Tomorrow brings the AIM introduction of Petro Matad, which has raised £5 million to probe oil prospects in eastern Mongolia.

Chaired by distinguished mining industry veteran Gordon Toll, Petro Matad is the first Mongolia-focused company to list on AIM, with the help of nominated adviser and broker Hanson Westhouse. The company has 100 per cent of the 18,956 sq km Block XX in the Tamtag Basin, which adjoins blocks being actively explored by PetroChina subsidiary Daqing, and is already estimated to hold resources of 745 million barrels of oil.

Petro Matad, which is expected to start on AIM with a value of about £35 million after its pre-float funding at the equivalent of 25p a share, is the brainchild of chief executive officer Douglas McGay, an Australian surveyor turned resources entrepreneur, and deputy chairman Dr Janchiv Oyungerel, head of Petrovis, a Mongolian energy developer. Petrovis originally secured the Tamtag licence in2005 and now holds 37 per cent of Petro Matad.

McGay, who says the money raised so far should be enough for 18 months’ work, says Petro Matad’s licence is ‘downtrend’ from the blocks where Daqing has already spent £150 million in two years and is likely to spend another £175 million this year. Of the 11 prospects and leads within Block XX, he is most optimistic about Prospect 8TS, with an estimated 23 per cent probability of finding 79 million barrels, and ‘strong lead’ 6TS, with an estimated17 per cent probability of finding 67 million barrels.

Block XX is not far from the Chinese border, across which lies a major oil area. The company will have a production sharing agreement with the Mongolian government on any oil it finds and McGay, a Mongolian pioneer with 10 years experience in the country, says the regime is democratic, keen on resource exploitation and adept at working its relationship with its two giant neighbours, Russia and China.

Petro Matad offers several unique features at a time when oil is in urgent demand, not only in China but almost throughout the world. In the absence of any new stock market shocks, the shares deserve a good reception.

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