Queensland Pacific Metals Ltd (ASX:QPM) business QPM Energy (QPME) has concluded a commercial agreement with Incitec Pivot Ltd (ASX:IPL) to facilitate the completion of the Moranbah Project acquisition and fast-track gas production growth.
Under the agreement, Dyno Nobel, a wholly owned subsidiary of IPL, will provide an initial development funding facility of up to $80 million, with the option to increase it to $120 million if necessary.
This funding will be allocated to accelerate the development of the Moranbah Project by covering the capital costs of new infill production wells.
In addition, both parties have entered into a new gas supply agreement (GSA), which will come into effect in April 2026 upon the expiration of the existing GSA.
Looking ahead, this long-term gas supply agreement is vital for QPM's TECH Project and Dyno Nobel's Moranbah operations, ensuring a stable and cost-effective gas supply.
Accelerate production growth
QPME's CEO David Wrench said: “These agreements with IPL will go a significant way to reaching completion of the transaction by mid-year.
“Furthermore, the financial support provided by IPL highlights their endorsement of QPM Energy as operator of the Moranbah Project and greatly assists in the acceleration of production growth.
“Further information regarding the project, including key transaction terms, strategic rationale for the transaction, project overview, field development and revenue opportunities, is set out in the announcements to ASX, regarding the acquisition of the Moranbah Project, dated April 5, 2023.”
However, it is important to note that the completion of these agreements remains subject to customary conditions typical for transactions of this nature. The parties involved are committed to fulfilling all necessary requirements to finalize the agreements successfully.
Higher quantities of gas
The current gas production at the Moranbah Project stands at approximately 10 peta (PJ) per annum.
QPME aims to increase this to 12-13PJ per annum within six months following the completion of the transaction.
This expansion will enable higher quantities of gas to be supplied to the Townsville Power Station, resulting in increased revenue from electricity generation.
To finance the associated capital costs of boosting gas production, Dyno Nobel will provide a funding facility with an initial aggregate limit of $80 million, which can be expanded to $120 million at the lender's discretion if the need arises.
The repayment of this facility will be made through the delivery of gas over the term of the new gas supply agreement.