Elixir Energy Limited  ASX:EXR

Company

Current Price

Initial Coverage

Date

Price

Initial Entry Price

Returns from Initial Entry

$ 0.150

05-Jun-20

$ 0.036

$ 0.039

285%

Report Date Price Current Return
Mongolia’s First Gas Discovery 05-Jun-20 $0.036 317%
How Our Investments Performed in Q1 of 2021 21-Apr-21 $0.405 -63%
12 months on, a de-risked EXR continues to deliver 04-Jun-21 $0.28 -46%
Watch Now: EXR reveals hydrogen plans at International New Energy Summit 30-Sep-21 $0.245 -39%
What have our portfolio companies been doing? (Part 2) 11-Nov-21 $0.232 -35%
Why we invested in EXR and what we want to see in 2022. 10-Mar-22 $0.150 0%
New sub-basin discovered 31-Mar-22 $0.180 -17%
EXR Inks Green Hydrogen MoU with a SoftBank Subsidiary 20-Jun-22 $0.1400 7%

ASX:EXR

Returns from Initial Entry

285%

Current Price

$ 0.150

First Coverage

05-Jun-20

$ 0.036

Initial Entry Price

$ 0.039

Returns from Initial Entry

285%

Past Coverage
Mongolia’s First Gas Discovery
How Our Investments Performed in Q1 of 2021
12 months on, a de-risked EXR continues to deliver
Watch Now: EXR reveals hydrogen plans at International New Energy Summit
What have our portfolio companies been doing? (Part 2)
Why we invested in EXR and what we want to see in 2022.
New sub-basin discovered
EXR Inks Green Hydrogen MoU with a SoftBank Subsidiary

Overview

Elixir Energy (ASX:EXR) is looking to build out a clean-energy producing hub consisting of Coal Seam Gas and Green Hydrogen in southern Mongolia, bordering China.

What is the macro theme behind EXR?

Decarbonisation via natural gas energy production and green hydrogen technology. As the world looks to cut greenhouse gas emissions, gas and green hydrogen may prove to be major building blocks towards a net zero economy.

Investment Memo: Elixir Energy (ASX:EXR)

10-Mar-2022


Why do we continue to hold in 2022?

  1. Strategic location: EXR’s project is on the border of the clean-energy hungry China, seeking transitions to cleaner, nearby energy sources.
  2. Strong board & management team: A history of success in coal seam gas.
  3. Green-Hydrogen potential: A research report indicated a strong base for a potential Green-Hydrogen project over EXR’s Nomgon PSC.
  4. Fully funded exploration: Drilling planned across giant landholding seeking to open up new sub-basins and add to existing prospective gas resource.
  5. Strong balance sheet: EXR’s $28.4M in cash (at 31/12/2021) can fund its existing business lines for the indefinite future, plus allows for potential acquisitions.

What do we want EXR to deliver in 2022?

Objective #1: Pilot production program at the Gas project

Design, costings, and permitting leading to a maiden pilot production program this year.

Objective #2: Exploration drilling

In addition to the pilot production program, Elixir will continue its exploration program across the Nomgon PSC, with ~20 wells planned for 2022.

Objective #3: Evaluate the Commercial Viability of a Hydrogen Project

  • Updates on MOUs signed with the government, and other stakeholders, exploring the potential for a Green Hydrogen project over the project area.
  • Other key ‘studies’ undertaken including legal, environmental, and commercial evaluation of the project.

What could go wrong?

  • Production risk: EXR is drilling for “Coal Seam Gas”. There is a risk that while there are gas shows, they may not be commercially extractable. CSG gas is more complex in nature as compared to conventional gas deposits.
  • Commercial risk: Green hydrogen project economics depend on governments putting in place mechanisms to support net zero goals.
  • Geographic risk: There is country-risk. Any political instability might put the production sharing contract at risk.

What is our investment plan?

We have been holding EXR since 2019, while we free carried and took profit during 2020 and 2021, we recently added to our position on market at 16.5c.

Our plan with EXR is to hold to see the company achieve our 2022 objectives, but will look to de-risk our position by selling 20% if the share price significantly re-rates on achieving our 2022 objectives OR based on the strong macro theme of global gas shortages and green energy.


Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 3,500,000 EXR shares at the time of publication. S3 Consortium Pty Ltd has been engaged by EXR to share our commentary and opinion on the progress of our investment in EXR over time.

EXR Corporate Milestones

✅  Portfolio Initiation & Energy Pick of the Year 2019
✅ 
$1.75M Capital Raise @2c per share
✅ 
MT Group non-Binding MOU for small scale LNG project
✅  MOU with Ministry of Energy
✅  $10M Capital Raise @36c (Institutional Investors)
✅  $16.6M Capital Raise @36c (SPP)

🔲  Unexpected Announcement 1
🔲  Unexpected Announcement 2
🔲  Unexpected Announcement 3

Natural Gas Project

Project Milestones

✅  7 Wells Drilled in 2020
🔄  13 Wells Drilled in 2021
🔄  200km of Seismic Operations (2021)
✅  Prospective Resource Increased
🔲  Production testing well drilled at Nomgon
🔲  Production testing well drilled at Yangir
🔲  Update on Nomgon power station project
🔲  Other wells yet to be named based on seismic and analysis from other wells

2020 Drilling Results

🟩  Appraisal Core-hole 2 returns gas (Nomgon-1)
🟩  Lab Results: Fully Saturated Gas Nomgon-1
🟩  Appraisal Core-hole 3 intersects coal (Nomgon-2)
🟩  Core testing from Nomgon-2 returns gas
🟨  Appraisal well 3 intersects coal (Nomgon 3S)
🟨  Appraisal well 4 intersects coal (Nomgon 4S)
🟩  Appraisal well 5 intersects coal (Nomgon 5S)
🟩  Exploration well 1 intersects coal (Hutul 1S)
🟩  Lab Results: Fully Saturated Gas Nomgon 2
🟩  Exploration well 2 intersects coal (Yangir 1S)

2021 Drilling Results

🟩  Appraisal Core-hole 4 returns “sales gas” (Yangir-2)
🟥  Exploration well 3 does not intersect coal (Temee-1S)
🟥  Exploration well 4 does not intersect coal (Cracker 1-S)
🟥  Exploration well 5 mechanical failure (Manlai-1S)
🟩  Exploration well 6 intersects Coal (Richcairn-1S)
🟩  Core-hole 5 Drilled & Intersects Coal (West Yangir-1)
🟩  Core-hole 6 Drilled & Intersects Coal (Nomgon Central-1)
🔲  Lab Results Core-hole 5
🔲  Lab Results Core-hole 6
🟨  Appraisal well 6 intersects coal (Kingston-1S)
🟨  Appraisal well 7 intersects coal (Kingston-2S)
🟨  Appraisal well 8 intersects coal (Kingston-3S)
🔄  Appraisal well 9 (Nomgon 6)
🔲  New Well 12
🔲  New Well 13

Green Hydrogen Project

✅  Green Hydrogen Project Announced
✅  SODAR Machine Mobilised
🔲  Update on initial SODAR results
🔲  New Milestones Added

EXR Investment Milestones

✅  Initial Investment: @3.9c
✅  Increase Investment: @2.6c
✅  Increase Investment: @13c
✅  Price increases 500% from initial entry
✅  Price increases 1000% from initial entry
🔲  Price increases 2000% from initial entry
✅  12 Month Capital Gain Discount
✅  Free Carry
✅  Take Some Profit

🔲  Hold remaining Position for next 2+ years

Why We Invested

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Giant prospective resource next door to China
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Multiple market channels
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Deep CSG Expertise
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Current exploration program
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100% ownership of Production Sharing Contract
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