Elixir’s Mongolian CBM drilling: an update

Elixir Energy Limited (ASX:EXR) today provided a further update on its 2019 drilling program at its gigantic 30,000km² Nomgon IX coalbed methane (CBM) production sharing contract (PSC) on the Mongolia-China border.

The company emphasise that the primary aim of the program is the drilling of two fully tested core-holes, with an option for a third — the results of which will feed into a contingent resource assessment in the new year.

While these core-holes have yet to be drilled, the drilling program has in recent weeks been supplemented by the drilling of low-cost chip-holes.

These holes are achieved for a fraction of a “fully loaded” core-hole cost and provide Elixir with valuable stratigraphic and geological information that allows it to fine tune the core-hole drilling and guide future exploration programs.

The chip-holes have been placed in geologically strategic locations and not all the stratigraphic chip-holes are anticipated to encounter thick coal seams. This method of drilling is very common in the South Gobi Basin, with most — if not all — coal exploration companies utilising this exact drilling method.

Many hundreds of these chip-holes have been drilled in and around Nomgon IX. Elixir anticipate that stratigraphic chip-hole drilling will be a significant exploration tool in the years to come.

For logistical reasons related to contractor water supply and camp access, Elixir started its drilling campaign with the two chip-holes BO-CH-1 and BO-CH-2, which are currently underway.

The BO-CH-1 chip-hole was drilling ahead at 729 metres at the time of Sunday’s daily drilling report. Some mechanical issues during the week meant that progress was slower than anticipated. Elixir continues to drill the well through the very thick Permian section. In the next few days the well will be logged and then the rig will move to spud Ugtaal-1 core-hole.

The BO-CH-2 chip-hole was drilling ahead at 198 metres on Sunday morning and is yet to reach the Permian section. Again, some mechanical issues have meant the rate of penetration achieved during the week was less than planned.

Elixir’s managing director, Mr Neil Young, said: “Drilling the lower cost chip-holes first, although slower than anticipated, has provided learnings for the prime objective of the program – the core-holes – at little cost to Elixir.”

While these wells have been drilled slower than anticipated, however they have afforded Elixir considerable drilling learnings, all done at the cheaper drill rate. And while slightly delayed, under the contract with the drilling contractor Elixir is paying on a per metre basis, rather than a per day charge.

First core-hole, Ugtaal-1

Core-holes are the primary tool for exploring and exploiting for CSG around the world. Elixir has a two firm (plus one contingent) core-hole program for Year 1 of the Nomgon IX PSC.

The first core-hole, Ugtaal-1, will spud in the next few days, after the completion of chip-hole BO-CH-1 as it awaits the rig that is currently drilling BO-CH-1.

The core-holes will target Elixir’s developed CSG leads, which were defined by surface outcrop, gravity and 2D seismic mapping.

The core-holes will have world-class drilling and geological supervision at the well site and will be accurately logged, with coal samples put through a US certified coal desorption process.

Gas samples will be captured for chromatographic analysis while the coal collected will be examined petrographically, and adsorption and proximate analysis also undertaken.

Finally, the core-holes will be subject to Injectivity Fall-Off Testing (IFOT) of the coal seams to determine the permeability of the coals, and in particular, the cleating. These CSG core-holes will be the most technologically advanced ever undertaken in Mongolia.

The spud of Ugtaal-1 has been later than Elixir anticipated in its drilling update last week due to some mechanical issues. The rigs are being progressively winterized to deal with colder conditions, yet the changing weather does not otherwise affect the planned drilling program.

The results of these wells will define Proof of Concept for CSG in Nomgon IX.

Chip-holes

Chip-holes are stratigraphic exploration wells that are drilled quickly and cheaply to assist with the definition of general geology and lithology, particularly in areas where geological data is either sparse or anomalous. They provide critical information and allow a better calibration of the recently acquired 2D seismic.

The cost-effective chip-hole program was afforded by Elixir’s strong relationship with its Mongolian drilling contractor, Erdenedrilling (ED). ED was recently able to mobilise an additional drilling rig to supplement the core-hole drilling plans. It offered a drilling service that has minimal well supervision, rapid drilling techniques which generally samples only rock chips or cuttings, and basic wireline logging.