Golden Horde signs production sharing agreement with government

Golden Horde (GOH) has signed a production sharing contract (PSC) for coal bed methane at Nomgon IX petroleum block with the Mineral Resources and Petroleum Authority of Mongolia.

The company is expected to be acquired by Australian company Elixir Petroleum by mid-November subject to final shareholder approval. Final Elixir shareholder approval for the issue of Golden Horde consideration shares will reportedly be sought at its annual shareholder meeting in early November 2018.

With the PSC now executed, GOH has advised Elixir that it will commence initial exploration activities almost immediately, with the initial work consisting of field mapping prior to the onset of the northern winter, together with reprocessing of existing gravity data over the PSC area.

“This work will assist in determining the exact location of the proposed early Q2 2019 seismic acquisition program, the Q3/Q4 2019 proposed initial drilling program and the preparation of an initial Prospective Resources Report of the Nomgon IX CBM PSC area,” Elixir said.

Operationally, the initial work will include completing an environmental impact study (EIS) over the Nomgon IX PSC, which can be done over the upcoming northern winter and be completed in time for commencement of the 2019 exploration program, Elixir said. Furthermore, the winter months will be used to set up the administrative processes required to successfully operate a PSC in Mongolia.

This work is to be funded via the recently announced convertible loan facility that was put in place between Elixir and GOH to allow the initial work program to commence whilst Elixir awaits its final shareholder approval, which will be sought at the annual general meeting to be held in early November 2018.

“Things have progressed quickly since the Mongolian Cabinet approved the award of the PSC and now with renewed focus, GOH can commence the detailed planning process for the 2019 exploration program following the official signing of the PSC. The next few months will be busy for Elixir with not only the Alaskan and Mongolian acquisitions expected to close, but also the commencement of exploration activities on both these projects leading into a very active 2019 program,” said Elixir Managing Director Dougal Ferguson.

On September 12, Cabinet approved the award of the Nomgon IX PSC to GOH and the exclusive option for Elixir to acquire GOH was extended to November 30, 2018 to facilitate Elixir shareholder approval within the option period. Interim funding of 250,000 USD was provided to GOH by Elixir through a convertible loan facility.

In October 2017, Elixir executed a binding terms sheet over an option to acquire GOH for a consideration of 79 million Elixir shares. GOH was established in 2011 with the sole purpose of securing CBM rights (also known as Coal Seam Gas or CSG) in Mongolia in an area directly adjacent to the existing gas markets of Northern China. GOH undertook a detailed prospecting study in the Nomgon IX PSC area prior to commencing negotiations with the Mineral Resources and Petroleum Authority on the commercial terms for a PSC.

Nomgon IX, which covers an area of over seven million acres, lies adjacent to the Chinese border and is ideally placed for future gas sales into the extensive Northern China gas transmission and distribution network, according to the company. In addition to Chinese gas demand, Mongolia currently has no gas production and there is a strong political desire to replace high pollution coal power and heat generation with low emission clean-burning gas fired generation.