Southland will become the beneficiary of $A7 million ($NZ8.5 million) raised by coal seam gas explorer L&M Energy (LME), which will be used to boost exploration in the area.
Dual-listed LME suspended its share trading on Friday, and yesterday announced to markets it had raised $A7 million following a placement to institutional and sophisticated investors of about 77 million fully paid ordinary shares at A9c per share.
LME's chairman Geoff Loudon said the company would consider a shareholder purchase plan being offered to existing shareholders "on similar terms" later this month - raising the prospect another $A7 million might yet be sought.
"LME intends to apply the funds raised to undertake a pilot production testing programme with the aim of certifying 2P reserves at its Ohai coal seam gas project in Southland ... and to undertake further drilling to extend its 3P reserve position in the area," Mr Loudon said in a statement yesterday.
The 3P to 2P designation means applying additional drill testing to prove the likelihood of success for commercial extraction.
LME's Southland pilot testing is scheduled to start in August or September, with a target of certifying the company's first 2P reserves by early 2011.
