Join our daily newsletter At The Bell to receive exclusive market insights
- TMK Energy (ASX:TMK) will pay for Talon’s 33 per cent earned interest in a Mongolian gas project with “up to” 1.1 billion shares
- Talon says the shares its paid mean its own shareholders can retain exposure to the gas project
- The project sits in the Gobi Desert in Mongolia relatively close to the Chinese border
- Chinese natural gas energy demand is forecast by some to soar in China across the coming decades
- Talon shares last traded at 22 cents. TMK shares last traded at 1.3 cents
Talon Energy (ASX:TPD) has executed a binding deal with its partner at the Mongolian Gobi Desert-based Gurvantes gas project TMK Energy (TMK) to consolidate 100 per cent ownership of the asset.
TMK Energy will pay for Talon’s 33 per cent earned interest with the issue of “up to” an eye-watering 1.1 billion ordinary TMK shares as well as 550 million listed options under the ticket TMKOB.
TMK shares are currently worth 1.2 cents but an issue of 1 billion ordinary shares will dilute them further. On top of this, TMK will also pay Talon $850,000.
Shareholders must first approve the deal (to make it binding) and on Talon’s end, its board of directors are all voting in support of the move while the company recommended its own shareholders do the same on Wednesday.
So too did TMK Energy, stating its belief the 100 per cent consolidation is “compelling for TMK shareholders.”
The project sits in the Gobi Desert within Mongolia relatively close to the Chinese border as far as the scale of the continent goes, but, lacks pipeline infrastructure connecting it to major networks.
While the price of constructing a pipeline remains to be seen, the microcap isn’t the only operator in the region. Elixir Energy (ASX:EXR) and Jade Gas (ASX:JGH) also work in Mongolia.
Chinese natural gas energy demand is forecast by some to soar in China across coming decades as coal is increasingly phased out and the companies are intending to leverage the still early years of decarbonisation.
Elixir is even going as far as to try and produce Hydrogen in the Gobi, too.
“The proposed transaction has been structured in a way that is highly value accretive for existing TMK shareholders … with minimal dilution and provides the incoming Talon shareholders with a zero-cost exposure to the enormous potential of the Gurvantes XXXV Project,” TMK CEO Brendan Stats said.
The shares and options Talon receives will be retained by the company with leftover distributed to Talon shareholders for approximately 1.56 TMK shares for every Talon share held.
This implies approximately 2 cents per Talon share, Talon Energy wrote on Wednesday.
“Talon shareholders retain exposure to Gurvantes via proposed equity and listed option holding in TMK Energy, delivering cost synergies by simplifying ownership and streamlining management of the Project,” the company wrote.
Talon shares last traded at 22.5 cents. TMK shares last traded at 1.3 cents.
