🕐12.11.14 - 11:54 Uhr

ALLENBY CAPITAL INITIATES COVERAGE ON CLUFF NATURAL RESOURCES WITH 19.4P PRICE T
ARGET: UNLOCKING THE UKS VAST ENERGY POTENTIAL VIA UNDERGROUND COAL GASIFICATION



Good morning, Please see below Allenby Capital’s Initiation of Coverage on Cluff Natural Resources (‘CNR’), preeminent UK resource entrepreneur Algy Cluff’s latest AIM venture which is focused on unlocking the vast energy potential in the UK by converting untapped coal under the North Sea to syngas via the underground coal gasification process.

Allenby has initiated coverage on CNR with a 19.4p target price, representing significant upside from the current 4.75p share price. On Monday, CNR announced a maiden resource at one of its eight underground coal gasification licences in the UK.

Its Kincardine licence in the Firth of Forth, Scotland is estimated to hold 335Mt of coal with 74% measured and indicated.

On an energy equivalent basis this coal resource represents 1.4 billion cubic feet of natural gas.

To put this into context 1 BCF of natural gas is enough to meet the entire combined energy needs of approximately 11,000 homes for one year or the average annual energy output of 49 of the largest onshore wind turbines.

CNR is now working towards a trial production facility at Kincardine. If you are interested in meeting with Cluff Natural Resources, please drop me an email or call +44 (0) 20 7236 1177. A summary of the initiation note is pasted below, and please click on the following link to view the full version: Download Note Many thanks, Lottie [cid:image002.png@01CECBDD.61F8A860] Lottie Brocklehurst St Brides Media & Finance Ltd 3 St Michael’s Alley, London, EC3V 9DS www.stbridesmedia.co.uk Tel: 0207 236 1177 | Mob: 07917010468 | Twitter: @StBrides1
Allenby Capital – Cluff Natural Resources Initiation of Coverage Cluff Natural Resources offers investors direct exposure to a technology that could potentially commercialise vast quantities of the UK’s onshore, near shore and offshore coal resources.

This technology is Underground Coal Gasification (“UCG”); the process of the gasification of coal as it lies within seams to produce a syngas.

Cluff is the 100% owner of eight hand-picked deep UCG licences in the UK. The US has its shale, the Middle East has its oil and Iceland has its geothermal.

The UK has its coal, but it can no longer utilise it given the structural decline of its traditional coal mining industry.

If UCG is proven to be commercial, it is a technology that could not only provide a domestic source of gas, but do so with better economics compared to other fossil-fuel sources, support the UK’s transition towards a low CO2 economy by using Carbon Capture and Storage and achieve all of this without harming the environment. Aside from the long term opportunity Cluff offers, it is currently trading considerably below our risked £30m market capitalisation target. Kincardine Licence, Firth of Forth – UK’s “lighthouse” test site · Cited by the Department for Trade and Industry as a prime site for a pilot UCG production facility in the UK, Cluff has recently announced a maiden 335Mt JORC resource (11,492PJ or 10.6Tcf equivalent) on the Kincardine licence. · Over the next 24 months Cluff will undertake all the necessary background work required to overcome the planning and environmental requirements to establish a c.40MW trial production facility on this licence. Selling syngas to the Petrochemical Industry - $345m NPV · Cluff aims to supply fuel gas to the UK’s petrochemical industry at a very competitive price compared to current levels. · We calculate an un-risked, unlevered NPV10 of $345m from a DCF model analysing a 300MWe operation selling syngas to the petrochemical industry. · For an initial capex requirement of $202m we estimate the project would generate an average annual steady-state EBITDA of £35.7m with margins of 69%, PBT of £20.1m with margins of 38% and unlevered free cash flow of £31.7m. · Project economics, at this stage, are ahead of most UK-listed development projects that are already fully-funded and under construction. UCG Syngas for Combined Cycle Gas Turbine Power Generation (“CCGT”) · Low Cost: UCG can generate electricity at a cost lower than CCGT and coal-fired power plants, even after accounting for carbon dioxide capture and storage and a rising carbon dioxide floor price. · Complementary to UK’s energy mix: The Department of Energy and Climate Change anticipates CCGT (and renewables) will facilitate a long term shift away from traditional coal-fired and nuclear power stations by replacing them as they retire from the system.

If UCG is proven to be commercially viable in the UK, its syngas could replace faltering production from the North Sea and imports as the primary source of the UK’s gas for power generation. · Not environmentally damaging: A commercial and permitted UCG operation could utilise the UK’s natural resources without harming the environment.

UCG has a significantly reduced surface footprint relative to traditional coal mining. We initiate coverage of Cluff Resources with a market capitalisation target of £30m or 19.4p. We believe this valuation figure is supported further by the other licences within Cluff’s portfolio, its strategic position over UCG in the UK and dominance over a large portion of the UK’s licences.



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