If you believe the company's announcements, there is a tiddler in SA that is planning to disrupt the urea market by producing fertiliser significantly cheaper than existing supplies.
The standard way of making urea is to take natural gas, convert it to syngas to produce ammonia, and then add carbon dioxide.
Leigh Creek Energy (ASX code LCK) will use underground coal gasification (now known as in-situ gasification or ISG) to produce syngas directly. It reckons its gas feedstock cost will be about $40 a tonne of urea, which compares with natural gas feedstock costing about $320 a tonne of product.
As a result, it expects to be able to deliver up to 2 million tonnes of urea a year at less than US$100 (A$148) a tonne, ex-plant.
Moreover, it will have its own secure gas supply, and will not be dependent on third party suppliers in a tight market.
It has an estimated 1153 petajoules of gas in the proven and probably (2P) category. (Probable reserves are those they can be at least 50 per cent certain can be recovered.)
Leigh Creek Energy has already demonstrated that it can safely produce gas from coal seams deep below the now closed Leigh Creek coal mine.
It will need to build a A$2.77 billion urea plant, based on existing Thyssenkrupp designs, but it hopes to be producing gas and fertiliser by 2023.
In the meantime it expects to generate cash flow under a binding heads of agreement, signed in August, to begin underground gasification in China for both hydrogen and fertiliser (China New Energy is LCK's largest shareholder, with 24.24pc. Hong Kong-based Crown Ascent Development holds a further 5.2pc).
The share price has fallen steadily since an enthusiastic peak of 41c in late March. The intrepid Punter has bought 10,000 LCK at 22c each.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
