LNC - Linc Energy

[The Dealer]

Macquarie banks forward estimates on Thermal coal is $73 per tonne through to 2015. What price did you use back on the 13th?

 

[Mickel]

OK - I did the maths...

Based on my original estimate (which nobody commented on as incorrect or daft), my guess of a revised AUD 1.1 billion for 852 million tonnes of Teresa coal means that the coal costs AUD 1.29 billion per billion tonnes.

Low Galilee (3 billion tonnes) plus Teresa (852 million tonnes) plus Pentland (zero as no estimate available) = 3.852 billion tonnes.

3.852 x 1.29 = AUD 4.97 billion. It was previously estimated that the cash price per Linc share was $2.4 per billion which would give us a CASH PRICE PER LINC SHARE of AUD $11.93.

Please note: These are my ROUGH estimate and most figures used are my estimates too (although you can see my logic in this and the previous post). Also be aware that I have used lower values where possible too and there are still some unknowns - like Pentland, exact coal price (which is now rising) etc. Feel very free to correct me here.

Still Holding but now very, very excited.

LP, I share your frustration and excitement. I have some additional points that could alter your maths.
1. The Teresa total of 852 MT includes 200 MT of coking coal which has a higher price than steaming/thermal coal (refer page 13 of ASX Ann 18/11/08- check it on LNC website).

2. The Chinese Yuan has appreciated against the AUD by about 20% since 9/08 according to previous posts on this link.


As the Galilee coal is thermal, point 1. would lower your overall valuation. Point 2. could possibly raise the valuation.

I'll leave the maths to you. I remain a long term holder.

 

[mexican]

LP, I share your frustration and excitement. I have some additional points that could alter your maths.
1. The Teresa total of 852 MT includes 200 MT of coking coal which has a higher price than steaming/thermal coal (refer page 13 of ASX Ann 18/11/08- check it on LNC website).

It will be alot more than 200mt of coking coal. Being located in the Bowen basin on the German creek seam, this deposit will be more coke than thermal.
The announcement states, "200mt of open cut mining" not the total amount of coking coal.
Be conservative and calculate on 50-50.


LT invester.



]

 

[JAKSPARA]

been holding for a while now. sold half my holding yesterday out of frustrationalthough this anouncement didnt really help the sp today??

 

[luckypaul]

Macquarie banks forward estimates on Thermal coal is $73 per tonne through to 2015. What price did you use back on the 13th?

Hi 'The Dealer'. FYI My original estimate back on May 13th was based on Thermal Coal being USD $63 per metric Ton (source http://indexmundi.com/commodities/?c...lian&months=12 ).
It was this same source that gave me the original estimated thermal price at original deal time back in September as being USD 163 per metric Ton.

I agree with Mickel and Mexican's comments on types of coal. Unfortunately more specific information is not readily available to make a more accurate estimate so this is the best I have at present. It could well be a significant over estimate as it stands but then it is not yet a complete picture yet either (i.e. coal price is rising, inclusion of Pentland resources, currency rate changes, the fact that the Chinese can get knocked back on occasions - may assist the valuation).

I would imagine that Linc are forbidden to make information available while the deal is still being negotiated. This Jorc update on Galilee is likely to be all we will get. Having said that 3.0 billion tonnes of whatever coal must have significant value in anyones book. My worry is that to get an accurate estimate and, therefore, to get an accurate worth, there would need to be significantly more drilling - which takes time and means more delays.

It has got to be good in the end though...as long as there is not some devious Chinese delaying tactic plan to take Linc off track whilst others take the lead. I have faith in Mr Bond though so will continue to hold.

 

[Mickel]

LP, I share your frustration and excitement. I have some additional points that could alter your maths.
1. The Teresa total of 852 MT includes 200 MT of coking coal which has a higher price than steaming/thermal coal (refer page 13 of ASX Ann 18/11/08- check it on LNC website).

It will be alot more than 200mt of coking coal. Being located in the Bowen basin on the German creek seam, this deposit will be more coke than thermal.
The announcement states, "200mt of open cut mining" not the total amount of coking coal.
Be conservative and calculate on 50-50.


LT invester.

]

Mexican, the reference I gave (page 13 of the Ann 18/11) quotes this-

"The Emerald “Teresa” deposit is currently estimated to contain a total JORC compliant coal resource of 852 million tonnes. All of this resource is within the Inferred JORC category. Of this total approximately 200 million tonnes has metallurgical potential."

Page 1 of the announcement did state 200MT of the 852MT would be open cut ie- "Emerald (Teresa) Coal Tenements have now been developed to an inferred resource of 852 million tonnes of coal in accordance with the JORC Code*, with a 200 million tonne open cut mine area identified".

They are 2 different 200MT references. However, it would not surprise me if they found more than 200MT of coking/metallurgical coal given its position in the Bowen Basin.

 

[Mickel]

Further to estimates of what the Chinese deal may be worth, I have found a JORC statement for the Pentland deposit.On page 7 of the ASX ann 30/1/09 Quarterly Report-

"As at December 2008, Linc Energy had announced coal resources totalling 3.408 billion tonnes (in accordance with the JORC Code). The resources were located in the following tenement areas:

- Chinchilla 600 million tonnes (being 24 million tonnes measured, 222
million tonnes indicated and 354 million tonnes inferred) of coal in accordance with the JORC Code

- Emerald ¡nferred resource of 852 million tonnes of coal in accordance
with the JORC Code"

- Pentland 266 million tonnes (being 176 million tonnes indicated and 90
million tonnes inferred) of coal in accordance with the JORC Code

- Arckaringa Basin inferred resource of 1,690 million tonnes of coal in accordance with the JORC Code*".

So up for sale are 200MT of coking coal and 3918MT of thermal coal on current estimate statements,
the latest statement(12/6) being only a target statement, not a JORC statement.

 

[luckypaul]

So up for sale are 200MT of coking coal and 3918MT of thermal coal on current estimate statements,
the latest statement(12/6) being only a target statement, not a JORC statement.

Mickel

Macquarie banks forward estimates on Thermal coal is $73 per tonne through to 2015.

- The Dealer

I think the $73 quoted is a USD price based on the fact that http://indexmundi.com/commodities/?commodity=coal-australian&months=12 is in USD.

For the thermal coal only:
3918 Million Metric Tons x 73 = USD 286 billion which at 0.81 = AUD 354 billion!!!

Huh! My maths must be wrong as that would give Linc a cash value per share of 354,000,000,000 / 417,451,436 (shares in issuance) = AUD 870!

Please correct me before I buy my Mercedes.

 

[luckypaul]

Ok - the above is crazy because USD 73 per metric tonne is probably the 'above ground' price, not the price for a valuation in situ. However even if you were to take 5 or 10% of that the valuation it is still extremely good for the cash per share it represents.

I'll try to look at this another way by reviewing the original deal values, adjusting for resource and coal price percentage change (in the @x@xx'ing long months since September 08) and using that value to estimate based on the 'Mickel' resource estimate above':-

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/?c...lian&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%.

That was some of what I wrote on May 13th. Assuming thermal coal is now USD 73, that is a drop of approx 55% (adjusted from 60% due to coal price increase) from September's approx $163 in the thermal coal price.

Teresa should, therefore, be AUD 1.5 billion + 81% (corrected) - 55% = AUD 1.221 billion for 852 million tonnes... Teresa+Galilee+Pentland Thermal coal alone 'The Mickel Resource estimate' should be worth AUD 5.61 billion for the estimated 3918 MT. That is AUD 13.43 per Linc share cash value!

Again all based on conservative estimates but I think the logic is OK (again feel free to correct as I am an investor, not a maths man). Fingers crossed anyhow and I am holding with bated breath on this. I wonder why the Sp hasn't moved yet??

 

[mexican]

Stand corrected Mickel. Coming off night shift does not do my brain any favours.
Really stands out that the SP is not moving until the sale goes through with the price of oil hitting over $70 US, the good report from the Galillee deposit and the SP has not moved.
I think sometimes to cash in some profit and if the sale does not go through buy in again.
But you just don't know with Bond, he could pull another rabbit out of his hat.
Another tenement that could be worth a few $ is the Alpha deposit. With Waratah coal looking at opening up a massive thermal mine, it might play into Linc's hands if the drilling results come back positive.

LT holder and waiting...waiting......waiting!

 

[grace]

Stand corrected Mickel. Coming off night shift does not do my brain any favours.
Really stands out that the SP is not moving until the sale goes through with the price of oil hitting over $70 US, the good report from the Galillee deposit and the SP has not moved.
I think sometimes to cash in some profit and if the sale does not go through buy in again.
But you just don't know with Bond, he could pull another rabbit out of his hat.
Another tenement that could be worth a few $ is the Alpha deposit. With Waratah coal looking at opening up a massive thermal mine, it might play into Linc's hands if the drilling results come back positive.

LT holder and waiting...waiting......waiting!

Hello there Mexican. I am just holding some free carried ones these days. I did lighten up quite a bit - overall holdings in lots of other things as well. Love this one - just waiting for a pullback to increase my holdings again. I've been saying that for a while now.

 

[namrog]

Love this one - just waiting for a pullback to increase my holdings again. I've been saying that for a while now.

Me too grace, have 2 immediate targets in mind 1-80 and 1-50, though could be anything if the markets correct as i anticipate, having said that though, with a structured averaging in plan in mind, I'm thinking that even now would not be worst time to put say the first 10 % on ?? and 10 % for every 25 cent drop in sp, to the bottom wherever that maybe , and back until 100 % in....could vary it to suit few things like general sentiment , etc.

Only an idea, worth thinking about maybe....

 

[DowJones]

In the last few days the LNC share price has seriously tanked.

I picked some up at 1.715 but I am not confident that it may hold that seeing it did bottom at 1.685 after opening at 1.84. There might be a big seller (or short sellers)?

I will average down if need be....

 

[Kuri]

In the last few days the LNC share price has seriously tanked.

I picked some up at 1.715 but I am not confident that it may hold that seeing it did bottom at 1.685 after opening at 1.84. There might be a big seller (or short sellers)?

I will average down if need be....

I have been a holder of Linc for a while now and a common trend is if the price rises their will often be some good news released a bit later and if the price goes down then bad news is released. It could just be a coincidence and I am hoping this is not the case at the moment. I will not sell my holdings though as the potential upside keeps me in the game.

 

[namrog]

Last few days weakness had in my oppinion, little to do with LNC per say and more to do with general market movement, and since it has been teetering around the $2 support, it wasn't going to take a lot to make it fall over.

In the absence of any sale news, what was going to support it, when everything else is going the same direction..

Have started to implement the stretegy outlined above, and picked up first 10 % today at $1-75
Looking for $ 1-50 now, and see where it goes..

 

[JAKSPARA]

Trading Halt? Announcement due Wed. 24th. Has anyone read the article in the AFR that they are referring to?

 

[Mickel]

Trading Halt? Announcement due Wed. 24th. Has anyone read the article in the AFR that they are referring to?

The article on page 13 of today's AFR by Michael Vaughan states that LNC is close to mandating an investment bank to sell its highly prospective Galilee Basin coal tenements in Qld and complete the stalled sale of its Emerald coal tenements after being frustrated by the slow progress of its exclusive talks with China's Yanzhou Coal.

In a 4 column half page depth article it goes on to state-

1. Together the 2 sales could generate $2 billion and that AFR understands that that LNC is in talks with UBS and Goldman Sachs JBWere about managing the twin sales.

2. Last December Yanzhou was in talks with Felix Resources for a $3 billion takeover but failure to move quickly and the drop in asset values caused the deal to collapse.

3. The Galilee deposits are between those controlled by Gina Reinhart and
Clive Palmer. Palmer is aiming to establish a $7 B mine, railway, and port operation to export up to 40 MT pa. Reinhart is doing a feasibility study to do a similar 30MT pa operation.

4. Proceeds from any sales could be realised by the end of the year.

So its good news without anything definite about a sale.

 

[namrog]

Looking through a few other boards, and can't believe the bull**** that people post about LNC, with almost everyone anticipating some kind of big percentage moves up when it comes out of the trading halt ??
I suppose it could happen, and expect it to be hype driven and very short lived, if it does...

Why I ask ?? If Bond and Co couldn't seal a deal after 6 months or more trying, what makes people think Goldman or some other investment bank can do it in a matter of days.
Just look at marion energy (MAE ) a very similar situation to linc with coal tennements and reserves for sale , and it's doubtfull that GS has had any success to date there..AND, if they are succesfull, they sure as hell ain't going to do it for nothing ?? what is their commision

Will be happy to be wrong, but can't see it..
Expect more lenghty delays and empty promises ahead.
My oppinion only and dyodd...

 

[basilio]

Linc down to $1.52 after the announcement...

What a bailout. Okay so now we know that the China sale is not going ahead. Instead LINC is putting roughly $1.5 billion dollars worth of coal tenements into the marketplace.

If we accept that the original business model of coal to diesel is still valid then the issue of if/when the other coal deposits are turned into cash still looks like cream on the cake. I suppose one could see it as Peter Bond deciding he wasn't going to be a patsy for the Chinese interests and see how much the coal tenements will bring in the broader market.

 

[Calliope]

If we accept that the original business model of coal to diesel is still valid then the issue of if/when the other coal deposits are turned into cash still looks like cream on the cake.

It's not cream on the cake. It's the crux of the whole issue. Without the capital their operations are stalled.