In consideration for the preparation of a conceptual opportunity study and entering into the term sheet, Exxaro will pay Linc $3 million within 30 days.
Exxaro will pay an agreed upfront licence fee and ongoing royalties for the synthesis gas produced for the access to Linc’s UCG technologies for use in sub-Saharan Africa.
Under the term sheet Exxaro will be granted a non-exclusive licence to use Linc’s UCG intellectual property in the region.
It will also have conditional access to Linc’s UCG intellectual property to jointly develop UCG commercial opportunities on their coal resources outside the region.
Linc will hold a minimum 15% equity in the first project and have the option to participate up to a 49% equity position in all UCG projects Exxaro develops.
Exxaro is the second-largest coal producer in Africa, with an annual production of 47 million tonnes and a stated objective to more than double its business by 2020.
The term sheet is the culmination of joint concept studies conducted between Linc and Exxaro over the past 12 months.
The work was done under a previously announced memorandum of understanding between the two parties signed in 2011.
The companies intend to implement a business model that optimally combines Exxaro’s strategic interests to expand its coal beneficiation opportunities with Linc’s UCG know-how.
They intend to finalise binding formal agreements for the development and implementation of these opportunities during the first quarter of 2013.
Linc chief executive officer Peter Bond said it was a move towards UCG commercialisation in an area that had embraced and spearheaded the move towards clean energy “through its historic dominance in conversion of coal and natural gas to liquid fuels and power and more recently its renewable energy programs”
“To work with Exxaro as our primary partner to bring efficient energy solutions to this resource-rich part of the world is an outstanding opportunity,” he said.
“Our joint business model is well-aligned to optimally draw on our respective strengths to make this happen.”
Exxaro CEO Sipho Nkosi said the agreement was in line with Exxaro’s aim to include the application of clean coal technologies as part of its future coal growth aspirations.