SOUTH Australian minerals explorer Marathon Resources has moved to acquire coal seam gas project owner ARP TriEnergy through a majority share issue.

Marathon announced it would issue 60 per cent of its expanded capital base – 138,311,683 shares worth roughly $8.3 million – to company vendors, subject to shareholder approval.

ARP TriEnergy is the owner of the Leigh Creek Energy project – located about 550 kilometres north of Adelaide over and around a coalfield which is owned and operated by Alinta Energy.

The company aimed to develop an in-situ gasification process at a depth of between 300 metres and 1.500 metres using oil industry technologies such as directional drilling.

These facilities operate by drilling two opposite sides of an underground coal seam, with one well injecting air into the coal seam to initiate a gasification reaction, with the other well used to return synthetic gas (syngas) to the surface where it is processed further.

Marathon said the syngas could be used to create natural gas – noting the facility was located within 125 kilometres of the Moomba-Adelaide pipeline system.

The project is contained within petroleum exploration licence area 650, within petroleum exploration licence application area 647 – one of five pending tenement applications held by ARP TriEnergy.

With an application for drilling program approval submitted to the South Australian department of State Development in February, preliminary gas marketing discussions for the project are underway, Marathon said.

Geophysics and appraisal drilling and definition of a JORC-compliant resource are both planned for the June quarter of 2015.

Marathon said it believed the appraisal drilling program would establish considerable resources for the project.

ARP TriEnergy sold 2.2% of the 19.99% stake it held in Marathon to raise working capital for works on the Leigh Creek project.

The remaining stake will be offloaded to a custodian for disposal within 12 months under the conditions of the sale agreement.

An extraordinary general meeting of Marathon shareholders to approve the deal is expected in late April or early May.