LNC - Linc Energy

Looks like some action on LNC this morning - probably as a result of Peter Bonds prediction of a Teresa sale/JV within 3 months.

But other things have also been happening.

1) Gasifier 5 is now working very effectively at Chinchilla. Apparently that means it is ready to go at any UCG operation LNC develops around the world

2) The Alkaline Fuel Cell technology is very, very close to commercialization. The company has announced it is stepping up inhouse fuel cell production (prior to high volume external production) and the trials with Akzo chemicals appear to be progressing without a hint of problems.

The game changer for LNC would be using it's UCG capacities to produce carbon free base load power from coal at very competitive prices. This could be a lot closer than realised.

http://www.lincenergy.com/investor_linc.php?articleId=83

http://www.afcenergy.com/regulatory...onal-production-facility-investment-approved/

By Ross Kelly
-- CEO says Chinese entity to take a relatively small stake

-- New interest in Teresa coal asset after several bids rejected last year

-- Linc may packaging Teresa with other coal assets for sale

-- CEO sees Linc Energy becoming profitable by the end of 2012

SYDNEY -(MarketWatch)- Australia's Linc Energy Ltd. said it hopes to secure investment in the company by a Chinese entity within weeks, and has experienced fresh interest in an auction of Australian coal assets worth over A$1 billion.

Linc hopes to build its next commercial underground coal gasification, or UCG, project in China with assistance from the unnamed Chinese investor, Chief Executive Peter Bond told Dow Jones Newswires in an interview.

UCG is being investigated by several international energy companies as a technology that has the potential to tap enormous and otherwise inaccessible coal reserves, and to slow the speed of climate change. The process involves burning the coal where it lies, deep below the Earth's surface, then extracting the gases produced for applications including powering turbines or the production of chemicals.

Bond declined to say how much of Brisbane-based Linc will be sold, but said the investment likely won't be has high as 10-20%.

"It'll be a relatively small stake," Bond said. "But I think in the scheme of things it will be significant to the commercialization of underground coal gasification and gas-to-liquids. And it'll be a significant revaluation of some of the assets within the group, including the UCG technology."

Bond said the China deal was expected to be completed this quarter. "I still think we're very close to doing that," he said.

Linc, which has a market value of A$643 million, wants to produce liquid transport fuels such as gasoline and jet fuel from coal by employing UCG and gas-to-liquids, or GTL, technology.

It already has an operational UCG facility in Uzbekistan, which feeds a power plant, and has built a GTL demonstration plant in Australia's Queensland state.

To bring in funding the company sold its Emerald coal property to India's Adani Enterprises Ltd. for A$500 million plus royalties in 2010. It's also acquired producing oil assets in the U.S. to generate cashflow to support its growth.

In a statement to the Australian Securities Exchange last week, Linc said it declined a number of offers for its Teresa coal property because they were either too low, or it didn't like the implied post-transaction ownership structure. Discussions are continuing with several potential new buyers, it said at the time.

Bond said that although the company received "a couple of firm offers" for Teresa, it had to consider them in the context of all its coal assets, including the Pentland property and Great Northern Leases.

"There's probably over A$1 billion of hard value in our coal assets and you've got to be pretty smart about how you unlock the value. I want to do an aggressive sale process on the bulk of the coal asset base because I think between now and the end of the year is a good time to do it," he said.

A wave of merger and acquisitions activity has swept over Australia's coal sector, generated by strong demand for metallurgical coal used in steelmaking and thermal coal used in electricity generation from rapidly industrializing countries such as China and India. But not all companies selling assets have been successful, with Bandanna Energy Ltd. (BND.AU) and Whitehaven Coal Ltd. (WHC.AU) both terminating formal sales processes after failing to attract adequate bids.

Linc's oil fields in Texas and Louisiana are currently producing about 3,000 barrels per day and Bond said the company is on track to hit 7,000 barrels per day by the end of 2012. This increased output rate would equate to around A$250 million of revenue and A$120 million-A$130 million of operating cashflow, he said.

Linc on Friday booked A$48.7 million net loss for the six months to Dec. 31. Bond said cashflow from the U.S. assets should make the company profitable by the end of 2012 and that, over the longer term, it may consider spin-offs and offshore listings of separate business units

http://www.marketwatch.com/story/linc-energy-close-to-investment-from-china-entity-2012-03-18

LNC is continuing to fall away. Dropped more than 30% since the January spike. Any thoughts on the persistent weakness ? Any inside or outside goss ?

STINKY LINKY the "ex" leader in the UCG market are falling way, way behind or so it appears. I have an image of them behind the garage smoking a joint while their investors sit in the front room with their head in their hands! ...or maybe they have been working away furiously behind the scenes and are just about to SURPRISE the world.

UK Companies

OXFORD CATALYSTS (OCG): A synthetic fuels company, with its Fischer-Tropsch (FT) reactors, today announced its latest full-year results. The highlights are:

Orders received for full scale FT units: one for SGC Energia; two for a Fortune 500 company; and one for a diversified energy company (although this was after the period of these results)

Progressed to Phase 2 of gas-to-liquid (GTL) engineering study for 15,000 barrels per day facility in North America

Several $millions committed for commercialization by offshore GTL partners post period end

One year successful continuous operation of Group's FT catalyst achieved

Market outlook is good – arbitrage between gas and oil prices in US is at exceptional level

Revenue of £4.7 million (2010: £7.7 million) reflecting continuing transition to commercial activities

Raised £21m before expenses through an oversubscribed equity placing

Cash at period end of £17.1 million (2010: £5.7 million)

Pierre Jungels, Chairman of Oxford Catalysts, said:

"I am delighted with the progress that the Group has made throughout 2011 in moving ahead towards commercialisation. The Company has taken significant steps in all areas necessary to deliver commercial sales of its products, and has started to receive orders for its FT reactors. The level of interest in our technology is at an all-time high and there appear to be exceptional opportunities, particularly in North America arising from near record low gas prices as a result of the shale gas production boom. Our GTL offering looks ideally placed to exploit the highly attractive arbitrage between low gas and high oil prices. With the Company well capitalised following the fund raising in 2011, we look forward to building on this progress to achieve further success in 2012."

Note: OCG's full scale FT units mentioned are 15,000 barrels a day - sound familiar???
Yesterday's Price 48.5p

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WILDHORSE ENERGY (WHE)

If you've been following Tom's updates, you'll know he's been waiting for the results of a Preliminary Feasibility Study (PFS). These came out yesterday.

This was to allow some independent experts to assess Wildhorse's licence area and put some numbers on its Mecsek Hills underground coal gasification (UCG) project in Hungary.

The results of the PFS confirm the preliminary findings from 1 June 2011, indicating 'attractive economic and technical potential of supplying syngas as a gas feedstock for power stations.'

The project consists of two distinct phases:

1. Phase I is a commercial demonstration UCG plant, designed to have a capacity of approximately 130 MWt of syngas. This would be used to supply a combined cycle gas turbine (CCGT) power plant. Both the UCG and CCGT are expected to be operational by the fourth quarter of 2014.

2. Phase II is the development of a large scale commercial plant designed to have capacity of approximately 280 MWt of syngas, with UGC facility to supply syngas to a potential 130 MW power plant. The development of this phase will commence after the commissioning of Phase I.

Wildhorse also announced an updated JORC Inferred coal resource of 383 million tonnes at Mecsek Hills. Yesterdays Price: 8.75p

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Yours, forever waiting for news, LuckyPaul (except on stock markets!)

The merits of a project cut no ice when the land holders cozy up to the greenies.

But the new Premier yesterday said it was "inappropriate" to expand the mine in the state's southern food bowl, 150km west of Brisbane. Mr Newman also said he would oppose the creation of Australia's first coal-to-liquids project on fertile farmland at Felton, on the Darling Downs. French company Ambre Energy claims the $3 billion project could supply one-fifth of Queensland's unleaded petrol and LPG needs.

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Ambre Energy director Michael van Baarle said yesterday his company would not be dissuaded from pursuing the coal-to-liquid project: "We haven't had an opportunity to speak to the new government or the new bureaucracy. We've always supported protection of cropping land."

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http://www.theaustralian.com.au/nat...e-shut-on-miners/story-fnbsqt8f-1226312958263

I seem to remember last year that LNC was in discussions with Oxford Catalysts re their reactor. After all why would you try to develop your own technology when a clearly excellent vehicle was already being produced ?

I suggest that the diversified energy company referred to as one of the buyers in Lucky Pauls comments could be LNC. Would certainly make sense.

There is also another excellent discussion on the potential of Oxford Catalysts.

http://www.investorschronicle.co.uk...-catalyst-gHy8amiXYMUGYZhKiZ4ioM/article.html

Announcement this morning regarding contract with Chinese company on joint development of UCG to GTL plant.

LNC up 35%

http://www.lincenergy.com/data/asxpdf/ASX-LNC-405.pdf

A very strange deal... GCL to take $120m (5%) of LNC at $4.50... or 30m shares.

Who in their right mind accept placement at $4.50 a share when the last traded price was ~$1.10. Even with the sharp rise to $1.40 today, you are only down ~$100m straight away!

Wouldn't they be better off just buying the 30m shares on market for $1.10-1.20, then loan the rest of the money to LNC at so minimal interest?

Great deal for LNC, however.

On the charts - $1.50 resistance was in sight but probably won't be breached today. $1 support was tested again last week and proved firm. That's a pretty big trading range being established..

skc said:

A very strange deal... GCL to take $120m (5%) of LNC at $4.50... or 30m shares.

Who in their right mind accept placement at $4.50 a share when the last traded price was ~$1.10. Even with the sharp rise to $1.40 today, you are only down ~$100m straight away!

Wouldn't they be better off just buying the 30m shares on market for $1.10-1.20, then loan the rest of the money to LNC at so minimal interest?

Great deal for LNC, however.

On the charts - $1.50 resistance was in sight but probably won't be breached today. $1 support was tested again last week and proved firm. That's a pretty big trading range being established..

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At first glance this may appear great for LNC, but for the price of a meat pie, GCL are getting access to all of LNC's IP and the use of that throughout China FOREVER.
That appears to me a major compromise, whilst LNC is selling it as though the company is worth X Billion.

If the company was worth X billion it would trade at X billion.

This entry may change things for LNC we will see.

I think this announcement will start a long overdue revaluation of LNC shares. It seems the technology is now sorted out and with the capital injection by GCL and the JV agreement the opportunity to turn coal into diesel at a big profit is being fast tracked.

It will be interesting to see some financial analysis of the project.

mr. jeff said:

At first glance this may appear great for LNC, but for the price of a meat pie, GCL are getting access to all of LNC's IP and the use of that throughout China FOREVER.
That appears to me a major compromise, whilst LNC is selling it as though the company is worth X Billion.

If the company was worth X billion it would trade at X billion.

This entry may change things for LNC we will see.

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That's a reasonable interpretation. Say they sold 30m new shares at more reasonable prices ($1.20) and they sold essentially 2/3 of their IP to China for the rest of the money or ~$80-90m. They still retain the rest of the world + 1/3 of the upside in China.

I guess that's better than not having any money from the UGC/GTL/HMSM* process.

*HMSM = Hopefully Make Some Money

As I read the deal LNC will be getting a 1/3 cut of all the UCG /GTL plants that will be built in China through the JV in return for their IP technology. Their Chines partner is very big and it seems quite capable of rolling out the infrastructure.

China is a huge market (obviously..) Creating a JV vehicle with a strong Chinese company seems like the most practical way LNC could gain access to this market. The Chinese are just too practical to allow a foreign company to effectively take away the value of all their underground coal.

The project also underpins the necessity for China to gain energy independence for liquid fuels.

I think this makes excellent commercial sense. Great win/win negotiation.

Just checking back on LNC's recent press releases. In March 19th Peter Bond stated LNC was very close to sealing a JV deal with a Chinese company. The SP then was $1.33.

Since then the SP has drifted (plunged !!?) to $1.05. Todays rally on the signing of the JV agreement merely takes LNC to the March 19th price. There has to be a bigger revaluation of this company.

Hmmm.... That was all a bit underwhelming. LNC finishes at day low of $1.27 which is substantially under the price when Peter Bond announced they were very close to signing off the JV deal.

Perhaps the US market will have more to say tonight and maybe some of the stock analysts can tell us a story on how much this all be worth....

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On another note. I remember that last September LNC announced a buy back of up to 5% of stock or around 25 million shares. On last count they had bought around 10 million. Could they go into the market with the Chinese money, buy the remaining 15 million at $1.30 and sell them to the Chinese for $4.50 ?

Or would that be just too naughty !

The transformation of LNC's balance sheet from 30 Jun 2011 to 30 Dec 2011 was nothing short of breath-taking.

Cash reduced from $310m to $32m. Debt increased from $2m to $127m. All these were turned into $358m Oil and Gas assets. Given the timing of these acquisitions, the last financial report makes it quite difficult to analyse their returns. The HY report only showed $19m revenue and a negative $48m operating result.

Along the way, LNC changed from an undervalued asset play to something that I have no idea how to value. Their 1 year share price chart suggests to me, however, that the buyback has been largely a waste of money.

Correction to previous post. LNC can still buy back 17.877 million shares under its buyback arrangement.
http://www.buysellsignals.com/10211283

A few more downticks and the gap @ $1.10 would be closed. Guess no one buying yesterday at $1.45+ expected such a quick turnaround.

Slightly negative view on yesterday's announcement.

RBS Australia rates as Buy (1) - Linc has finally taken a step along its path of Chinese aspiration with a 67/33 JV with China's green power generator (among other things) Golden Concord. To the broker, the terms look good. The problem is Golden Concord is not a big company, not a coal miner, and has no coal tenements, the broker notes. Not only will coal tenements have to be acquired but Linc is giving up its proprietary technology to a small player and surprising choice, the broker suggests. More information would be useful.

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From http://finance.ninemsn.com.au/newsc...03/fn-arena-broker-call-headlines-17-apr-2012

If it can do another dive like that tomorrow it may find itself in the Ausi Olympic team!
Then take out the rolling year record low.
And get the gold medal for idiots all round.

notting said:

If it can do another dive like that tomorrow it may find itself in the Ausi Olympic team!
Then take out the rolling year record low.
And get the gold medal for idiots all round.

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Yeah - I think LNC shareholders are going to be disappointed to see this downtrend continue for as long as the UCG technology, for all the promise that it shows, can't show $1 of revenue.

Is anyone out there any closer to any credible reports about UCG and how close we are? Otherwise (or alternatively) can someone have a view about buying LNC on a Contracts for Difference basis. Hopefully, this is at a fraction of the cost and will more acceptably allow the holder to sit on the sidelines waiting for something to happen (which could take a few more years).

StumpyPhantom said:

Yeah - I think LNC shareholders are going to be disappointed to see this downtrend continue for as long as the UCG technology, for all the promise that it shows, can't show $1 of revenue.

Is anyone out there any closer to any credible reports about UCG and how close we are? Otherwise (or alternatively) can someone have a view about buying LNC on a Contracts for Difference basis. Hopefully, this is at a fraction of the cost and will more acceptably allow the holder to sit on the sidelines waiting for something to happen (which could take a few more years).

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How's buying LNC on CFD more acceptable and allow the holder to sit on the sideline?

What ever position size you have with CFD, you'd have the exact same exposure to holding the real shares. The cost of carry for CFD is actually higher because you pay interest on the full position size. And if you don't actually have the money for the full position size, you are liable for losses greater than what you have put up as margin.

That's exactly the wrong way to use CFD. Don't do it.