Looking for an Energy and Commodities play? Think MetalNRG PLC
“…With developments at Gold Ridge and BritNRG forthcoming and the prospect of long-term revenue through its waste-to-energy partnership, MetalNRG has a few significant events on the horizon…”
Natural resource investment and exploration company MetalNRG (LON:MNRG) may have a market cap of just £5.5m, but it covers a wide spectrum of the energy and commodities markets, spanning hydrocarbons, renewables, gold, and even uranium, across the UK, the US, Italy, Africa and central Asia.
Headed by CEO Rolf Gerritsen, a natural resources sector veteran with 30 years experience developing listed and private mining companies, and Executive Director of Oil & Gas Pierpaolo Rocco, who has held executive, commercial and project management roles for independents and majors such as Total, ENI and Shell, the company’s current flagship venture is its 100pc-owned Gold Ridge Project, mining a 1.8km strike on the lower southern slopes of Arizona’s Dos Cabezas Mountains.
The Gold Ridge Project
The Project encompasses three historic underground gold mines, Gold Prince, Gold Ridge and Dives, mined intermittently since the mid-1800s, which MetalNRG believes offer significant potential for new discoveries. Samples show consistent unmined mineralisation, with gold values ranging from 0.05 to 6.5 g/t, dump material from historic mining recording results as high as 115 ounces per tonne gold. Gold Prince produced approximately 22,000 oz up until it was last mined 25 years ago.
The company is currently completing field work focused on lithology and compiling data collected from several previous operators into a modern 3D platform with a view to exploration trenching over selected targets and additional soil sampling in Q3 this year. Mineral lease agreements are being negotiated with adjacent land owners to allow additional targets to be explored.
BritNRG: oil and gas in Lincolnshire
MetalNRG has a 100pc interest in six oil and gas licences in Lincolnshire, three producing, three exploration, through the BritNRG venture managed by Pierpaolo Rocco. Currently producing a collective 50 bopd the company believes there is potential for additional production ranging from 200 bopd to 500 bopd.
The most prospective licence, Whisby, has historical production of some 860,000 bbls from a thin basal carboniferous sand. The future potential of the field is ‘undetermined’: no systematic geological and reservoir engineering studies have been conducted since BP departed the block in the 1980s. But initial appraisal of its producing well W-4, which has produced at rates of more than 100 bopd, indicates sidetracking may unlock reserves in the range of 0.5 MMboe. BritNRG is planning workovers and integrity studies that may bring two wells back into production.
Another licence Newton on Trent is currently shut-in, but its Newton-1 well has produced some 50,000 stock tank barrels (the volume of a barrel of oil at the earth’s surface as opposed to the corresponding volume in the subsurface). Two new production wells updip of Newton-1 well – BritNRG’s interpretation shows that Newton-1 was drilled downdip of a significant four way dip closure – are planned next year subject to development approval. Studies estimate Newton may yield 2.7 MMStb.
Though new exploration and production on British soil may present the company with a communications headache, it notes the state mandate given last year to the UK Oil and Gas Authority to Maximise Economic Recovery (MER) of Britain’s hydrocarbon reserves, estimated to be up to 20bn boe.
Waste-to-energy partnership with ECTEC
MetalNRG can also point to the significant shift towards renewables it made earlier this year, with the establishment of MetalNRG Eco, a Special Purpose Vehicle designed to develop biomass, waste-to-energy and sustainable green energy projects across the UK and Europe. MetalNRG Eco aims to invest in ‘shovel ready’ green energy infrastructure focused on biomass-woodchip and refuse derived fuel, anaerobic digestion, gasification, hydrogen, and carbon capture. The global biomass market was worth $49.8bn in 2019 and is forecast to grow at a compound annual rate of 9.2pc between 2020 and 2027, promising to at least mitigate the world’s runaway waste disposal problem: waste is expected to increase by 70pc from current levels by 2050. Biomass now accounts for 40pc of the UK’s renewable energy consumption.
The establishment of MetalNRG Eco was facilitated by a business development partnership announced in March with EQTEC (AIM:EQT), a leading gasification technology solutions company for sustainable waste-to-energy projects. As TMS discussed in detail in our November feature on EQTEC, the company employs ‘fluidised bed reactor’ technology to apply heat, oxygen and pressure to feedstocks to transform them into a composite ‘syngas’ of sufficient purity for industrial use. The technique works with materials including olive stones, nut shells, straw, grape bagasse, wood chips, sawdust, pine cones, forestry clippings, lignite, sludge, rubber, demolition rubble, plastics, and plain municipal solid waste (known in the industry as refuse-derived fuel). Syngas can be turned into a synthetic natural gas through the addition of methane, and then injected directly into the electricity grid. Or it can be converted into hydrogen or biofuel, making it suitable for a range of emerging green technologies, including vehicles and power generators that run on fuel cells.
The partners’ focus will be on European projects with a capex investment of between £5 million to £15 million, able to be financed through a combination of debt and equity and deliver revenues within 18 months of a transaction. The venture will be further cemented through EQTEC’s acquisition of £500,000 MetalNRG shares.
Gold and uranium interests
In addition to its direct investments, MetalNRG has two significant indirect interests. It has a 3.84pc stake in the Lake Victoria Gold Project in Tanzania. Two of the 10 ore zones so far explored estimate an economic open cut Reserve of 44,000 oz at 2.9g/t and a Resource of 200,000 oz. MetalNRG had entered into Head of Terms to take full ownership of Lake Victoria Gold, an Australian based company, but took its current equity position instead after due diligence highlighted an ownership issue around two licences.
MetalNRG’s other indirect investment is a 9.9pc interest in the Kamushanovskoye Uranium Project in Kyrgyzstan. Owned by the US company International Mining Company (IMC) Invest, the mine, less than 100km from a uranium processing plant at Karabalta, has been valued at $151m. The venture was put in doubt last year when the Kyrgyzstan government imposted a country wide ban on the exploitation of uranium. The decision is currently under review by Kyrgyzstan’s new government. If the ban is not reversed MetalNRG has an agreement with IMC to receive funds equal to its equity portion to be recovered from any damages awarded to IMC.
As MetalNRG acknowledged in its final results to 31 December 2020, published in April, the company ‘has had an eventful year with key successes, but also faced some difficulties’. In addition to the issues in Kyrgyzstan and Tanzania, the company dropped out of a planned oil and gas venture in Romania in the midst of last year’s oil price crash.
The pandemic forced frustrating delays with the Gold Ridge Project, but a Gold Ridge Project update last month reported the publication of a CPR conducted by SRK Exploration Service, that in the words of MetalNRG CEO Rolf Gerritsen, ‘has put a new light’ on the opportunity. The CPR considers that the mapping and sampling conducted to date suggests the Project ‘has the potential for the discovery of further, minable gold mineralisation’, with a number of opportunities sitting between and adjacent to the three mines that Mr Gerritsen says are ‘very prospective for gold’. Further structural mapping, both on the surface and underground, should help define the structural history of the project area and its controls on gold mineralisation, informing future geochemical and geophysics surveys.
The CPR’s fresh indications of the Project’s promise come as wider economic conditions suggest the price of gold could remain at high levels for some time. The yellow metal reached historic highs last year, prices rising well above $2,000 per ounce. Gold is on the rise again as investors look to it as a hedge against possible inflation generated by post-pandemic economic stimulus packages.
There was further positive news when the company announced its participation in its first waste-to-energy project, the acquisition and planned recommissioning of a 1MWe waste-to-energy plant in Italy built around EQTEC’s gasification technology. MetalNRG will join a consortium led by EQTEC to repower, own and operate the biomass-to-energy plant, which will turn straw and forestry wood waste from local farms and forests into green electricity and heat for use in the local community. MetalNRG will invest €700,000 for a 26.66pc stake in the venture, which is aiming for an annual EBITDA of more than €750,000. The plant is due to be fully recommissioned and operational by Q2 2022.
MetalNRG’s year end results reported a loss for the year ended 31 December 2020 of £810,133 (2019: £584,855 loss). But Mr Gerritsen says the firm expects to become self-sustainable ‘in a relatively short period of time’, generating enough cash and revenue to avoid fundraising.
In its first full year on the Main Market of the LSE, having moved over from the NEX Exchange Growth market, the company’s shares have been volatile, fluctuating with the 0.6p to 0.85p region since last autumn, and spiking at well over 1p in March. The price has since subsided to less than 0.6p. But with developments at Gold Ridge and BritNRG forthcoming, and the prospect of long-term revenue through its waste-to-energy partnership, there MetalNRG has a few events on the horizon that might push that price up again.