LNC - Linc Energy

[glads262]

LNC saw buying of about 900k between 1130-1145. All in one hit. This jumped the price up, and there was a minimum of sellers stepping in.
Could be an insto buying perhaps.
Consequently, some traders may have jumped on it due to it breaking out of its short term range around 2.20-2.30.
Not necessarily insider trading related.
With LNC narrowing down their buyers and including all three tenements recently though, the sale or non-sale should be announced fairly soon you would think.
Otherwise, why have the buyers narrowed down to one?? This either shows that the other two dropped out due to lack of interest/funds, or they were forced out due to price negotiations with the one buyer left being the current highest bidder.
My speculation only.
Holding still, despite any temptation at a quick 20% profit on some recently purchased holdings.

 

[Mickel]

LNC saw buying of about 900k between 1130-1145. All in one hit. This jumped the price up, and there was a minimum of sellers stepping in.
Could be an insto buying perhaps.
Consequently, some traders may have jumped on it due to it breaking out of its short term range around 2.20-2.30.
Not necessarily insider trading related.
With LNC narrowing down their buyers and including all three tenements recently though, the sale or non-sale should be announced fairly soon you would think.
Otherwise, why have the buyers narrowed down to one?? This either shows that the other two dropped out due to lack of interest/funds, or they were forced out due to price negotiations with the one buyer left being the current highest bidder.
My speculation only.
Holding still, despite any temptation at a quick 20% profit on some recently purchased holdings.

Glads, that buying around 1130-1145 included at least 6 lots of 10,000 shares and one of 80,000. There were other large parcels sold around that time as well.

IMHO they were from overseas (USA).Perhaps the US people who attended the dinner and official opening of the GTL plant last week returned to the US and told their friends. The trading unit of LNC in USA is LNCGY which is equivalent to 10 LNC shares. So a sale of 10,000 would be 1000 of LNCGY, a common parcel in USA. I agree with your other comments about not necessarily being insider trading.

LNC did get a speeding ticket yesterday, and answered that a possible explanation was uninformed speculation about the coal sale. They confirmed that there was no new news.

LNC closed yesterday up $0.30 at $2.56, after an intraday high of $2.68, on turnover more than 3m, opened today at $2.55 and are currently at $2.46.

I hold.

 

[glads262]

I was out at 2.55 yesterday, thinking that this scenario would peter out and that the SP would fall into the close - and the POO may drop overnight due to flu, and I could buy back in at a lower price.
First time I have not been exposed to LNC in 12 months.
I stressed all night, and crapped myself this morning when the POO was back at $51/bbl.
Seems that the share price has stabilised this morning at 2.46 & I am back in. I have lowered my entry price by $.10c, but I think I have aged about a year in the process.

Quarterly out today - not much new news, but does re-iterate that LNC have a lot more going for them than just the Teresa etc etc sales.
Jorc due out on dalby in next 2 months.
Drilling at Gallilee
SA exploration full speed ahead.
Further refining ops at Chinchilla.
Just need to get this asset sale done and dusted to take the uncertainty out of the SP.
Note that LNC seem to have enough cash available in lending facilities for next 6 months.

PB knows exactly how he is going to spend his $1bill plus. The plans must be all ready to go, just waiting on the cash for execution.

I would say once the sale goes through, there will be a raft of new announcements out regarding ramping up of exploration in all tenements (current budget about $20mil a year, imagine if this was increased to $100m??) Update on GTL process, and immidiate ordering of long lead time equipment for facility in Chinchilla/SA. There are plenty of unemployed in the industry that could be hired to speed this up at a lower cost than 12 months ago.
It will be all systems go - very exciting. Just waiting on that cash. Waiting. Patiently.

Don't forget - LNC is an ASX200 stock. NOONE is covering them at the moment. I reckon this may change with the above activity, a market cap that pushes LNC towards the ASX100, much safer investment with the cash backing. Also, PB owns 50% plus of the company, so any institutional buying will have a larger effect on the share price, as only 50% of the companies shares are available for purchase (less the large % of people who are long term holders!)

Patience is a virtue....

 

[Mickel]

A number of people on this thread (myself included) believe LNC S/P is directly linked to the oil price. With this in mind, and noting the AUD/USD exchange rate is moving within a broad range, I've listed various rate and oil price combinations-


AUD/USD Rate .65 ---- .70 ---- .75 ---- .80

Oil Price
USD
50 -- -- 76.92 - -- 71.43 -- -- 66.67 ---- 62.50

55 ---- 84.62 ---- 78.57 ---- 73.33 - ---- 68.75

60 - --- 92.31 ---- 85.71 ---- 80.00 ---- 75.00

70 ---- 107.69 ---- 100.00 ---- 93.33 ---- 87.50


Approx a month ago when oil was USD 45 and AUD/USD rate was.70 the Aussie equivalent was $64.29 . Last night with oil at USD 56 and the rate .75
the Aussie price was $74.67

When looking at LNC's 20,000 BPD operation(still 2-3 years hence) an increase of $10 pb equates to $72 million pa added to the bottom line.

Food for thought.

I hold for the long term and added more yesterday at $2.35

 

[glads262]

Cheers for that Mickel. Its easy to focus on the short term.
I agree that LNC is highly correlated to the oil price. Its a pretty high leverage play.
The AUD oil price should continue rising, as the AUD is probably overvalued at the moment, and signs of economic recovery should hopefully start showing up the the inventory reports (like yesterdays.)
Don't forget to add the premium for diesel!!

LNC seems to have found support around the 2.35 mark again - cheers for that Mickel! - and is having a good day today with the rising POO.

Haven't heard from PB for a bit though - there has to be some progress sooner or later...

 

[Mickel]

Cheers for that Mickel. Its easy to focus on the short term.
I agree that LNC is highly correlated to the oil price. Its a pretty high leverage play.
The AUD oil price should continue rising, as the AUD is probably overvalued at the moment, and signs of economic recovery should hopefully start showing up the the inventory reports (like yesterdays.)
Don't forget to add the premium for diesel!!

Glads, I have a different view on the AUD. When the economic recovery starts most of the commodities will increase (as long as China continues full steam ahead). The AUD appears to be linked to commodities prices and so, in my view, will increase. However, I think the USD oil price will increase more than the AUD rate, so I agree that the AUD oil price will increase. The thread " Oil Again" has some interesting comments regarding oil price rises.

I am aware of the premium for LNC's diesel (USD 10 to 15 pb) and it applies to all the prices I quoted previously, so it won't change the increase .

A story in the Courier Mail this morning of oil above USD 58.

http://www.news.com.au/couriermail/story/0,23739,25446890-5003402,00.html

 

[Jazzee]

I wonder how long before we get an update on the Tenement sale? It has been a little over 3 weeks, surely Linc has a responsibility of some sort to update the market in the very near future.

 

[glads262]

I wonder how long before we get an update on the Tenement sale? It has been a little over 3 weeks, surely Linc has a responsibility of some sort to update the market in the very near future.

Hi Jazzee,

Not really. LNC only have an obligation to report something if the situation changes - ie they have new information that could impact the share price - ie sale going through or falling through.

I would assume though, like most companies, that LNC will provide an update shortly even if there is no change. an announcement pretty much like the last "sale is progressing, but hasnt reached a conclusion"

 

[Go Nuke]

I would have thought that as the deal got closer the share price would go up..but that hasn't happened.

No perhaps its been played down so that you can buy in at a low price like today and make a good gain over the next few weeks...OR someone knows something about the deal being delayed again etc...OR people have lost interest in waiting for the announcement.

Just thoughts

 

[glads262]

I would have thought that as the deal got closer the share price would go up..but that hasn't happened.

No perhaps its been played down so that you can buy in at a low price like today and make a good gain over the next few weeks...OR someone knows something about the deal being delayed again etc...OR people have lost interest in waiting for the announcement.

Just thoughts

Nuke, valid thoughts.

Not sure about the first comment though. How do we know that the deal is getting closer?? It could be getting further away...

I reckon this is why the SP is falling. Its been 2-3 weeks since last news. Short term holders are capitulating, saying they can't wait & are pessimistic. SP should rise if LNC come out with a "its coming, but not yet" announcement, as this would confirm that it is not dead.

But ultimately, a re-rating is only going to occur with a positive announcement - of any kind - anywhere north of $1billion would be acceptable.

If you are a strong believer, you could be accumulating in at this lower price. Risk is I guess that if the sale falls through, SP could tank to $1. But if sale goes through - could spike to $3-4.

I have my money placed, but am not willing to commit any more funds at this stage. Many long term LNC holders would be same - therefore we are not providing much buying support to counter the short term sellers.

Hopefully should hear something before the end of the month...

 

[voyz]

could it bepossible that linc would be holding off the sale till the new financial year for tax reasons? i heard this could be a possible reason?

 

[Mickel]

could it bepossible that linc would be holding off the sale till the new financial year for tax reasons? i heard this could be a possible reason?

An interesting comment, Voyz.

In BBY's analyst report dated 8/9/08 (page3) below, they assumed that LNC would pay approx $300M tax on a sale price of $1.5B. They mentioned "deductions and some roll-over relief" as reasons for a reduced tax rate of 20%.

I'm not sure of the implications of the "roll-over relief" but it does suggest deferring tax to a new tax year. If that was the case, it would seem there would be no advantage in delaying the sale to the new financial year.

LNC also could structure the payments similar to the initial arrangement- ie $150M pm for 6 months and the balance at the end of 6 months. This would put most of the sale proceeds in the next F/Y.

Are there any tax accountants who can shed more light on the situation?

http://www.lincenergy.com.au/pdf/analyst-17.pdf

 

[luckypaul]

Hi - I am a long term holder who is getting a little frustrated by the delays and lack of information on the Emerald (Teresa) sale. I have no doubt that this is the reason that the SP is declining and find it frustrating that further delays mean that there is more chance that another correction in the markets will kill either the SP by itself and/or kill the potential beneficial impact of positive news. This was exactly what happened when they produced first diesel back in October 2008 when the market decline caused a 30% drop in Linc's share price and amongst all of the negativity the fantastic 'first diesel' news resulted in a megre 15% rise whereas it should have had a mind blowing impact!

Don't get me wrong, I do STILL have a lot of faith in Mr Peter Bond and Linc's vision but It's been over 8 months now since the initial Emerald sale announcement (then to Xinwen). Since then we have had world markets crashes, financial confusion and mayhem before finally getting regulatory approval from Australian and Chinese ...so close to a deal...and then the game changed again.

To try and keep the faith I thought I would try and do some simple maths. Back in September 2008 Linc announced the Teresa tenement sale to Xinwen for AUD 1.5 billion. At this time the JORC statement for Xinwen stated 470 million tonnes of thermal coal. At this time the USD price for thermal was approx USD 163 per metric Ton (source http://indexmundi.com/commodities/?commodity=coal-australian&months=12 ).

Since then Linc has updated the Jorc statement to 852 million tonnes (approx +85%) but the price of thermal coal has plummeted to USD 65 (same source - March was the low). That is approx -60%.

Now I am not technical, not normally into coal and certainly not the mathematian that some of you are but AUD 1.5 billion + 85% - 60% = AUD 1.1 billion (very approx). To complete this logic I need Jorc statements for Galilee and Pentland (and some idea of what type of coal they hold as it may not be themal and therefore may be priced differently). Has anyone seen that information anywhere??

I did find an article in a Linc document (dated 31st March 2008 - therefore probably out of date = http://www.lincenergy.com.au/pdf/asx-65.pdf ) detailing Linc Energy tenements whith 3 Galilee tenements listed (covering a total of 2084 km²), 1 Pentland (190 km²) and mentions Teresa as covering 197 km². This is interesting but without up to date JORC statements is useless in trying to approximate and predict a sale price. NOTE: I would guess that the sale delay may be due to time spent getting confirmed JORC statements for these 'for sale' areas, if so, it could take a long time and a hell of a lot of drilling !%!

Linc currently has 715,782,205 shares (source Internaxx) on issue so dividing 1 billion by that means that the cash value per share for every 1 billion netted from the sale is AUD 1.39 eek: Why is that very different from BBY's AUD 3 per share mentioned in http://www.lincenergy.com.au/pdf/analyst-17.pdf )?

What I am trying to do here is get a cash price per share for every billion netted in the upcoming coal sale. If we have this information, we will have a good base target SP as soon as the sale details are announced. My logic above may well be floored and I am sure you guys can do a much better job but maybe, just maybe the wait will be worth it! I certainly hope so.

 

[glads262]

:
To try and keep the faith I thought I would try and do some simple maths. Back in September 2008 Linc announced the Teresa tenement sale to Xinwen for AUD 1.5 billion. At this time the JORC statement for Xinwen stated 470 million tonnes of thermal coal. At this time the USD price for thermal was approx USD 163 per metric Ton (source http://indexmundi.com/commodities/?commodity=coal-australian&months=12 ).

Since then Linc has updated the Jorc statement to 852 million tonnes (approx +85%) but the price of thermal coal has plummeted to USD 65 (same source - March was the low). That is approx -60%.

Now I am not technical, not normally into coal and certainly not the mathematian that some of you are but AUD 1.5 billion + 85% - 60% = AUD 1.1 billion (very approx). To complete this logic I need Jorc statements for Galilee and Pentland (and some idea of what type of coal they hold as it may not be themal and therefore may be priced differently). Has anyone seen that information anywhere??

Hi Luckypaul,
Don't forget also, the Currency difference of 20% in favour of the chinese. this would also have an impact on the cost of the tenements.

I have no doubt of a value of $1billion at current prices for all three tenements. Hoping for anything above this is probably futile.

No doubt, the value of all three tenements was probably $2billion a year ago, and will probably be $2 billion again in another 12 months. But LNC want a sale now, so will have to take whatever is offered - or wait.
Waiting another 12 months means SP collapse, a slowdown in all their drilling etc to conserve cash, probably another share placement, and a years delay to their first commercial facility. A lot to give up.

But then again, so is giving up the potential for another $1billion from the sale.
Its a hard one to balance, which is probably why it is taking so long. PB does not want to firesale (I'm sure he could sell it tomorrow at $500million), but he also wants a quick resolution.

Just remember. Even if it doesn't happen this year, it will eventually happen.

 

[Mickel]

Linc currently has 715,782,205 shares (source Internaxx) on issue so dividing 1 billion by that means that the cash value per share for every 1 billion netted from the sale is AUD 1.39 eek: Why is that very different from BBY's AUD 3 per share mentioned in http://www.lincenergy.com.au/pdf/analyst-17.pdf )?

What I am trying to do here is get a cash price per share for every billion netted in the upcoming coal sale. If we have this information, we will have a good base target SP as soon as the sale details are announced. My logic above may well be floored and I am sure you guys can do a much better job but maybe, just maybe the wait will be worth it! I certainly hope so.

Luckypaul, LNC currently has just under 416m shares- check page 3 of latest announcement on May 6. At the time of BBY's analyst report LNC had 397.6m shares according to page 1 of the report.

So, that equates now to $2.40 per share per billion gross (or $3.60 gross for $1.5B). Refer to my previous post on this thread regarding possible tax on this sale.

I share your frustration with the delay in finalising the sale. I am also a long term holder.

 

[Jazzee]

Assuming that the profits on the sale of the tenements is a capital gain (which I'm assuming it is), the timing of the capital gains tax event(determines which year the gain would need to be declared), such as the sale of the tenements is when the contract is entered into, regardless of when monies are received. I'm not sure whether it would be considered that Linc have already entered into a contract (particularly with the vague details provided). I am impatiently waiting like everyone else - I hope I will be pleasantly surprised sometime soon with an announcement.

 

[luckypaul]

Luckypaul, LNC currently has just under 416m shares- check page 3 of latest announcement on May 6. At the time of BBY's analyst report LNC had 397.6m shares according to page 1 of the report.

So, that equates now to $2.40 per share per billion gross (or $3.60 gross for $1.5B). Refer to my previous post on this thread regarding possible tax on this sale.

I share your frustration with the delay in finalising the sale. I am also a long term holder.

Mickel, You are correct. Linc has 415,782,205 shares currently on issue. My appologies for my earlier mistake. Happy that now matches the earlier BBY quote AND that it greatly improves the cash per share price per billion. In theory the price for Emerald should be around the 1 billion+ mark (and coal prices are rising along with other commodities so maybe the delay may help us here). Of the other 2 tenements Galilee covers a far greater area (in km²) than Emerald whilst Pentland is very similar to it (Source: http://www.lincenergy.com.au/pdf/asx-65.pdf ). I know that doesn't mean it has the same quantity or quality of coal but it sure as hell adds to the potential deal price. Any JORC info out there on these areas????...I need to support my fantasy of good news although I still feel like I am waiting for Santa and it's now New Years Eve!! I am hanging in there though :

 

[happytown]

linc energy ann,

signs contract for acquisition of approx 90,000 acres of coal tenements in us

...

The 92,059 acres being acquired have a coal deposit exploration target range of 7 to 8 billion metric tonnes (non-JORC Code standard) based on existing drilling data.

The Powder River Basin is the largest coal producing region in the United States with current production from surface mines representing over 45% of the total US production. The area being acquired by Linc Energy contains multiple subbituminous coal seams ranging from 6 to 15 metres thick and occurring at depths in excess of 150 metres, making them excellent targets for Underground Coal Gasification (UCG) operations.

Linc Energy has agreed to pay US$5 million for the purchase of the GasTech coal tenements. This agreement follows the Letter of Intent between Linc Energy and GasTech which was announced on 3rd December 2008 and completes the first phase of the proposed GasTech purchase, with the remaining area subject to a further transaction pending resolution of pre-emptive rights held by a major petroleum company.

...

due diligence still to be completed, settlement expected in 60 days

cheers

 

[glads262]

In theory the price for Emerald should be around the 1 billion+ mark (and coal prices are rising along with other commodities so maybe the delay may help us here). Of the other 2 tenements Galilee covers a far greater area (in km²) than Emerald whilst Pentland is very similar to it (Source: http://www.lincenergy.com.au/pdf/asx-65.pdf ). I know that doesn't mean it has the same quantity or quality of coal but it sure as hell adds to the potential deal price. Any JORC info out there on these areas????...:

Luckypaul: Check out past announcements for LNC. Pentland has JORC figure quoted from drilling results received late last year I think. Most analysis back then was saying a potential value would be around $100 million.

Galilee - I think they are drilling this at the moment/in the near future. They have no figures on this one, so it will sell for a fairly low value at the moment.

I wouldn't be putting too much focus on how much they are going to get for all three tenements. It has now boiled down to whether they will get anything at all in the current environment.
This is why LNC have thrown in the two other tenements - they are throwing everything at this transaction in order to get a deal done.

If you must focus on the figures - I would say $1billion is most likely for all three (as this is a fire sale at the bottom of the market)
$1.5 billion would be more of an acceptable value, but less likely.
$2billion would probably be a "market value" based on the JORC resources, but this is HIGHLY unlikely.

BASIC analysis on the SP - if sale is $1billion, probably $3-4 per share
If sale is 1.5billion, probably $4-5 per share
If sale is 2 billion, probably $5-6 per share.
If sale is less than $1billion, probably $2.5-$3 would be it.

If no sale.............. SP will be around $1.

Its a risk/reward between the sale going through or not.

Most likely if sale goes through, you may double your money...
If sale falls through, you will do in half your money short term...... but in the long run - a sale will happen at some stage to someone for some amount when things improve globally.

Hopefully, with the resources prices (coal price) improving by the day, this will give China some incentive to get a deal done. They have been holding out watching things deteriorate. But I don't really expect them to give up the opportunity to purchase these tenements at a firesale price. I reckon they will buy them, its just a matter of who cracks first on the price - Peter Bond or Xinwen.

 

[Mickel]

Perhaps the chinese company Xinwen are awaiting the outcome of the RIO/CHINALCO deal before agreeing to LNC's price for the coal tenements.

If some reports, that the deal is unlikely to go ahead, are confirmed, then the chances of LNC wrapping up a good deal would seem to increase. Refer this story in Brisbane Times-

http://business.brisbanetimes.com.au/business/rio-shares-pounded-on-deal-worries-20090514-b3yv.html