News

June 20, 2008

At Today’s Oil Price, Altona Has Billions Of Dollars Of Revenue To Look Forward To From Its Ackaringa Coal-To-Liquids Project

By Our Man in the City

The stock market may be being put off by the US$3.2 billion development bill hanging over Altona Resources’ coal-to-liquids Arckaringa project in Australia, but a crude calculation based on today’s oil price of US$140 per barrel suggests it will take less than two years’ worth of production to get a return on its investment, according to chairman Chris Lambert. “Diesel commands a US$15 premium to today’s oil price. Add an extra US$20 on top again for jet fuel and you’re talking about the quality of product we will produce.” By his estimates, Altona will make US$1.7 billion from oil sales and an extra US$150 million from providing power each year. Of course, that is dependent on oil prices staying where they are today. When Royal Bank of Scotland spent four months putting its financial model together in early 2007, it worked off a forward oil price of US$40 per barrel. No-one really knows what the oil price will be when Altona starts production, potentially in 2013. Yet if oil did maintain its price strength, then the company will be laughing all the way to the bank.

To give a headline summary of Altona’s situation, it has 7.8 billion tonnes of coal underneath 150 metres of overburden. This equates to around 7.5 billion barrels of clean liquid fuel which will be converted at the rate of 10 million barrels a year. Around 700 million tonnes of coal should be upgraded to Jorc level soon, the company having drilled up historical workings. “The numbers shouldn’t change. Our drilling confirms the original estimates,” says Mr Lambert. With the technical part of...