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Over five years since founding his energy company, a SA-born entrepreneur who claims that he can make millions of rands off using drones and special algorithms to find gas in the Namibian desert, has yet to start sinking test wells.
This, while he says he has turned down a $500-million Chinese investment, decided against listing and insists he never said he would frack.
In April last year London-based Stephen Larkin claimed that investors could be in for “free cash” of $20-billion if Africa New Energy, which uses a unique algorithm to pinpoint possible gas deposits, makes a find in Namibia’s Kalahari Desert.
The Namibian government has awarded Africa New Energy a 22 000 square kilometre concession – and the company said last year that it planned to start drilling in 2018.
While Larkin says his company has raised “north of $10-million” from investors and written off millions more in research costs through a number of state incentives, analysts remain cautious.
Larkin however told Ventureburn that he expects to begin sinking test wells any time from 28 June, when the company will conclude its four years of ground and airborne studies and the licencing phase for drilling will commence.
But he says the company will not use any fracking to remove gas, but that the gas will be extracted simply by breaking the surface and allowing it seeping out onto the desert floor, as his company’s “17 layers” of technology enabled prospectors to find those reserves that are under high pressure.
It follows a report by Ventureburn last year in which he had told this publication offstage at an event that he would use some fracking to extract gas. He now says he is “absolutely” not going to frack.
SA-born entrepreneur Stephen Larkin claims that he can make millions of rands off using drones and special algorithms to find gas in the Namibian desert
He claims that it was always his intention to not frack and that his company’s “17 layers” of technology enabled prospectors to find those reserves that are under high pressure. The gas can then be extracted simply by breaking the surface and allowing it to simply seep out onto the desert floor, he says.
Larkin also says he rejected an earlier $500-million investment from Chinese investors as it would have meant that the Chinese investors would be given a tenth of the company’s net value.
In addition, the Chinese investors wanted to frack — something which Larkin says he is against, did not plan to use sufficient local labour and wanted “very large” upfront payments from the investment which he says would have delayed payments going to the Namibian people.
The Chinese investment is not the only thing Larkin has changed his tune on. Last year he told Ventureburn that he aims to use the Chinese investment to form most of the listing price for the company. Now he says he has no plans to list.
He says if he opted to list the company, investors would find themselves disqualified from getting a tax break for the first three years after an investment is made.
There are other ways to raise capital, he points out, such as licensing the technology or by conducting a trade sale.
Is confusing structure for fundraising?
It seems Larkin is also counting on a confusing structure involving a venture capital (VC) company and a cryptocurrrency organisation to source funding for startups that will service his venture.
The VC company which will invest in these startups is headed by his business partner Shakes Motsili, while the cyptocurrency investor is domiciled in the Isle of Man and will take 20% equity in each startup — including a 20% share of Africa New Energy.
The cyptocurrency investor will also provide these startups with the opportunity to buy Aziza Coins.
The Aziza Foundation says on its website that it has planned an initial coin offering (ICO) for this month and that the funds raised by the ICO will be used by the foundation to provide centralised support services for up to 1000 selected startups in exchange for up to 20% of their shares.
But the organisation’s portfolio manager, Chris Dorrington, said the ICO has been held over to later this year, so that the necessary legal and technical work can first be concluded.
In effect startups get two things — the physical money via Alumni Energy Investments, where the 12J tax deduction for the investors comes into play — and secondly the tokens that the coin foundation sells to them. So far about R40-million has been raised from about 35 investors.
To date two SA startups — Africanopy, which provides long-wave phone and data — and airborne surveying technology company Gyrotek — have received funding from Motsili’s Alumni Energy Investments.
In addition, the Aziza Foundation will take a 20% stake in these firms, as well as in a further five UK-registered startups, which according to a diagram supplied by Larkin’s PR representative Chad Fichardt are: Walsh Aviation, Champion Mobile Global, Metashare Media, Acqumine and Grasshopper Surveying Service.
Explained Fichardt: “For startups to enrol in the Aziza Foundation programme, the first step is to sign a binding contractual agreement with the Aziza Foundation. The Aziza Foundation will then buy 20% of each company’s equity, and obtain representation on the board in order to execute its business governance, monitoring and mentoring responsibilities.
“In return, the startup is given the ability to buy Aziza Coins, which will progressively appreciate,” he says.
‘Larkin is neither an investor nor director’
Brian Segoe, who claims to be the sole director of Gyrotek, said Africa New Energies is a potential client of Gyrotek, where the startup is looking to provide aerial surveying services on their Namibian concession.
“Gyrotek is a completely separate entity to Africa New Energies, and Mr. Stephen Larkin is neither an investor nor director of Gyrotek,” he said.
Africanopy’s William Stucke said his company had applied for a commercial trial license from Icasa for the provision of long wave phone and data provision.
Stucke said his company had clinched funding from both Alumni Energy Investments and the Co-operative Governance and Traditional Affairs department linked to a tender in KwaZulu-Natal. Altogether the company has received R20-million in funding.
He added that his company is not “directly” involved in Larkin’s prospecting for gas in Namibia. “Stephen Larkin is a very talented man with many irons in the fire,” he added.
When Ventureburn pointed out to Larkin the complexity of the investor proposition — having a Section 12J company for the tax incentive, a coin foundation to sell tokens and then his own energy company, he responded by saying “things can be confusing, running a cornershop can be confusing”.
The question now is whether investors will find his plans for prospecting for gas in the Namibian desert as confusing too.
Featured image: Africa New Energy founder Stephen Larkin (Supplied)