins to be had here. But I still believe the NWS tolling model makes sense given they are predicting 2 of the 5 LNG trains could be shut in 5 years if no other gas is found to replace their depleting fields. We already saw BPT sign a deal to sell their PB gas to NWS.

I am pretty excited after reading MIN's energy strategy and it would just be the most incredible transition for NWE... from being a micro-cap O&G hopeful... to possibly a $1b MC player in a matter of years. But... I still can't help thinking that since Min already own effectively ~84% of Lockyer Deep and all the key north PB prospects... it makes sense for them to just simplify their energy strategy and consolidate the asset level / operations and takeover NWE. It would be but a blip for their balance sheet, with $1.5bn cash currently sitting their waiting to be utilised. The energy business makes a tonne of sense to allocate MIN's capital and the ROI would be very compelling.

Very happy to be a part of this journey either way and I'd be very happy to stump up my own capital to help fund this incredible transformation.

GLTA