With projected fuel shortfalls in southern Africa, CIC Energy’s planned Coal-to-Hydrocarbons (CTH) Project intends to convert coal to a variety of downstream products including fuels and petrochemicals, by first gasifying the coal to produce synthesis gas (syngas). The Central and Eastern Blocks at the Mmamabula Coal Field are being considered for the CTH Project. Drilling results have indicated that the coal qualities of both blocks are suitable for gasification.

The CTH Project is not being actively pursued until the financing for the Mmamabula Energy Project has closed. 

Wood Mackenzie completed an initial market study for the CTH Project in early 2008.  The study assessed the potential demand for the different downstream products that can be produced from syngas and indicated several downstream product opportunities for the Southern African Development Community (SADC) and international markets. 

A second phase detailed value-chain study, which included a more comprehensive market study, conducted by Shell Global Solutions International was completed in late 2008.

A major technical feasibility study for the CTH Project by Jacobs Engineering was completed in mid 2008 and announced in the Company’s news release of August 5, 2008. The purpose of this study was to develop and evaluate viable CTH Project alternatives as well as provide technical and cost estimates.

Three possible CTH Project alternatives were evaluated by Jacobs, all of which included an upstream coal gasification island to produce syngas, with different combinations of downstream processes to make fuels and petrochemicals. Results from the study were positive and concluded that the coal from the Mmamabula Coal Field was entirely suitable for the production of syngas.

Alternative 1 of the Jacobs study was to convert the syngas to methanol and then to gasoline and dimethyl-ether (DME). DME is being considered for future use as a fuel substitute for diesel for use in power plants and as a transportation fuel or as a fuel additive. Alternative 2 of the Jacobs study was a smaller operation that would produce only gasoline. Alternative 3 was to produce methanol and construct a pipeline to transport the methanol to the industrial heartland of South Africa . Alternative 3 is subject to confirmation of the viability of using methanol as a fuel substitute for gas-fired power stations in South Africa . The final product slates for the CTH Project have not been determined.

Jacobs Feasibility Study - CTH Project Alternatives
Alternative 1	Coal→syngas→2 methanol plants→ gasoline & DME
Alternative 2	Coal→syngas→1 methanol plant → gasoline
Alternative 3	Coal→syngas→2 methanol plants → methanol pipeline to South Africa

CIC Energy management is currently reviewing the findings of all the studies in order to finalize its economic assessment of the CTH Project.  In making such assessment, the Company will consider both current market conditions and expectations of long-term market conditions for the products anticipated to be produced from the CTH Project.

CIC Energy is also exploring opportunities to market syngas to large scale users in the region under long term agreements, given the volatility in the market for petroleum products.

The major milestones ahead for the CTH Project are:

• Identification of preferred fuel and petrochemical products and their associated technology solutions
   
• Identification of preferred markets and logistical solutions
   
• Identification of preferred investment partners
   
• Completion of environmental impact assessments
   
• Completion of a bankable feasibility study
   
• Initial commercial operations

The CTH Project team is led by Dr. Pieter du Toit, Executive Vice President, Coal-to-Hydrocarbons, who has over 30 years of international petrochemical engineering experience. Dr. du Toit previously held the position of Projects Portfolio Manager, Project Management department at Sasol Technology, a division of Sasol. He also worked as Project Director for Saudi International Petrochemical Company, and for petrochemical engineering companies in Japan and South Africa . Dr. du Toit holds a Ph.D. Management of Engineering and Technology from Southern California University, a M.Sc. Construction Engineering and Project Management from the University of Texas and a B.Sc. Civil Engineering from Worchester Polytechnic Institute in Massachusetts .

- October 2009 -