STA.L Regulatory News (STA)

Star Phoenix Group Ltd

("Star Phoenix" or "the Company")

13 July 2021

NON-BINDING AGREEMENT SIGNED FOR NEW PROJECT

Star Phoenix, an AIM listed company (AIM: STA) focused on growth through attractive opportunities, is pleased to announce that it has signed a non-binding agreement (the "Term Sheet") with a national university in Australia, Curtin University (the "University"), ranked in the top one per cent of universities worldwide in the Academic Ranking of World Universities (ARWU, 2020) to jointly explore, appraise and develop natural Hydrogen ("H2") opportunities in Western Australia.

At this stage the term sheet is non-binding, subject to various approvals, including the preparation of documentation and negotiations may be discontinued at any time. Accordingly, there can be no guarantee that this arrangement will progress and a further update will be provided in due course if this arrangement is formalised.

Some of the proposed terms of the arrangement include:

· The intention to develop a clean, decarbonated energy play;

· H2 as the most abundant element has the potential to become one of the future sources of clean energy;

· If progressed, a collaboration agreement with a national university could provide access to qualified researchers to undertake the work programme in conjunction with the Company;

· Potential two-year work programme (the intention is this will be funded by the Company) aimed at establishing production potential;

· All intellectual property discovered during the project will be owned by the Company; and

· The parties are working on executing binding agreements.

Under the Term Sheet, the Company has agreed it will look to put an agreement in place pursuant to which it will work in collaboration with the University. Both parties would undertake an initial low-cost work programme over two years from execution of any agreement. The aim would be to appraise natural H2 production points in Western Australia, specifically in areas having a high iron-rich content and circular depressions. Any high priority areas that have the potential to produce large quantities of H2, would then be analysed to determine various parameters for potential future production.

At this stage, the intention is that the work programme would be funded by Star Phoenix with an estimated cost of approximately GB£350,000 over a two-year period. The Company would also enjoy exclusive rights to develop the H2 opportunity during the course of this joint work (if any) and all intellectual property discovered during the project would be owned solely by Star Phoenix. However, all the terms set out in this announcement are subject to renegotiation and change and either party can withdraw from the term sheet without consequence. Further updates will be provided in due course. 

Opportunity overview

H2 is the most abundant gas and can be considered a good source of renewable energy. It is a low-carbon fuel that can be used for heat, transportation, power generation, and manufacturing of various materials.

There are many ways to extract H2. Conventional methods include the use of steam reformation, electrolysis of water, solid oxide fuel cells, alkaline fuel cells, and proton exchange membrane technology. However, when compared to natural production the Directors believe these methods to be more carbon intensive and expensive. Natural H2 production is believed by the Directors to be a cleaner and more economical energy source, and therefore it presents a potentially more attractive alternative energy source. The Directors consider this is particularly the case as countries drive towards a low-carbon future, and environmental, social and governance becomes more of a priority for investors.

For H2 to be produced naturally, it requires water to be passed over and/or through the iron-rich geological formation. This source of H2, for example, was found on the Hydroma Inc site in Mali, where H2 is continually produced from a natural trap, and then piped to a gas turbine which in turn, produces 100 KVA of power to supply electricity to a local village.

The Directors believe Western Australia represents significant potential for the production of natural H2 from the iron-rich deposits occupying over 650,000 km2 (although at this stage there can be no guarantee that any natural H2 will be identified in economic quantities). There are two key areas of particular interest: the Yilgarn Craton and the Pilbara Craton. The concept is that water passes through the Yilgarn Craton either up deep-set fractures in this 50 km thick layer, and/or across the surface of the layer, producing H2 which may then either naturally escape from circular depressions across the state, or from local shallow geological traps.

The main objective of the proposed work programme (if progressed) would be to identify production points of H2, specifically in areas having a high iron-rich content and circular depressions. Circular depressions are preferred as a first exploration point, since they are readily observed whereas natural traps require more thorough and expensive exploration. It is intended that any planned work programme would initially target selected areas of approximately 300 km2. Once an area of high H2 production is identified, the subsurface will be sampled and tested in the laboratory to determine H2 production parameters, such as flow rates, as an indicator of potential future production.

The Directors believe the populated areas near Perth in Western Australia could represent a ready marketplace for the sale of natural H2, with minimal infrastructure cost, although at this stage the economics of this proposal have not been explored. The general concept that backs this proposed collaboration is based on identifying and producing natural H2 for less than half the price than hydrogen produced through conventional methods, making it potentially much more competitive.

As set out above, this collaboration is still at an early stage and further updates will be provided if this opportunity progresses.

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.