Wow what a great few months EXR has had, culminating yesterday...

Wow what a great few months EXR has had, culminating yesterday in our highest close (36.5 cents) and highest intra-day price (39 cents) ever. Be warned all, the following is a long post from a long term passionate shareholder!

SHARE PRICE INCREASE

Since last posting on this forum just before Christmas, EXR has seen a very robust threefold increase. A number of factors have helped contribute to the price fold increase and I think it’s totally justified for a few solid reasons:

*EXR being fully cashed up from the conversion of 118 million options to $8 million dollars. With a strike price of 6.79 cents those former option holders are doing very well indeed.
*Improved macro-economic conditions, spurred on by vaccine hopes and now rollouts across the globe. Added also is the increased stability within the U.S political system, at least for the next four years.
*Some welcomed reddit / reddit-style publicity that helped get the word out about EXR.
*The thawing of our PSC post winter and some Covid restrictions being eased, meaning the drill bit is turning again. There are high hopes for success at Yangir-2 where ‘very active gas bubbling from coals and in the mud-pit’ were observed late last year.

OTHER ENTRANTS

I’ve been thinking about some of the other companies who are entering the CSG sphere in Mongolia. The fact that new players are entering the space shows me that as we have known all along, there is a ton of gas within Mongolia’s Umnugovi region (centered around the Gobi desert) that’s waiting to be unlocked and the Mongolian Government is supporting this. ERCE and various other expert bodies has defined its world class potential in various research papers. Gas from Mongolia, wherever it is, into China is always going to be a whole lot cheaper than gas from Australia or any other country that relies on the liquefaction of their gas and then shipping it half way across the globe. China, currently being the world’s most important gas market, has a rosy forecast too. BHP, Shell and Wood Mackenzie’s all agree that China’s insatiable appetite for gas will only increase over the next few decades.

What sets EXR apart from some of the other new entrants are:
*We have 100% ownership and operatorship of our PSC.
*We don’t have a primary CSG asset that forms the crux of our Mongolian business model. We have lots of room to move within our vast 30,000 km(2) PSC, given success or failure within a multitude of basins.
*We don’t have operational coal mines in the vicinity of our discoveries, meaning no conflict of operating interest or logistical issues.
*Our PSC was approved in September 2018 (under Golden Horde) and was the first awarded under the country’s new legislation for unconventional oil and gas exploration. Leading up to this, Neil (our MD and largest shareholder) had spent a number of years in Mongolia establishing contacts and networks.
*We have a number of recent drilling successes under our belt. We have Mongolia’s first CSG discovery and likely soon to be second CSG discovery. Likely also is Mongolia’s first successful pilot well - Neil has said that the results from Nomgon-1 bode very well for a successful pilot well later this year (however, nothing is certain in this field).

Accordingly, EXR has first mover advantages in a number of key areas.

All this being said, Elixir’s results to date have proved that southern Mongolia is ripe for CSG and any company entering this space is likely to have a bright future and I wish any new entrants and their shareholders all the best.

CONTINGENT RESOURCE

As for the contingent resource, there has been a varying degree of figures surmised on this forum. I suspect that there could be a wide range between the low 1C / P90 to high 3C / P10 – not enough testing may have been done to define the resource within a tight range, but it really depends on what the certifier will allow. I suspect that they could try and include the resource in Yangir, even though it was mentioned in a research report from late last year that it would likely be limited to the Nomgon project area. I’m not a CSG expert and I have limited access to data, so I wouldn’t even give it a stab.

Either way, as the company has said on a number of occasions, we don’t need an Australian style multi-TCF gas resource as the economics of even what is minimal un-economic resource in Australia could mean a multi-million dollar value in Mongolia, being right next door to China, the world’s largest consumer of natural gas. IMO a few hundred BCF resource alone could be enough to justify the current market cap. Not to mention the rest of the PSC with the prospective resource of 14.6 TCF (risked) and 48 TCF (unrisked)! Hence, needless to say we should apply a different level of thinking with resource size in Mongolia compared to resource size in Australia.

In a number of presentations, it was said that if you add up and link some of the sub-basins, you have a resource size of interest to Majors (i.e Shell) and National Oil Companies (i.e CNPC). Note, Nomgon’s close proximity to the other sub-basins of Yangir and Temee.

FORWARD DRILLING PLANS

With drilling results imminent for Yangir-2 many like myself would be ‘on tenterhooks’. Assuming the expected success at Yangir, I would expect further step out wells within that sub-basin to define the extent of the resource, similar to what happened in Nomgon. Then onto perhaps the Temee / Bayan-1 prospect which sits in a large basin a number of km east of Nomgon-1.

Drilling nearby prospects like Temee / Bayan-1 has a number of benefits including linking up basins with discoveries, nearology for geological success, the ease of ‘moving digs’ / ‘upping sticks’ for logistical ease, local regulatory approvals and proving up one section of the PSC so it can potentially be carved off to a player and then EXR continues to another area to further carve out.

Within the bounds of our tenement there exist numerous coal outcrops including Tsant Uul, Tsaagan Tolgoi and Ulaan Tolgoi, some which have limited historical shallow drilling work. Recent field work has also discovered a number of other coal crops which provide further opportunity. Recent seismic has outlined exciting new prospects across our PSC including Cracker, TT South West, Khaar Sult (Richcairn West), Richcairn, TT North, Temee and Bag (P.13 of last investor conference). Lots of scope going forward, all of which provide ample opportunity for further discoveries (especially with potentially two rigs drilling in tandem). It’s a case of ‘rinse and repeat’, a ‘relentless’ process. All done with the ‘shoe string’ cost of drilling CSG in Mongolia.

COMPANY ENGAGEMENT

No company can and should operate as a silo disconnected from the local and wider communities that they operate within. It’s encouraging to see that Elixir has recently received recognition from the Mongolian Government, receiving the Mining Minister’s ‘Best Investor of 2020’ award. Note that one of EXR’s largest shareholders has links to the Mongolian Business council too. Elixir’s recent adoption of ESG and HSE practices show that the company is committed to good corporate social responsibility (note the new ESG section on their website). Nice touch with the recent donation of Covid PPE to the local administration - thankfully Mongolia has seen limited Covid numbers to date (partially contributed to lockdowns) and a countrywide vaccination program was rolled out a few weeks ago.

WRAP UP

Well, good luck EXR’ers / Elixirnaires the next few months should see some exciting times ahead.

As a holder of EXR shares this has been a phenomenal ride for me. EXR was first brought to my attention back in September 2019 by one of those HotCopper ‘heart’ posters. After investigating the company I decided to make a modest purchase. In the eight months that followed I accumulated a sizable amount of shares with an average at 3.75 cents. Needless to say I’m now sitting on a nice profit. It’s heartening to know that a number of other posters on here have similar stories. True EXR believers that have supported the company and been rewarded and will hopefully continue to be rewarded.

Keep up your informative posts @WatchNact
Hope your pub gathering is a hoot @tui
If you are reading @lawrence1967 I hope you have made a Lasseter’s reef type pile by buying all the shares you could under 5 cents! Never before has there been such a true believer in a stock.

Keep up the great work Neil, Richard, Stephen & Anna. Safe drilling to the team in Mongolia headed by in-country manager, Buyannemekh.

All of the above IMO and DYOR. GLTAH. Enough of the acronyms (and writings) for now.