update

The price is currently at a discount of 10.3% to the 1-month volume weighted average price of 68.04c, which may appeal as a value proposition.

From the 13th May up to the 4th June, MEE has been up 11 times and down only 3. The last 6 days the sp has been down, but the total volume has only been at 24,117,968. Compare that to the 5 days prior, days when the sp was up, the volume was at 33,9772,39. I would expect a rise up to the 64 - 66c level on Monday, and some consolidation for the next leg up, leading up to the pilot burn, as well the EGM on the 23rd June, by then they will have tied up:

* Funding construction payments for the undergroundcoal gasification(UCG) demonstration trial at Bloodwood Creek;

* Funding for the cash component of the consideration for the Carbon Energy Acquisition;

* Exploration drilling to increase the coal resource at Bloodwood Creek and exploration drilling on Carbon Energy’s other coal tenements;


In summary, it is anticipated that the funds raised will be broadly applied in the following areas:

* Bloodwood Creek UCG trial 50%

* Carbon Energy Acquisition payments 10%

* Exploration 20%

* Administration 10%

* Working Capital 10%


Then there is having an $8billion company on your side:

Metex Resources Ltd (ASX: MEE) is pleased to advise that Incitec Pivot Ltd (ASX: IPL) has confirmed that IPL is satisfied with the results of their due diligence investigation.

Metex looks forward to welcoming IPL as a substantial shareholder subject to resolution of the acquisition of the remaining shares in Carbon Energy Pty Ltd and the various share issues pursuant to the Shareholders’ meeting called for 23 June 2008, after which IPL will hold approximately 10.7% of the equity in Metex.

Carbon Energy has received all necessary approvals from the Minister of Mines and Energy and the Environmental Protection Agency in Queensland to progress with its demonstration trial of a standard 1 petajoule (PJ) per year UCG syngas module at Bloodwood Creek in the Surat Basin, located 55km west of Dalby in southeast Queensland. The trial site is strategically located at the hub of energy infrastructure in southeast Queensland.

Carbon Energy has identified a suitable site within its coal resource of over 100 million tonnes of high quality coal at Bloodwood Creek. Using conventional estimation techniques, and an average bulk density of 1.5 the resource meets the requirements of a JORC (2004) compliant Inferred Coal Resource. It remains open along strike and down dip and is expected to increase significantly with further drilling. This resource is estimated to contain approximately 2,000 PJ of energy, with some 1,000 PJ being potentially recoverable utilizing CEPL’s extraction technology. The current lack of drilling is the only constraint on significantly increasing this resource, together with the energy contained within it.

The footprint of UCG is small compared with coal seam gas (CSG):

Table1. Energy (PJ) potentially recoverable from 12km2 section of the Surat Basin utilizing UCG technology

Total Area 12km2, Total In situ Energy (PJ), Recoverable Energy (PJ)
Coal Resource (Underground) 120 M Tonnes, 2400, 800
Coal Resource (UCG) 120 M Tonnes, 2400+22.8*, 1257+22.8*
CSG (CH4m3) 2.175x106, 82.6, 59.5

* CH4 contained within the coal resource.

Based on a 20 year production life these range from approximately 1280PJ’s recoverable by UCG, 800 PJ by underground mining to less than 60PJ from CSG. At A$3 per gigajoule (GJ) this translates as an in situ recoverable value of energy of A$176 million for CSG, A$2.4 billion for underground mineable coal, and A$3.84 billion for UCG.

Carbon Energy are currently proceeding with the construction of the surface and underground components of what will be the world’s first commercial scale, oxygen-injected UCG demonstration trial.

Commissioning of the facility expected in July - Sept. UCG syngas production will follow shortly thereafter as part of a 100 day production test.

The difference between Carbon Energy,Linc Energy and Cougar Energy is Carbon Energy use unique technology and intellectual property developed within CSIRO for UCG, and incorporates aspects of the successful trial in the United States at the Rocky Mountain 1 site near Hanna, Wyoming. Note the word successful.

The Bloodwood Creek demonstration will verify the quality and production of gas in the specific conditions of the coal resource identified within tenement MDL374. The technical director of the Rocky Mountain 1 trial, Mr Burl Davis, is assisting MEE with this development.

The successful demonstration of this syngas producing module will confirm Carbon Energy capability as the world’s first company with the capability for commercial scale, oxygen-injected UCG syngas production suitable for existing, proven, gas to liquids and gas to chemicals technologies. Modules can be combined to meet the gas supply requirements for any power station or chemical plant.

MEE also have their other assets:

* Uranium: 18 granted tenements that have a total area of 5,413 km2 in Western Australia, South Australia, Queensland and the Northern Territory.

* Gold: 852,350 ounces attributable to Metex.

* 10 million shares in ASX listed Magma Metals Ltd (ASX:MMB).


If you were to add up all their assets and consider that the test pilot burn will commence in July - Aug and compare that to Linc Energy, who are in a similar position to Carbon Energy, 'they are close to completion on the commissioning of their facility,' Carbon Energy are 3 - 6 months behind. Linc Energy is currently valued at 1.5 billion mkt cap, versus MEE 1.7 million. Makes you think doesn't it, will MEE/Carbon Energy (CSIRO/CEPL) be much higher than today's price in the next few months? Are we looking at the next Linc Energy and if you had 100,000k to invest, which one would bring the greater return? Linc Energy has the potential to run to $6 - $10 on success of their commissioning plant, Carbon Energy..60c to ....?

---------------------------------------------------

All sounds very promising, which is exactly why I have invested heavily in MEE.

I've read all about the succsessful progress made at Wyoming (particularly with respect to improved environmental performance) and Dr Mallet from CSIRO is a genius so I'm extremely optimistic that the pilot burn will prove that MEE is the leader in UCG.

Appealingly, after a successful demonstration, international markets beckon... India in particular could deliver more for this company than the relatively small Australian market ever could.

But in terms of Linc v MEE - doesn't MEE still need to locate a GTL technology provider?

The thing that drew me to this concept initially was the fact that although GTL technology is prevalent world-wide, it's never really taken off due to the prohibitive price of gas. But with UGC seemingly presenting a ready source of gas, extremely cheaply, the figures on GTL start to look very attractive indeed.

To their credit Linc have always been very focussed on UGC-GTL, but MEE less so - they seem willing (at the moment anyway) to investigate other potential applications for syngas i.e fertailizer.

I don't doubt that these other options present a strong commercial case, but in the current climate the word on everyone's lips is OIL.

But having said that, I still think MEE is in a very strong position to make a run at this - Linc's background with UGC has not been without issue, and if, as I expect, MEE's pilot burn can demonstrate its technology is superior, GTL collaborators will not be hard to find. Cracking the UGC nut is the hardest part - the GTL bit is easy with the right people involved. I also like the fact that the Bloodwood Creek site can be scaled-up relatively quickly after the trial; post-trial commerical quantities on syngas can virtually be good to go.

LNC has done very, very well, and will continue to grow. But MEE seems a better value proposition - it's yet to boom. It won't happen tommorow, but within the next 12 months I expect MEE capex will have made up some good ground on LNC capex. Waiting for a few key events.