financing agreement with a European commercial group alleging a breach of contract.

Kemgas said in a statement to the press it has as a result reserved all rights of action.

The company claims an agreement, which was under negotiation from October 1999 and signed on 10th November 1999, provided for a renovation of the credit agreement with Kemgas' primary lender, Epsom Investment Services NV, to the new group and thereafter the extension of the existing credit facility from US$5 million to US$20 million. Kemgas said some US$8 million would have been immediately drawn down permitting Kemgas to retire current debt and commence implementing its proposed business plan.

They say the new lender would have converted into equity the amount drawn down under the conversion terms resulting in their becoming a major control block shareholder.

Kemgas said: "Completion was scheduled for 10th December 1999 and in the event this did not occur. A provision to extend for a further 28 days to 7th January 2000 was provided for in the agreement. The proposed lender failed to fulfil certain pre conditions and did not complete the transaction by the later date.

The directors do not consider it is in the interest of Kemgas to continue this agreement further, thus terminating it with cause forthwith. Kemgas has been denied the opportunity to pursue alternative financing and its activities have been generally diverted.''