Altona Energy

Altona Energy has upset investors by raising £3m at a deeply discounted 9p for its Arckaringa coal-to-liquids project Down Under.

The London-based company, which turned a £40,000 loss into £640,000 pre-tax profits last year, on turnover up 31% to £7m, says the placing, priced at a 55% discount to yesterday’s AIM price of 20p, will provide funding for the next 18 months. Altona, chaired by the entrepreneurial Christopher Lambert, has a joint venture agreement with Chinese oil giant China National Offshore Oil Corporation (CNOOC) to develop the project in South Australia’s Arckaringa Basin, which holds a measured 1.5bn tonnes and an estimated 7.8bn tonnes of coal.

The joint venture agreement gives 51% of the project to the Chinese group’s CNOOC-NEI subsidiary, which will pay for a bankable feasibility study and, if all goes well, arrange the funding. Altona cites estimates for Arckaringa’s net present value ranging from £451m to almost £2bn and payback in eight to 11 years, from hoped-for eventual production of at least 10m barrels a year of diesel, jet fuel, fertiliser, ethanol, hydrogen and electric power sources.

Qiang (Michael) Zheng, a non-executive director of Altona, has played a key role in negotiating the joint venture and, in return, stands to receive up to £400,000 and 9m Altona options if the project passes through all its stages as planned. That will see Altona’s stake fall to 30% of a project with a greatly enhanced value.

The market has not taken at all kindly to the placing’s hefty discount. But, even at 15.25p, down 4.75p this morning, Altona shares are comfortably ahead of Growth Company Investor’s 2009 recommendation at 4.1p and our 8.13p mention on 17 March.

For those with a longer-term perspective, it is worth holding on.