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Battery storage is now an official part of the revised 'draft' IRP 2019.

The basis of its inclusion is by no means perfect but at over 2,000MW envisaged over the next 10 years, it is certainly a start. It also now has to get past Nedlac although i don't envisage that battery storage will be what is under the most scrutiny.

Nobody should be under any illusion as to the importance of this event. Battery storage has gone from a place of ignorance to a part of energy guidance in SA in a very short amount of time. That demonstrates what we have discussed here at length, that the new Energy Minister and President of SA are backing its development such that the above 2,000MW represents not just a figure but the key moment when the lock to the REIPPP cupboard was finally picked.

I look forward to reading more of the finer detail when the IRP is finally released but its a very big day for battery storage in SA.

https://twitter.com/BigBiteNow/status/1105089299974889472

I have another view point which supports why i believe AMER is in such a strong position.

We know that JW travelled out to India to talk with the senior management regarding CP0-5. At the very least there will have been discussions regarding the additional rigs that are talked about in the AMER RNSs.

I wouldn't be getting too excited if this was a case of a small operator trying to convince a big operator to increase its operations on an average oil find.

It would be a move that smacks of a need to further production to enhance its cash flows and would highly likely be refused.

However, JW was goling over to India to discuss 1 300ft oil column that has no OWC, which could quite easily deliver 50-100m 2P reserves. It is a discovery that hints heavily at combination traps. It is a discovery that has got the attention of the Energy Minister of Columbia.

Then we have the fact that JW has admited that he is in regular contact with the president himself. So that deonstrates political pressure and enhances JW's credentials as a negotiator in this situation.

Those factors for me plus the fact ONGC has turned around and started a new 4 drill programme in just circa 6 weeks (bearing in mind it took them some 17 months or more to start drilling Indico after the Mariposa-1 discovery was announced), point towards intent and realisation, and further support my beleif that the 2nd and even 3rd rigs are a matter of when and not if.

NOTE - Mariposa-1 was a 38 days drill with planned depth of 12,880ft but drilled to 11,556ft and was reported near as damn it at 38 days.

Whilst on the subject of additional drill rigs, i found this article a while back, which gives some insight into the policy that ONGC has with regards to oil drilling rigs.

ONGC has a fleet of 67 rigs and in late 2018 were set to purchase 27 new ones to replace their ageing fleet of 67 onshore rigs.

More importantly the article quotes the company as saying ;

"ONGC has traditionally owned onshore rigs, instead of hiring them, due to scarce availability of quality onshore rigs, the executive said."

Now this is ONGC as opposed to ONGC Videsh but still it is interesting to see the policy and size of the in house rig capacity. As CP0-5 develops it is plausible that they could bring in their own rigs in to Columbia, if the availabiity becomes an issue because they are certainly big enough.

As the article states "the company plans to drill a record 535 wells in 2018-19," so AMER are swimming with a very big fish with the ability to make big moves, when it wants to of course.

https://economictimes.indiatimes.com/industry/energy/oil-gas/ongc-plans-to-buy-27-rigs-for-up-to-rs-3500-cr/articleshow/66154976.cms

Looking at the latest Feb presentation I noted this line on slide 8, which i hadn't seen before. I had said previously that I thought Aguila would be finished by now but that is not the case.

"Sol-1 remains drill-ready Aguila-1 in 3 months"

The presentation is dated 4th Feb so that would make Aguila drill ready by about the start of May.

I still stand by my thoughts of yesterday that I think Calao and Pavo will be drilled before the 2nd rig is mobilised in order to confirm the prospectivity around Indico and decide on any further drills in that area. If I am right then Pavo should be completed by around end of June with a decision on any chnages to the drill programme coming in the period after that. This I feel is supported by the wording on slide 8 ;

"Fully funded, initial four-well drilling programme to determine the prospectivity of the area within the LS3 play"

It took the partnership just 3 weeks post Indico discovery to declare this updated 4 drill programme.

Slide 18 indicates an order of play and has Aguila before Sol-1, which is perhaps based on the current plan that the rig at Indico will make its way south after the appraisal wells at Indico.

If so then Aguila and Sol are drill ready from early May onwards.

However, I think they expect to hit and hit well at Calao and/or Pavo and that should in very simple terms open up far more opportunities there. Just my opinion posted for debate.

Apologies, for those wishing to review the quotes are from the 2nd Jan update.

@willec with all due respect that is simply not going to happen. There are all sorts of reasons why the share price may or may not be being held at this level. I have posted previously that I believe there is a background seller who wishes to take their leave (at least in part) at these levels. I say thi because I have bought a substantial amount at this level and have more often than not been able to achieve a slightly lower price with later buys.

It is of little consequence. This is about the fundamentals and it is they that will shine through in the end not the activities of said MMs. One must merely be patient enough to wait.

What I find absolutely remarkable is the lack of buying activity going on considering these guys are about to update the market on the next well at CP0-5, a well that sits immediately adjacent to a near 300ft oil column, which according to the 10th Dec RNS announcement ;

"The wireline formation pressure and sample data subsequently acquired in the LS3 formation confirmed an oil column throughout the reservoir, with no indication of an OWC"

The position of this drill was chosen post Indico results.

"The initial flow data also support our view of the importance of this play, not just at Indico but also in the surrounding area, extending down to Mariposa and up to the Aguila and then Sol structures."

I could go on but I/we are simply repeating the same message over and over, that this company is making it abundantly clear that CP0-5 merely as it is currently known, is an enormously prospective play.

However, rather than being worried about the lack of buying or indeed the fact the SP is standing still at 16.8p, I am actually seeing it for what it is, a chance to add to my position. It is rare to find stocks where the opportunity is so great and indeed proven, whilst the market's awareness is so subdued but from past experience I have learnt that that is the time to really push hard and take full advantage.

See slide 18 for details of what i have just explained.

http://www.amerisurresources.com/images/rns-pdfs/Investor-Presentation-Feb-2019.pdf

@Yachtmaster without wishing to get into a game of numbers, what I can say is that the Cala0-1 well is approximately 1.5km away from the Indico pad. Pavo is closer but Indico 3 is shown as being 2.5km from the Indico pad. The marked up map is indicative but still it gives an idea of how far they can drill from this pad with the rig that is on site.

Out of interest GTE have been drilling wells at 750m centres as part of their methodolgy to extract as much production out of Llanos-34 as possible. This is perhaps because many wells there are producing at around 1,000 bopd. Those parameters should give an indication as to what is possible around each pad.

I have convinced myself that the 2nd rig will come in H2. The decision to drill Calao-1 and Pavo in order to search out the extent of the play around Indico is key. If these 2 wells comes in, which I think the team feel very confident they will, then that could well be the catalyst to keep the rig at Indico and expand its appraisal programme and send a 2nd rig to Aguila and Sol. If Sol and Aguila come in then a rig could be lost down there for the foreseeable future just expanding and appraising those 2 plays.

I have no doubt about AMER conviction and desire to expand the rig count but perhaps it will take the next 2 drills to push ONGC over the line. Just an opinion based on the words coming from JW and the way the drill programme has been set up.

@leas whilst i am quietly confident about Calao-1 it shouldn't in my opinion be overplayed. JW himself talked about a dry well being part of the learning curve for the play. With a 300ft oil column that has no OWC there is clearly a lot of oil out there and that is what I am excited about. It may be that Calao-1 delivers big and they test the depth more on this well, but if not they are going to test it at some point in this 6 drill programme and that could be the initial really exciting part of all this.

@JP2000 I am under no doubt that such scale is well within reach if AMER can hold onto their 30%.

JW stated CP0-5 drilling is self funding after 3 wells assuming they only drill with 1 rig. However, as I pointed out earlier they have completed the civil works on 4 pads and the average cost per drill is coming in at around $2.8m.

It will depend how successful this 6 drill programme is but at 4 decent hits (bearing in mind 2 are appraisals) we should be looking at a 2 rig capmpaign that is near as damn it fully funded. Once that happens then if they have a good hit rate then it won't be long before the 3rd rig is fully covered by successful production. The higher it goes the less time it takes to cover the costs of the next rig. In the case of ONGC Videsh we are talking less than 1.5 wells per rig.

Whatever GTE's wells are production or exploration, it has still taken circa 95 drills at 90%+ success rate to achieve 200m+ reserves, and they have never come anywhere near a 300ft oil column, nevermind one that has no OWC. If it pushes even another 50-100ft deeper, then it completely dwarfs anything GTE have found on Llanos 34. Plus no well on Llanos 34 has broke even 2,000 bopd. So both wells drilled at CP0-5 are bigger producers and Indico-1 is producing over 150% more bopd a day than any well on Llanos 34.

And all of that on a block that is as you say 6x bigger than LLanos 34.

It will take time to establish but CP0-5 for me is going to demonstrate itself to be a monster compared to what Columbia is used to.

@Richken Right now what I am saying is that there has been a subtle chnage to the presentation, which states that the 10,000 mtv growth is going to come from "expansion and enhancement of brownfield operation" They have only 1 and if they were planning something else then surely the words would be set out differently.

In terms of the second rotary kiln all I can say is that it has been quoted in 2 interviews, one with FM and one with Chika Edeh, and it is highly unlikely that the person writing the article simply made it up. The company is quoted as saying "no decision has been made yet." That was back in July 2018 i believe.

The presentation does still talk about brownfield processing being available close to their deposits, but then one could easily say that about Vametco.

I was a little dubious about a major expansion at Vametco being announced when they haven't even got a full grip on the phase 2 expansion, which added 'only' circa 1,000 mtv. That said we don't know the timeframes involved. An announcement to increase production to 10,000 mtv is just that. It does not happen instantly. I would think 18-24 months, which gives them ample time to sort out the production at Vametco and add Brits to the line.

I just still think that positive progress needs to be demonstrated with the current Vametco production prior to any major expansion there, if it is indeed going to happen that way.

As for the electrolyte believe the 200MWh initial production stands and will come on line in H1 2020. How much it will contribute to any large scale mandate wins is debatable and I would very much like to see how the Eskom timelines are affected, if at all, by the 3.5 month delay to the tender release.

What I will say is the company states they are targeting 1,000MWh by 2020. It does not say that they will be carrying out the work themselves or that they will all be installed by 2020. It could well be contract wins or contracts under execution

With all due respect I disagree. Once a 3rd well comes in at CP0-5 then the capex for drilling there is covered by the production. Therefore, any further successes, which given there are 2 appraisal wells planned is going to happen, then that goes straight into the AMER coffers.

Of the $36m total capex for this year $16.8m is committed to CP0-5. Calao-1 is $2.6m. If it comes in then the remaining $14m or so will come from AMER share of production at CP0-5.

So then the capex is down to just $22m, which is less than half of the cash the company had on the books at H1 (June 2018).

In addition, a review of the capex slide from the Feb 2019 presentation (slide 6) shows that there is no further civils capex for CP0-5 in 2019. That means that there are now 4 pads that are drill ready and can be utilised depending on the rate and direction of success moving forward.

Slide 18 is clear as to what that entails. The opening wording is very confident about the "significant low risk potential" and the current drill programme is designed to "throw further light on the combination trapping expected to
exist in this play."

It then lists 15 drills and prospects. Now anybody can jump in here and say that a great many of these are only prospects at this time. Agreed but lets not kid ourselves. ONGC are already on record that the seismic is essentially complete with just some infills required. Plus success will bring more prospects, and the partnership has 4 pads to go at, so if anything the plan will expand along with the options.

That alone is supportive of a higher SP at this time.

However, whilst that reserves report yesterday demonstrated a good uplift in 2P reserves, the reality is that the 3P figure is the actual starting position, given what we were told in the operational RNS from 22nd Jan. At just 13.6% more oil column depth AMER would have another 3.7m 2P reserves. If they go deeper which is hinted at in the 22nd Jan RNS then we could conceivably double the 3P 11.28m figure. Then if Calao-1 and Pavo both come in then we are adding big percentages once again.

Remember Llanos 34 took circa 95 drills to deliver +200m of reserves. CP0-5 has the ability to deliver half of that in just 7 drills, and that is extended purely by the fact that the Indico appraisal wells are Nr. 5 and 6 on that list.

We are all investors with our own opinions and we make our decisions and we stand by them. I believe that AMER is one of the best oil plays on AIM right now on its stake in CP0-5 alone. I believe it will go on to prove itself to be significantly bigger than Llanos 34 such that ONGC will not be able to ignore it and will be compelled to expand the programme there and push 2, 3 even 4 rigs onto those drill ready pads.

And we haven't even discussed Putamayo and the 4 weel programme expected there later in the year.

Sorry but I believe that figure is some way short of the actual 2018 average.

H1 averaged 5959 bopd.
Q4 was 4,602 bopd
July was 4868 bopd
Aug was 4,927 bopd
Sept was 4,974 bopd

That comes to 5,360 bopd, which may well be short of promises and expectations but it is a lot higher than 4,410 bopd and solid enough to deliver the capex needed to fund what is now a very exciting drilling programme across 5-6 blocks.

I appreciate that in the past AMER have got it wrong and JW in my view gets paid too much and so should have perhaps delivered earlier than he has. But at the very same time the past is the past and whilst it should be respected it should not be allowed to cloud over what we now see before us. For me this price range is too cheap and a great base from which to spring forward as the year and the drilling programme develops.

I have just had a look through the new presentation and from what I can see it appears to be a subtle change in direction, which i note is mirrored in the Feb 2019 presentation.

On slide 4 there is the statemen "Focus on expansion and enhancement of brownfield operation" that being Vametco.

Underneath this one can see the umbrella entitled "The Group is targeting a 10,000 mtV production in the medium term"

This same slide appears as slide 3 in the Feb 2019 presentation.

However, if we go back to the next available presentation on the timeline, the Junior Indaba presentation from June 2018, then we see the same "focus" led statement but the umbrella under says "Targeting more than 5% of global V market by 2019" meaning the phase 3 expansion at Vametco.

Many of the other indications regarding brownfield expansions through "close proximity to brownfield
infrastructure" are still there but if nothing else I question why this slide was changed in this manner. One reason could be that the 10,000 mtv expansion is after all at Vametco, just like the FM news article interview hinted at back in mid 2018.

My only other thought on the presentation is that that very same slide still says "Targeting 1,000 MWh opportunities by 2020"

Given it is now March 2019, they are showing an awful lot of confidence in that timeframe don't you think.

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Well through Eskom and the battery industry that it will ignite they can do that. Hence why the presentation states ;

"Demonstration effect in South Africa will enable variable renewable energy to expand faster in Africa, and in low income countries.

Largest WB and AfDB operation on battery storage, mostly funded by CTF, this flagship project could serve as reference for many others"

When we piece all of that together then as a percentage play on VRFB battery storage uptake there really cannot be a better angle out there than BMN/BE.

They have the resource, the cost and are demonstrating they are on the road to the value chain. Now in SA they have a massive opportunity to establish themselves and their partners in an SA battery industry that will have political will behind it to flourish because it will help answer a great many problems for both the SA government and western world at large.

If all of that weren't enough, there is the fact that this whole story is centred around a budding industry that is a buzzword of our times. It is the computer, the internet, the mobile phone of this time, and that attracts money at all levels.

And if for some unexplicable reason it all goes wrong, there will always be steel and alloys because at 5,000 mtv Vametco is the cheapest prodcuer of vanadium on the planet.

Now some will be saying why isn't the SP reacting? if the story is so good then why aren't more people buying into it? Well my answer is that this particular story hasn't been told yet. What we are discussing is a point in time in the future. It is a future I can see clearly and no doubt a great many here can too, that is why they are perhaps here. But the wider market isn't ready for it yet. It hasn't got the patience or the tenacity to go and fidn the answers that are clearly staring us all in the face on this. It wants to see more evidence, which means it will likely end up paying a great deal more for it when it sees it.

So being here now and waiting on the rewards that this battery play will bring requires patience and understanding, just like it did for Vametco and vanadium, but it is as far as I can see coming and when it does arrive it is going to be quite something to behold.

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@Alfacomp From a strategic point of view the changing of the guard in SA governance coupled with BMN's efforts to instigate a fully integrated battery value chain, makes for a mighty and exciting beast.

The biggest 2 hinderances to battery storage uptake have for so long been cost and regulatory blockages.

As the owner of such abundant resources with a clear plan and path to minimise the cost of the full battery value chain, there can be fewer companies around that could offer such a competitive offering. That in itself is very invest worthy.

However, now we have a scenario where by the very country where this integrated platform is being put together, is embarking on a project which will be the largest single programme of electrochemical battery installations in the world. A programme that is being conducted by the largest utility in Africa and 11th largest in the world, in a country which has the largest RE programme in Africa to date.

Furthermore, that changing of the guard in SA political leadership is now acting as the ignition to expand this programme beyond its initial offering into the far more expansive entity that its main backer the World Bank envisaged when it announced its $1 billion drive to establish battery storage in low to middle income countries.

That leadership is now opening up the last main door to full roll out, regulatory approvals and support.

I now fully expect energy storage to find a place in the revised IRP, be it in the face of strong and vested opposition. It has to if the words of Minister Radebe are to have any substance.

All of this is being driven by the simple fact that Eskom is on its knees and in desperate need of a change of direction, coupled with the fact that the world simply isn't prepared to back coal anymore.

Some may spend their time worrying about how Eskom would stay afloat when in my view they should have been seeing the situation for what it really is. Eskom was never going to be allowed to fail becasue if it did then SA would fail too. Hence why we see the bail out from the SA government, which itself has placed SA on an even finer line with the ratings agencies, but it was a chance the government had to take becasue they had no other choice.

That has now given Eskom time but that comes with a cost and that cost is change. If they are to raise any real funding and support globally then they have to emrbace the one area that is expanding at the greatest pace, and that is RE and carbon reduction. Hence why that presentation with Eskom is all about C02 offsets. The western world will gladly pay for Africa to reduce carbon emissions it doesn't want to achieve itself.

Some other final thoughts.

It is important to understand that this project as wonderful as it is, is not all that BE is about.

The IRP is a significant update that BE has stated has in part prevented other project opportunities from being realised. I have a suspicion these are with munipicals such as CityPower in Johannesburg. From the comments and positivity we are seeing from the Minister of Energy Jeff Radebe, i feel more and more confident that energy storage will be included. Not just that it looks like the concerns specifically raised by BE (Mikhail Nikomarov) in answer to the previous draft IRP, are going to be tackled. Now as head of the newly formed SA Energy Storage Committee he no doubt has brought the same vigor and ideas to the fore and tabled these with the SA Government.

However, I suspect that it is the IDC that has enabled the most change within the SA government coupled with new fresher political faces that are willing to instigate what is best for the country and not what is best for themselves.

IT will be interesting to conduct a comparison when the IRP is available to review. It could go a long way to demonstrating just how influencial BE/IDC are on the regulatory direction of SA energu policy.

That all said and recognising that there is much to come from the company this year, I still do feel that everything is being geared up for the Eskom BESS Project and that will take time to come to fruition, but I do feel it will be worth the wait.

Here is the document once more for those that haven't seen it.

https://esmap.org/sites/default/files/events-files/7_South%20Africa%20-%20Eskom%20Battery%20Storage%20Project-4Feb2019.pdf

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Then of course we have this gem of a line ;

“Vertical integration in the battery storage value chain (mining, manufacturing, operation) feasible in South Africa”
It is important to understand that SA has in theory the capabilities to set up both lithium-ion and zinc based battery value chains. Nobody has more Mangenese in the world than SA and President Ramaphosa just opened a very large zinc mine in the Northern Cape. SA has also invested in studies to understand the extent to which a lithium-ion battery value chain could commence in SA.

However, I can find no evidence of any company that is capable of achieving this, that is ready to participate in this particular BESS project. That said the likes of Fluence, which is the love child of Siemens and AES must fancy their chances and would likely be able to sell the idea of being able to bring their battery operations to SA if the work was there for them. Siemens have a strong footprint in SA already.

This is just an example of the competition out there. This project is a game chnager for any company that is successful, thus I expect the competition to be strong.

However, I keep coming back to that same thought. How is the Minister of Energy and now Eskom able to say with such confidence that a vertically integrated battery industry value chain that includes mining, beneficiation, manufacture and operation, can be set up in SA, if they haven’t had guidance on it from those that would achieve it. Are the likes of Siemens really demonstrating that in the background. If they were, wouldn’t the IDC be partnering with them as they are with BE? They appear very keen to share the benefits of a VRFB led industry so why not a lithium-ion one?

There is no evidence from any of the IDC Annual Reports that this is the case right now.

Plus we have to remember that all those graphs out there pointing to lithium-ion being the most cost competitive has absolutely nothing to do with SA. When vanadium is able to play out in its own backyard through a fully integrated value chain, lithium in my view cannot be observed in the same light.

All of this is what we already know and what has made it into the public light.

Now imagine the sort of numbers and strategies that BE is banding about to its partner the IDC, that politically, regulatory and financially connected entity.

Like I say the competition should be strong and the list very long, but it is in my view looking very good for BE/BMN with success now mapping a big future for both entities.