ECSI launches itself into Hungarian coal space

ECSI (ASX: ECS) is moving towards the acquisition of seven coal permits in Hungary with an option agreement to acquire all of the issued shares in Synclean Resources.

Synclean Resources, a wholly owned subsidiary of Synclean Energy, owns permits covering around 738 square kilometres prospective for underground coal gasification (UCG)-suitable coal seams in two different regions of Hungary.

In general, coal seams in Hungary have a comparatively low calorific value, with high ash and sulphur contents.

However, for UCG purposes, this is not an issue as ash remains in the coal seam after production and sulphur is not mobilised at the UCG process temperature.

The Hungarian Permits are located in areas of relatively good infrastructure with access to both road and rail in an area with a rich history of mining.

The permits are also located close to potential markets and well situated to take advantage of the regional pipeline network and power stations.

If ECSI chooses to exercise the option to acquire the permits, the company will have exclusive rights to explore and investigate coal seams suitable below 300 metres for UCG use.

Importantly, ECSI has access to existing data on the coal seams from more than 11,000 exploration wells drilled, which the company will use to fast track the initial site selection process.


Vesprem Permits

The Vesprem permits, comprised of Bakony-North I, Bakony-North II, Gerecse and Berhida, are located in the west of Hungary.

From analysis of historical data, the permits are known to contain resources of high grade brown coal that ECSI believes is well suited for use as part of a potential UCG operation.

The permits contain between two and four coal seams at a depth of below 300 metres. The average thickness of the seams is 2 metres, with a maximum thickness of 4 metres developed in some areas of the permit.


Mecsek Mountains Permits

The Mecsek Mountains permits are comprised of three separate permits – Volgyseg-Hegyhet, Komlodeep and Hosszuheteny West.

The permits are located in the south of Hungary, north of Pécs, the fifth largest city in Hungary with a population of 150,000 and a long history of mining.

The exploration target in Mecsek is black coal, a higher rank coal than the potential resource on the Vesprem Bakony permits.

As such, the potential black coal resource on the Mecsek Mountains permits generally has a higher calorific value.

Historical data indicates that the permits contain up to 60 separate coal seams. The coal seams attain a maximum thickness of 30 metres, although the mean seam thickness in the permit area is around 1 metre.

The coal seams in the Mecsek area are deeper than on the Vesprem Bakony permit area with depths in excess of 450 metres, 550 metres and 800 metres for Hosszuheteny, Hegyhat, and Komlo-deep respectively.

The greater depth of the seams makes the coal ideal for UCG purposes as it can exploit coal seams that are uneconomic for conventional mining.


Hungary Demand

Hungary’s domestic oil and conventional gas production falls far short of demand and the country has large coal reserves of which new exploitation by conventional mining has been banned by the government.

The country does not have energy security and is highly dependent on Russia and the Ukraine for its gas imports. Importantly, European gas prices are high.


Consideration for Coal Acquisition

Under the formal agreement with Mutual Wide Corporation, the company that is assigning ECSI the rights to the option to acquire all of the shares in Synclean subsidiary, ECSI will pay $8.1 million as a scrip consideration.