WPG Resources (ASX: WPG) is an Australian mineral resources company with iron ore and coal exploration projects located in South Australia. WPG's iron ore deposits comprise direct shipping ore (DSO) deposits, magnetite deposits and a new style of mineralisation; beneficiable feed ore (BFO) deposits.
WPG Resources and Evergreen Energy Inc to use K-Fuel® technology to lift lower rank coal quality
WPG's strategy is to "value up" lower rank coals by increasing calorific value using the K-Fuel® process in order to compete with traditional thermal coal from the Hunter Valley for the Asian export market.
WPG Resources (ASX: WPG) and Evergreen Energy Inc (NYSE Arca: EEE) have signed agreements to set up a joint venture to develop and produce Evergreen’s coal upgrading technology, K-Fuel®, throughout Australia.
WPG’s subsidiary, Southern Coal Holdings Pty Ltd (SCH), holds all of WPG’s coal assets in South Australia and will be used as the joint venture vehicle.
SCH will be 50% owned by WPG Resources and 50% by Evergreen Energy on completion. Evergreen has a market capitalisation of US$51.77 million.
Importantly, the K-Fuel® process should not only achieve a significant increase in calorific value, but also a reduction in greenhouse gasses from WPG's considerable coal resources.
SCH will hold the exclusive licence for the first 15 million tonnes per annum (mtpa) of K-Fuel® produced anywhere in Australia under the terms of the agreements, and will not be only from SCH’s current tenement portfolio.
SCH will also have the first right of refusal to participate in production of K-Fuel® in excess of 15 mtpa, on terms to be negotiated in good faith at the time.
Bob Duffin, WPG Resources' chairman, said “WPG Resources and Evergreen Energy share a common goal of tapping into the rich and valuable market for coal as a source of energy from the Asian market.
"I have just returned from a visit to Evergreen’s K-Fuel facility in Wyoming where coal testing of our Penrhyn samples will continue over the summer. I am very excited about the future of SCH and the plans to build our first K-Fuel plant in Australia.”
The K-Fuel® process has been developed by Evergreen over a many years and WPG has conducted the necessary due diligence and has no doubt that the process works at both the laboratory and production plant scale.
WPG believes the K-Fuel® process is capable of achieving a significant increase in calorific value and reduction in greenhouse gasses when applied to sub-bituminous and lignite coals such as those at SCH’s Penrhyn and Lochiel North project areas.
The joint venture is expected to take on its own character and be led by its own management team in due course.
Demand for coal from regions such as India, China, Japan and Korea highlight the need for coal upgrading technologies.
The price of thermal coal continues to be not only buoyant in the Asia Pacific area, but also represents a significant premium to prices in North America.
WPG’s core business will remain in the iron ore space. On May 30 WPG announced that it expects the Mining and Rehabilitation Plan for the company’s Peculiar Knob iron ore mine to be approved during July 2011.
