Cambrex Corp. (CBM)

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Saber Energy gains confidence in Botswana project as exploration progresses to second phase

http://www.miningweekly.com/article.php?a_id=136236

By: Christy van der Merwe
Published on 23rd June 2008

Coalbed methane (CBM) exploration company, Saber Energy Corp, has completed its first phase of exploration in the Kalahari, in Botswana, and has drilled over 65 holes as well as conducting a feasibility study and environmental impact assessment for the possible routing of a pipeline to transport the gas produced to off-takers.

"All the parameters look good, and the depth of exploration being done is giving us more confidence as we go ahead," said Saber Energy director Colin Kinley, while explaining operations on site to a number of Botswana government and Botswana Power Corporation (BPC) representatives as well as independent advisors and media, on Friday.

The holes drilled allow the company to understand the geology better, and test the gas content of the coal, as well as study the mechanics of the rock and gauge its permeability. "Certainly the geology is right - there is enough gas in it. The numbers look good - as good as some of the coal basins in the US," stated Kinley.

He added that the quality of the gas was also very high, about 98% pure methane. This varied throughout the field, but as the gas would all come together at a central point before being piped, this was not a great concern.

In the next phase of exploration, the five pilot five-spot wells with pump-jacks and gas separators that have been established, would pipe gas to a central point where it will be flared and further monitored and verified, allowing the company to gain a better understanding of the resource, and establish the gas flow rates.

Kinley expected that by the end of July, Saber Energy would have spent about $50-million on the project, and expected that another $50-million would be spent on the project in the next year. A lot of this money was benefiting the Botswana economy as the company had sourced a number of local suppliers and services.

To date, the company has been funded by private investors, but once exploration was complete, it could go to market with more exact details, a dual listing in Botswana and Toronto was likely.

"I expect we will take the stock to the market in about a year from now. At that point we will have more confidence in the resource and the market," added Kinley.

Saber Energy has acquired three concessions, which total an area of some 3,6-million acres in the area close to Mahalapye, in Botswana.

The area is said to be one of the largest contiguous blocks containing CBM, and the scale of the Saber project could be the largest in the world with one resource owner, under a single government regime. There are also very few landowners or farmers in the area, making the project particularly attractive.

Although CBM has gone from a largely research and development-based initiative to a commercially viable power source in places like the US and China, this would be the first commercial development of CBM in Africa.

Saber Energy's exploration takes place in the core of what is a large coal basin. The central coal seams are deeper and not economically feasible to mine, but are expected to be rich in methane which can be used as a power source. Towards the edge of the basin, the coal is shallower and accessible to mine, and it is on the edge of the same basin where the Mmamabula coal power complex will be situated.

Mmamabula developing company, CIC Energy Corp is a Saber Energy affiliated company, which also falls under the parent company, TSX-listed Tau Capital.

"There are many complementarities between the two initiatives," explained CIC Energy Corp COO Tore Horvei.

The most interesting of these complementarities is the possibility of Saber Energy supplying CBM as a power generation source for CIC Energy's construction requirements of the Mmamabula complex. Construction at Mmamabula would require about 150MW of power.

Other end-users of CBM from the Saber project could be the BPC, which is investigating the construction of a 250MW peaking power plant in Botswana.

CBM can also be converted into liquid diesel fuel, and with the increasing demand for diesel in the region, a local fuel company could also be a potential customer for the Saber Energy Corp.