ESI said Gastar’s decision did not affect the agreement that it has developed with VCR (a subsidiary of US company Geostar), and it would continue with plans to roll out a range of proprietary clean coal technologies hoped to radically alter the environmental impact and efficiency of Victoria’s vast brown coal (lignite) resources.

VCR chairman Thom Robinson agreed: “Gastar’s late decision not to take up an equity position will in no way impact on the Victorian coal project and the definitive agreement is in the process of completion,” he said.

VCR director Jeff Marvin said the upgrades to the Bacchus Marsh pilot plant, trialling ESI’s “Coldry” process – a dewatering technology creating high-energy, clean-burning pellets from lignite – should result in commercial 24/7 operations by September 2006.

ESI said it would also introduce its “Matmor” process – also developed by ESI subsidiary Asia Pacific Coal & Steel – claimed to produce high quality, low cost steel from iron ore tailings, brown coal and limestone.

“The Gastar decision allows VCR to pursue its original plans to aim for rapid large-scale commercial production of upgraded brown coal and a unique steel product, as well as significant coal-to-liquids development with effectively 100 percent of the resources and technology in one entity, which should be very significant for any potential equity investors,” Marvin said.

ESI chairman Murray d’Almeida said the project was on track to deliver its first export order of 50,000 tonnes of Coldry energy pellets to Singaporean commodity trader Green Energy Resources by December 2007.

ESI shares are continuing to slide on the Australian Stock Exchange, falling another 4.29% in morning trading to A67c per share.