Linc Energy signals coal interest spin-off
Linc, which sold Adani the tenement for $500 million in 2010, is entitled to a $2-per-tonne royalty from the yet-to-be-approved Carmichael project, which would mine 60 million tonnes a year for at least 20 years from early 2016.
Linc chief executive Peter Bond told BusinessDay on Tuesday that Linc's coal division would "end up being floated off and stand on its own two feet".
Linc Energy shares have almost tripled since late November - when they were trading below 60¢ - closing up 10 per cent, or 19¢, on Wednesday to $2.16. The shares remain short of their high of $4.96 in September 2008.
Wednesday's gains came after Linc said two independent consultants had evaluated three formations in the Arckaringa Basin, finding they were rich in shale oil and gas-prone kerogen that "may form the basis of a new liquids-rich shale play". Linc said the resource in its 100 per cent-owned acreage compared favourably with "prolific US unconventional liquids plays like the Bakken and Eagle Ford".
It has appointed Barclays Bank to find a farm-in partner with shale oil expertise to fund the development of Arckaringa.
Mr Bond said Linc was looking for a partner to put $200 million to $300 million "into the ground and take it to the next level". "We'll still hold a significant stake - we'll probably hold at least half of it. I don't want to just flog it off."
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Linc Energy has signalled it will spin off its coal division, with chief executive Peter Bond saying the coal business will “end up being floated off and stand on its own two feet.” The spin-off would include coal assets and a future royalty tied to Adani Mining's Carmichael project.
Linc is entitled to a $2-per-tonne royalty from Adani Mining’s Carmichael Coal project. Linc sold the tenement to Adani for $500 million in 2010, and the royalty applies to the yet-to-be-approved Carmichael project in Queensland’s Galilee Basin.
Adani's Carmichael project is described as a 1.2 billion-tonne coal project in the Galilee Basin. The project has been reported to plan mining about 60 million tonnes a year for at least 20 years, with production potentially starting from early 2016 — meaning royalty payments would depend on the project receiving approval and proceeding to production.
Based on the figures reported — a $2-per-tonne royalty and a proposed 60 million tonnes a year — that would imply around $120 million a year in royalties while production runs at that level. Actual payments depend on the project being approved and operating at the stated scale.
Linc Energy shares nearly tripled from late November levels (when they were trading below 60¢). On the Wednesday reported, shares closed up 10% (19¢) to $2.16. However, they remain below their September 2008 high of $4.96.
Two independent consultants evaluated three formations in the Arckaringa Basin and found they were rich in shale oil and gas-prone kerogen. Linc said the resource in its 100%-owned acreage compared favourably with prolific US unconventional liquids plays like the Bakken and Eagle Ford.
Linc has appointed Barclays Bank to find a farm‑in partner with shale oil expertise to fund development of Arckaringa. The company is seeking a partner to help take the play to the next stage of development.
Linc said it is looking for a partner to put $200 million to $300 million “into the ground” to advance Arckaringa. The company expects to retain a significant stake in the project — Mr Bond said they would “probably hold at least half of it.”
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