Hexagon Energy Materials shifts gears to focus on clean energy Pedirka Hydrogen Project

Hexagon Energy Materials Ltd (ASX:HXG) chairman Charles Whitfield said that while the company was continuing exploration at its Halls Creek Gold Project and McIntosh Graphite Project, the focus was shifting to the potential of Ebony Energy’s Pedirka Hydrogen Project in the Northern Territory. He said at today's AGM: “The global trend for solutions to energy needs and climate awareness has not changed and despite a swing back to more climate focused government in North America, it is Asia that is still at the forefront of this trend and where Australian operations can have the greatest relevance. “Hexagon already has strong prospective mineral projects, but I want the company to have a project which is a standout in its merits and can have scale and international relevance. “We believe Ebony’s Pedirka Hydrogen Project is just such a venture.” “Globally significant project” Whitfield said: “Ebony’s aim is to be the largest hydrogen producer in the region and thus Pedirka to be a project of global significance. “We have got an excellent working relationship with the Ebony team and are working towards an agreement that we think will be beneficial for both sets of shareholders.” While the deal is yet to be finalised, Whitfield said the company was optimistic that there was a great opportunity for the project and Hexagon to create a world-class business. Hexagon is seeking to acquire 100% of Ebony Energy with the transaction's next steps including: Completion of due diligence process; Agreement of terms and structure; and Seeking and obtaining requisite approvals. The Pedirka Hydrogen Project is located in the Northern Territory. ‘Blue’ Hydrogen potential Ebony is focused on developing the Pedirka project based on ‘clean’ zero carbon emissions and is planning to extract coal as a feedstock to a gasification plant, converting the coal to produce ‘blue’ hydrogen for export or domestic markets. Notably, the project is uniquely located with respect to oil and gas infrastructure, and offers unique advantages for large-scale H2 gas production with zero carbon emissions through CO2 sequestration in enhanced oil recovery projects. Overall, the project is well-placed to take advantage of the strong global growth outlook for clean, portable energy sources such as hydrogen. Post-transaction plans Assuming a successful transaction, operational steps for Pedirka would include: Drilling of the Pedirka coal deposits aimed at defining a JORC-compliant resource; Review of regional downhole geophysical data to better target a drill program; Advancing commercial opportunities with regards to gasification technology and offtake, JV or partnership relations, access to pipeline infrastructure for CO2 and or H2 distribution and CO2 sales for EOR or access to depleted reservoirs for CCS; and Preparation of PFS key objectives and study plans. Hydrogen market outlook Hydrogen is a clean, versatile fuel with strong demand forecast growth – predicted to expand from US$135.5 billion in 2018 to US$199 billion by 2023. Asian countries (China, Japan and South Korea) are at the forefront of progressing the hydrogen economy with expected high compound annual growth rates through to 2023. These countries represent the key potential export markets for the company as hydrogen fulfils many of the energy gaps that battery technology struggles with. On a global scale, hydrogen production is over 600 billion newtons per square metre, which is equivalent to about 54 million tonnes of hydrogen -  making Pedirka phase 1 about .6% of global supply. Hydrogen is a clean, versatile fuel with strong demand forecast growth. Zero carbon emission Globally over 95% of hydrogen is ‘Blue’ meaning it is produced from a fossil fuel energy source. In the USA 95% is from natural gas and less than 4% is produced via electrolysis due to the cost and difficulty in scaling production. Unlike the vast majority of other producers, the Pedirka project aims to provide large volumes of hydrogen, but because of its position near ‘senile’ oil fields, it can capture and store any carbon dioxide with zero atmospheric emissions. The project could potentially produce commercially attractive volumes and costed hydrogen without CO2 emissions. Next steps In the near-term the company plans to: Progress the Ebony acquisition – seeking to finalise diligence, terms and approvals; Focus company management and resources to progress projects; Undertake further work on Halls Creek and McIntosh projects to find ways to realise their potential value; and Assuming a successful transaction with Ebony, initiate PFS on Pedirka with targeted resource identification.