LNC - Linc Energy

[mexican]

Gap has been filled $1.70. Will be interesting to see if the SP closes today at or above $1.70...................................................................................

 

[Mickel]

Good news for the UCG industry with these DERM (Dept of Environment and Resource Management) press releases on 11 August 2010 -

Cougar Energy CXY
Landholder bore restrictions removed near Kingaroy UCG plant.

http://www.derm.qld.gov.au/media-room/2010/08/kingaroy-testing-11.html

Carbon Energy.
Kogan Creek water tests indicate no concerns.

http://www.derm.qld.gov.au/media-room/2010/08/kogan-creek-11.html

 

[Mr Z]

I see good support in the 1.69/65 area using a method that often works well for me. Immediately under that there is more, two bands in fact, reaching down to 1.56 which I would expect to be the worst of it if this immediate support area gives up the ghost. I think LNC will attract a reasonable amount of attention in this area given their changed circumstance. If we clear this area this method identifies a massive band of resistance in the 2.90 to 4.56 area. When the bands come in this wide the mid point is often a good target (3.73). Traditional T/A suggests 2.5x as the first hurdle and I would expect we take a break around there as it sticks out on the chart... but first we must nail $2! We where over done in the short term, IMO a bit of backing a filling around here would be very healthy. I am quite optimistic on this one mid term... if the market holds up! Bring on QEII Mr B!

 

[Mr Z]

Good news for the UCG industry with these DERM (Dept of Environment and Resource Management) press releases on 11 August 2010 -

Cougar Energy CXY
Landholder bore restrictions removed near Kingaroy UCG plant.

http://www.derm.qld.gov.au/media-room/2010/08/kingaroy-testing-11.html

Carbon Energy.
Kogan Creek water tests indicate no concerns.

http://www.derm.qld.gov.au/media-room/2010/08/kogan-creek-11.html

Man did the media misreport all of that little episode.... they even had me worried at first!

but a little frantic digging reassured me

 

[Mickel]

I see good support in the 1.69/65 area using a method that often works well for me. Immediately under that there is more, two bands in fact, reaching down to 1.56 which I would expect to be the worst of it if this immediate support area gives up the ghost. I think LNC will attract a reasonable amount of attention in this area given their changed circumstance. If we clear this area this method identifies a massive band of resistance in the 2.90 to 4.56 area. When the bands come in this wide the mid point is often a good target (3.73). Traditional T/A suggests 2.5x as the first hurdle and I would expect we take a break around there as it sticks out on the chart... but first we must nail $2! We where over done in the short term, IMO a bit of backing a filling around here would be very healthy. I am quite optimistic on this one mid term... if the market holds up! Bring on QEII Mr B!

Very interesting Mr Z. Can you post some charts to demonstrate this please?
100 characters!! Perhaps one to show support level at 1.69/65 and one for the resistance level.

 

[Mr Z]

It will not be very clear but here it is. The differing colours indicate differing probable strength, if you look closely you can see we are in a large purple zone 1.79/1.56 indicating a strong but wide ranging support area, within that we have a blue zone demarking the range quoted and the one that I think has the best chance of holding near term. Its is confused by further support zones in the lower half of the purple zone... messy picture but in my world that gives a higher probability of the 1.56 area being the absolute worst of it and not overly likely at that. Top left you can see the massive day that defines the big purple range I quoted, not precise by any means but as I said the mid point marked in Grey often tends to be significant. In large red dashes I have marked more traditionally derived resistance areas, I consider them obvious really. You can also see the red and green support congestion around the $1 level that supported my description to buy and defined my stop loss areas.

I hope that helps some what!

Cheers
Z

 

[basilio]

It is an interesting set of observations on support levels for LNC.

Just a question. Is it reasonable to think that a series of re evaluations of LNC's prospects based on current cash assets as well as fully funded future projects could underpin the SP into the future ? If for example what would be the effect of 2-3 analysts saying it was worth at least $4.00 a share based on direct coal sales and minimum development?

 

[Mr Z]

Yes.

All we are looking at here is market memory, there will enviably be a number of holders at these levels that will sell because they are returning to their entry and the whole down cycle has left them jaded. Like wise support kicks in where people previously missed out on what was considered a good value entry point.

At any point in time a new fundamental fact can overwhelm these levels easily or we can simply exhaust the buyers/sellers at these levels. These levels have a habit of being sticky because after a bad price trip people often don't reappraise the situation logically and just act on the relief of seeing their capital returned. That said good news like we recently had will mean we can chew through the sellers far more rapidly. Look for volume increases into the levels for an indication of increased chances of breaking through each level. Look for volume decreases as we pull back from the levels indicating rejection of lower prices and another potential swing up and shot at the resistance level. (or down as the case maybe!) Also keep in mind once broken resistance tends to become support etc etc... again sorry if I am handing you eggs! New here!

Sorry if I am teaching you to suck eggs here, I believe support and resistance are among the most important T/A concepts and often over looked in favor of more complex indications.... me I am dumb so I KISS.

A couple more good news stories and hopefully we should change the markets view of LNC, I think they are a winner but alas energy has not done well coming out out the GFC ---> but I think a change in that is due soon.

Looking a little bloodied ATM, hopefully a strong close after all the panic merchants on lunch breaks have sold out and gone back to work.

 

[Mr Z]

PS... Re the chart. You will also note that we have developed two recent what are now resistance levels which at there limits span 1.72-96. We will need to get back through them in short order before they get too sticky, any long delays will mean we will likely make more of a meal of the two dollar area... IMO.

On the positive side volume is falling away with the pullback from these levels meaning that we maybe exhausting the selling nice and quickly. Covering the gap is also something chartists like to see, however you might rationalize the need for that! I look at it as simply a support test, successfully holding is a good thing. So despite the tone of the day I am more inclined to buy rather that sell here.

but then again I am a holder of LNC so get the salt out!

 

[Mickel]

I hope that helps some what!

Cheers
Z

Thanks Z. It is good to see the T/A view with graphics.

I hope that we have at least 2 ASX announcements within the next 2 months stating that "Teresa" has sold for at least $500M cash and all tests with the AFC fuel cell have been completed and LNC will definately have a min 250MW power station at Oorroo in SA operating within 9 months.

If these or similar announcements are made it should be sufficient to jump start the S/P over $4.00 and those resistance levels.

Hopefully, we will have at least 1 analyst report before then which should give a 12 month target S/P of $10+ IMHO.

This is on LNC's website-
"In November 2009, Linc Energy announced it discovered a significant lignite coal exploration target of 1.0 to 1.3 billion tonnes. Further drilling is now underway in the Walloway Basin to gain technical details of the geology, formation structure and physical parameters of the coal. This work supports Linc Energy’s UCG team identify the most suitable sites for commercialisation in the basin. Work towards Linc Energy’s environmental approvals is also underway, as is the conceptual design study for Linc Energy’s first GTL commercial plant.

Linc Energy intends to execute a commercial UCG project for the Walloway Basin based on the following three stages:

* Stage 1: Pre-production – including the construction and commissioning of UCG Generator 5 to gain valuable site specific UCG gas generation experience.
* Stage 2: Power generation – including the production of approximately 15 petajoules per annum of UCG gas for up to 250 megawatts of power.
* Stage 3: Increase UCG gas production to support GTL synthetic fuel production."

http://www.lincenergy.com.au/pro-aus.php

PB's comments on Inside Business last Sunday may change where they set up the 1st GTL plant but they could still easily go ahead with the power generation in Sth Aust.

 

[Mickel]

Thinking about LNC's sale of "Galilee" for $500M cash and a royalty stream of about $2.5B. LNC says they can monetise this royalty stream for about $1B.

The question is - Which is the most tax effective way to receive the royalties, over the 20yrs of production or getting the $1B now ???

Given that LNC probably has about $300M in exploration expenses to date, they would only pay tax on $200 M of the $500M received to date- ie $60M.

But if they monetised the royalties in the current F/Y would they pay 30% on the full $1B , ie $300M ?

Anyone (particularily Accountants) like to comment ??

 

[basilio]

Was having a scout around the AFC website and they are certainly moving quickly on the development of their product. Given that LNC is one of their partners and has rights to distribution and use of the technology it looks promising.

Check out the video on the front page called AFC energy techmology

http://www.afcenergy.com/

 

[Mickel]

Was having a scout around the AFC website and they are certainly moving quickly on the development of their product. Given that LNC is one of their partners and has rights to distribution and use of the technology it looks promising.

Check out the video on the front page called AFC energy techmology

http://www.afcenergy.com/

Good find, Basilio. That video and also the other 2 (Sir David King & Presentation) are very informative and highlight the value of the agreement between LNC and AFC Energy.

I think it's been mentioned on this thread before but it's worth repeating. Combining UCG and the AFC fuel cell can produce power at less than 4p (AUD $0.07) per KWh . This is stated about 5 min 37 sec into the Presentation video.

Given that the exclusive agreement initially is for only 2 yrs from Dec 2009, I'm sure LNC will want to have a commercial plant up and running well before (6 months) Dec 2011.

 

[Mickel]

Also on the AFC Energy website is an analyst report by Allenby Capital


AFC Energy plc (AFC.L)
Interims show costs under control, Linc trial done
AFC is on track to commercialise its low-cost, alkaline fuel-cell technology for mainstream clean energy generation. Interims demonstrate firm cost control, with 2010 cash burn set to come in below £2.8m. In June, AFC successfully produced power from Underground Coal Gasification (“UCG”) operations on site at Linc Energy (“Linc”). Forecast roll-out of UCG with Linc, in which carbon capture is free, generates potential 20yr cash flow that supports our fair value of £207m. This assumes a 22% WACC, no green credits, no maintenance income and no growth after 4.2GW of UCG is running by 2021. In the coming year we look for long term operation of AFC’s technology with chlor alkali partner Akzo Nobel to unlock value in all target markets. We maintain our Speculative Buy rating and 137p target price.

Interims confirm solid cost control. AFC’s interim numbers were in line with expectations with no real surprises. Cash out for the period was £1.37m. This corresponds with a sub £2.8m annual burn; far lower than many of AFC’s AIM listed clean-tech peers, which have more capital intensive business models and more challenging target markets. With £2.68m in the bank at the end of the period and the anticipated £2m from Linc Energy in the coming 6-12 months to maintain exclusivity, we see no immediate funding requirement.
Power produced with AFC technology from UCG Syngas at Linc. In June, AFC successfully deployed its technology to generate power from syngas made by the UCG process. The trial took place at Linc’s operating UCG facility in Chinchilla, Australia (ASX: LNC, www.lincenergy.com.au). This verifies the plausibility of combining AFC’s technology with UCG operations to produce cheap power from coal with total carbon capture. It also strengthens the AFC/Linc relationship as both companies look to move this potentially world changing technology marriage into mainstream power generation. We expect to see this strengthened further when Linc exercises its option over £2m of AFC equity to maintain exclusivity in the coming 6-12 months on the completed sale of one or more of its major coal assets.

Projected 4.2GW Linc UCG roll-out by 2021. Based on Linc’s objectives we project 4.2GW of UCG sites throughout Australia, Europe and the US by 2021. In December 2009, Linc signed a deal with AFC giving Linc exclusive rights to deploy AFC's technology for power generation at these sites. Sales of a 50kW modular system by AFC to Linc at £35K on a 43% margin and a 10% royalty to AFC on power produced, generate 20yr cash flow for AFC with a NPV of £157m.
Third party expert predicts commercialisation within 2 years. “It is my firm opinion, based on a number of reviews of the progress of the company, that it has consolidated the learning that it has gained from its early system development to design a truly scalable alkaline fuel cell power system that will satisfy its clients requirements…….There is no obvious reason why the company should not be successful in commercialising the system within the two year timeframe it is predicting.” These are selected quotes from Dr John Helliwell of the Centre for Process Innovation (CPI), who conducted an independent technology and business review on AFC in April this year.

I'd like to see an analyst's report on LNC based on power plants building up to 4.2GW pa by 2021. $$$$$$$$$$$$$$

 

[profitmann]

No one in Australia will achieve a 50MTA Coal Mine within the next 10 years. Do your royalty caclculations again guys on max 20MTA at best. Rest is dreamland as Infrastrucure will never support 50MTA Coal Mine in this State.

 

[namrog]

Understandably there is a lot of chatter re LNC these days, most of it speculation and guess work.....

Have a look at this little chart and tell us what you think, !!

It could be while before we see a substancial rise in share price from here, me thinks....

 

[Mickel]

Understandably there is a lot of chatter re LNC these days, most of it speculation and guess work.....

Have a look at this little chart and tell us what you think, !!

It could be while before we see a substancial rise in share price from here, me thinks....

If a Director OR their indirect interests have a liquidity problem, it doesn't necessarily equate that the company's S/P will be limited to the Director's selling price.

I've seen a classic case in the last 12 months where a Director sold down and the Company subsequently had a friendly takeover at 100% + premium of the Director's selling price.

 

[Slipperz]

Also on the AFC Energy website is an analyst report by Allenby Capital


AFC Energy plc (AFC.L)
Interims show costs under control, Linc trial done
AFC is on track to commercialise its low-cost, alkaline fuel-cell technology for mainstream clean energy generation. Interims demonstrate firm cost control, with 2010 cash burn set to come in below £2.8m. In June, AFC successfully produced power from Underground Coal Gasification (“UCG”) operations on site at Linc Energy (“Linc”). Forecast roll-out of UCG with Linc, in which carbon capture is free, generates potential 20yr cash flow that supports our fair value of £207m. This assumes a 22% WACC, no green credits, no maintenance income and no growth after 4.2GW of UCG is running by 2021. In the coming year we look for long term operation of AFC’s technology with chlor alkali partner Akzo Nobel to unlock value in all target markets. We maintain our Speculative Buy rating and 137p target price.

Interims confirm solid cost control. AFC’s interim numbers were in line with expectations with no real surprises. Cash out for the period was £1.37m. This corresponds with a sub £2.8m annual burn; far lower than many of AFC’s AIM listed clean-tech peers, which have more capital intensive business models and more challenging target markets. With £2.68m in the bank at the end of the period and the anticipated £2m from Linc Energy in the coming 6-12 months to maintain exclusivity, we see no immediate funding requirement.
Power produced with AFC technology from UCG Syngas at Linc. In June, AFC successfully deployed its technology to generate power from syngas made by the UCG process. The trial took place at Linc’s operating UCG facility in Chinchilla, Australia (ASX: LNC, www.lincenergy.com.au). This verifies the plausibility of combining AFC’s technology with UCG operations to produce cheap power from coal with total carbon capture. It also strengthens the AFC/Linc relationship as both companies look to move this potentially world changing technology marriage into mainstream power generation. We expect to see this strengthened further when Linc exercises its option over £2m of AFC equity to maintain exclusivity in the coming 6-12 months on the completed sale of one or more of its major coal assets.

Projected 4.2GW Linc UCG roll-out by 2021. Based on Linc’s objectives we project 4.2GW of UCG sites throughout Australia, Europe and the US by 2021. In December 2009, Linc signed a deal with AFC giving Linc exclusive rights to deploy AFC's technology for power generation at these sites. Sales of a 50kW modular system by AFC to Linc at £35K on a 43% margin and a 10% royalty to AFC on power produced, generate 20yr cash flow for AFC with a NPV of £157m.
Third party expert predicts commercialisation within 2 years. “It is my firm opinion, based on a number of reviews of the progress of the company, that it has consolidated the learning that it has gained from its early system development to design a truly scalable alkaline fuel cell power system that will satisfy its clients requirements…….There is no obvious reason why the company should not be successful in commercialising the system within the two year timeframe it is predicting.” These are selected quotes from Dr John Helliwell of the Centre for Process Innovation (CPI), who conducted an independent technology and business review on AFC in April this year.

I'd like to see an analyst's report on LNC based on power plants building up to 4.2GW pa by 2021. $$$$$$$$$$$$$$

Holy moly 4.2 GW is a huge number.

Then again so is 20 000 barrels of diesel a day in two locations globally with a massive Alaskan gas field in production!

Doesn't hurt to think positive does it?

Oh wait I forgot that royalty stream of 100 million a year for doing nothing my bad

With half a billion in the bank and another half a billion on the table waiting for a signature I think I have the patience to stick with LNC for a while....

 

[namrog]

I've seen a classic case in the last 12 months where a Director sold down and the Company subsequently had a friendly takeover at 100% + premium of the Director's selling price.

There are always exceptions, I just think it's not a good look.

I've been thinking about the deal that's been done, and if linc are serious about ctl surely it's best to take the cash now and get on with the job, because I'm hearing that it will be 5 to 7 years before the Adani boys ship any coal...

I'd really like to see from management now a plan of action going forward, with the final goal of a comercial liquid plant, laid out step by step including estimated time to completion, regardless of where it's located.

 

[Smurf1976]

To put that 4.2GW in perspective:

About the same as the total generating capacity in South-West WA (Perth etc).

About the same as the entire generating capacity in South Australia.

If run as baseload plant, would supply about one sixth of the average demand in Qld, NSW, ACT, Vic, Tas and SA combined.