Under the deal, Exergen’s shareholders will become major shareholders of the ASX-listed Cape Range.

The proposed transaction will result in the issue to Exergen shareholders of up to 412.5 million Cape Range shares, which is about 87.7% of Cape Range’s expanded issued capital.

The transaction is subject to number of conditions, including approval by Cape Range shareholders.

Shareholder approval will clear the way for stage one of the Exergen transaction to start, which involves a $2 million capital raising via the placement of 40 million Cape Range shares at 5c a share.

Cape Range confirmed its proposed deal with Yong Shen Mining Company was not going ahead due to technical difficulties.

It intends to repay the fully drawn down $500,000 loan facility Yong Sheng made to Cape Range.

Exergen has developed a patented technology used in a process called continuous hydrothermal dewatering, which upgrades low rank coal with high moisture content.

“A listing on the ASX gives us the right corporate structure and the timely access to capital markets to pursue the next phase of our development,” Exergen chief executive officer Trevor Bourne said.

“We have a clear strategy to utilise and enhance our proven technology to build a major coal business and will now focus our efforts entirely on that goal.”

Cape Range chairman Wayne Johnson said the transaction gave Cape Range shareholders the opportunity to participate in the development of an Australian technology with scalability and international licensing possibilities.

Exergen shareholders include the company’s founders, India’s largest private utility company Tata Power, Thiess, Japanese trading house Itochu Corporation and ASX-listed mineral processing group Sedgman.

Tata and Itochu represent potential offtake partners in two of the world’s largest coal markets.

Exergen shareholders have so far invested more than $40 million in developing, testing and proving the CHTD technology.

Core to the CHTD technology is a deep shaft vertical autoclave that uses gravity to achieve high pressure and incorporates heat recovery in its design.

It results in minimal energy input and high efficiency.

The autoclave exposes coal water slurry to high temperature and pressure to transform the surface chemistry and physical structure of the coal.

Up to 80% of the original moisture in the coal can be removed in liquid state without the need for energy intensive evaporation processes.

Potential products include CHTD briquettes, CHTD pulverised fuel and a CHTD slurry suitable for long-distance transport or as fuel for a direct injection coal engine.

The technology has been proven through a 4 tonne per hour pilot plant established at the Beaconsfield mine in Tasmania.

The plant was developed in 2004 and upgraded in 2008 to operate at higher temperatures before being decommissioned last year.

Exergen is planning to further prove the CHTD technology by constructing and operating a 50tph pre-commercial demonstration plant in the Latrobe Valley, Victoria.

The company has signed a memorandum of understanding with Energy Brix Australia Corporation to use the Morwell power station site to host the demonstration plant.

Exergen has established a joint venture with Mantle Mining to develop the Bacchus Marsh project in Victoria.

Mantle and Exergen each hold a 50% interest in exploration licences EL5294 and 5323, which host a JORC-compliant inferred resource of 1.6 billion tonnes of coal.