aminex agm presentation, page-15

And here's the view from marben100 from stockopedia, another interesting read:


Kiliwane North

KN-1 has been tremendously frustrating for investors in Aminex. Expectations were that some limited trial production, at least, could be brought on-stream within a few months of the discovery, now two years ago. The result has been that the market appears to me to have almost totally discounted the discovery. I do not accept that view and the answers from the AGM justify my view, IMO.

Just to put this in context, for those that may not be fully up to speed, bringing KN-1 on-stream requires the following:

?An upgrade to the Songo-Songo gas processing plant to accept flows from the well. Brian maintains that with the upgrade, there will be sufficient capacity for gas from Aminex's licences, despite Orca possibly trying to suggest otherwise. Orca are simply a customer of the pipeline company and Aminex also has rights of access under its PSA. Bear in mind that Orca (who are also awaiting additional capacity for their more recent discoveries) may have a vested interest in suggesting that they are "more equal" than Aminex in their access rights.
?A short pipeline (2.5km) from the well to the plant
?Definitive agreement of fiscal terms for gas sales
?Marketing of the gas

Brian was asked to put his confidence in the plant upgrade occurring on a scale of 0 to 10. His immediate response was "10". The delays have been immensely frustrating but they WILL be overcome, as all key parties are keen to proceed and Tanzania has a pressing need for indigenously produced energy. Brian explained that the delay was due to the time take for negotiation of an agreement between Songas and EWURA (Energy and Water Utilities Regulatory Authority of Tanzania). I had not previously realised that Songas was a UK controlled entity, established with finance from CDC (and World Bank). When negotiations between Songas and EWURA began, there were over 100 points of disagreement. This is now down to a single issue: which country will host any necessary dispute resolution between Songas and EWURA. Songas has access to the necessary finance (around $120m) to proceed with the upgrade.

ISTM that agreement could be reached at any time.

Some investors are also sceptical about the market for Aminex's gas. Brian indicated that there was strong demand for gas from industrial users, to substitute for expensive imported fuel. Prices agreed with such users are significantly ABOVE the Henry Hub price. There is significant industry around Dar-Es-Salaam and talk about a possible pipeline to Mombassa continues.

It is also important to realise that Aminex has significant accrued costs, which are recoverable before the Tanzanian government becomes entitled to a profit share Hence my conservative calculation of Aminex's NET revenues from initial production is: 50% x 10,000mscf/d x $2 (net of Songas tariff) = $10,000/d = $3m p.a. That's significant against Aminex's current market cap of ?31m and annual GROSS revenues of $7.8m.

Rest of Nyuni Licence

When Aminex contracted ISIS to perform an independent assessment of the Nyuni resources, Brian had expected that only the KN-1 discovery would be taken into account. On considering the quality of data from the suspended Nyuni-1 well, however, ISIS concluded that they could also assign contingent and prospective resources to other structues within the Nyuni licence.

Brain explained that ISIS hadn't completed their work at the time Aminex's results were announced. That work has now been completed and slightly larger figures have been assigned, which can be seen in slide 12. In total, there are over 2tcf of prospective GIIP resources. I asked Brian about realistic recovery factors and, given the reservoir quality, Aminex consider 75% recovery to be conservative. In response to the query raised by dbfromgb, Nyuni is now regarded as a gas play and oil is not considered likely to be found in that licence.

This leads to a development concept for the Nyuni licence as a nice gas business, beginning with KN-1 well. The expanded Songo-Songo treatment plant would act as a hub for gas collection. Aminex is hoping to drill a further well on the licence this year and, potentially, could be supplying increasing volumes of gas to Songo-Songo as time and drilling proceed, leading to growing supplies to the Dar-Es-Salaam market and to growing revenues.

It is to be noted that all the Nyuni prospects are drillable using land rigs from small islands or shallow reefs close to those prospects.

The market doesn't believe it. You, the investor, will have to decide for yourself whether you do.

Finally, before completed my writeup relating to Tanz, Brian was asked about Key's intention to dispose of their Tanzanian interests. Brian was somewhat surprised when Key published their intention to divest their interests as they had not informed Aminex of this! A meeting was scheduled for the following day, where this was to be discussed.


I'm almost tempted on this update to shift my sentiment back to a buy, but we've had delays for so long now that I'm not prepared to change until I actually see concrete action.