Perth-based explorer Mandrake Resources (ASX:MAN) has executed a well access agreement (WAA) with oil, gas, and helium producer Paradox Upstream for the Utah Lithium Project in the US.
The company reports the WAA will allow it to re-enter Paradox’s existing suspended oil and gas wells to sample lithium-rich brines. The majority of the wells considered for re-entry are drilled to a total depth of about 8,000ft, which enables Mandrake to sample at least 4 independent zones across the Leadville and Paradox formations.
Mandrake says this will provide a series of data points to inform resource calculations.
Additionally, the WAA circumvents the requirement for drilling, which Mandrake says will save millions of dollars in exploration drilling costs, noting re-entering and perforating existing wells is a tenth of the price of drilling a new well.
Mandrake also reports the WAA will potentially allow for a more streamlined permitting process with local regulatory agencies.
Under the WAA, Mandrake will make an upfront payment of US$180,000 and a US$40,000 payment for each of the first 3 pre-approved wells re-entered at any time. The company says 6 wells are pre-approved for immediate entry, though additional wells require approval from Paradox.
Mandrake also has the right to transfer both operatorship and ownership of any re-entered wells at any time. All subsequent Mandrake leasing will also be added to the scope of the WAA.
Additionally, a 2% overriding royalty interest will be payable to Paradox on the sale of any lithium or other minerals extracted from re-entered wells.
Shares in Mandrake Resources were up 15.38% to $0.045 at 3:18pm AEST.
Commenting on the agreement, Mandrake Resources Managing Director James Allchurch says: “Mandrake currently holds over 80,000 acres prospective for lithium-rich brines in the Paradox Basin, Utah.
The execution of a well access agreement with the biggest oil and gas operator in the district, Paradox Upstream, represents an immense value-add for Mandrake. The company can now access existing suspended oil and gas wells and utilise the cased well bore to test multiple potential zones for lithium-rich brines.
“The execution of a well access agreement with the biggest oil and gas operator in the district, Paradox Upstream, represents an immense value-add for Mandrake”
The cost to drill a new well for this purpose would be in excess of US$3 million. The cost per well to re-enter existing wells is expected to be less the US$300,000 per well.
The broader alignment with Paradox Upstream will facilitate the permitting process and may also pave the way for additional opportunities for Mandrake to utilise Paradox’s impressive infrastructure footprint. This includes 900km of operated gas gathering lines that feed directly to the Paradox-owned Lisbon Valley Gas Plant located in the centre of Mandrake’s lease position.
We look forward to delivering an exciting period of strong news flow that will be underpinned by the lithium brine sampling program across the lease position, utilising existing wells and targeting several reservoir intervals prospective for lithium.
The sampling and evaluation phase will facilitate the generation of a maiden lithium resource estimate, which in turn will be a value driver for the company on multiple fronts.”
Paradox Upstream is a privately held energy company based in Houston, Texas, focused on extracting helium and natural gas in the Paradox Basin of Utah and Colorado.
Mandrake Resources is a Perth-based exploration company with a diversified mineral portfolio across the US and Australia. Along with the Utah Lithium Project in Utah, US, the company holds the Jimperding Nickel-Copper-PGE Project in Western Australia and the Berinka Pine Creek Gold Project in the Northern Territory.
The Utah Lithium Project covers about 356km-square of the Paradox Basin which features historically documented ‘significant’ concentrations of lithium, potassium salts, bromine, boron, and other elements.
Write to Harry Mulholland at Mining.com.au
Images: Mandrake Resources Ltd
