Shares to Buy Linc Energy (LNC)
LNC has successfully combined two known technologies and demonstrated its vision of being a leading supplier of a new source of clean liquid transport fuels for the future. These technologies are Underground Coal Gasification (UCG) and Gas to Liquids (GTL).
The company’s use of UCG and GTL technologies will enable stranded underground coal deposits to produce the relatively “green” Syngas, which can be converted into fuels.
LNC also has extensive mining tenements across Queensland. It has also been expanding its presence abroad with investments in Vietnam, the US, India and China.
It also produces crude oil in the US and is looking to expand production.
Linc Energy received an offer from a Hong Kong-based company for its Teresa coal asset in Queensland state, and is waiting for three other companies to submit bids before it announces a sale.
The coal case
LNC is not simply a green Syngas company, but has mining sector exposure via its extensive mining tenements across Queensland.
It has been using funds from asset sales to develop its coal gasification and gas to liquid businesses.
The Teresa coal resource contain a mix of coking coal and thermal coal and is capable of producing 5.5 million metric tonnes a year.
An increasing number of end users are bidding on coal assets because they can secure the price of their coal supply rather than be subject to volatile market rates.
LNC has made significant progress, recently signing an MOU with Huandian Coal Industry Group to form a joint venture and is now looking at different locations in China to begin a project.
In both India and China, LNC is in various stages of talks with major coal companies about possible partnerships.
LNC is in the process of completing due diligence on a few acquisitions in the US.
For the first half, LNC recorded a NPAT of $327.65 million (up from a loss of $34.8 million) on year.
This translates to an EPS of 66.1 cents per share, up from a loss per share of 7.7 cents the previous year.
The result was primarily driven by the sale of the Galilee non-core coal tenement.
LNC sold the tenement for $500 million, plus royalties of $2 per ton over 20 production years to India’s Adani Mining.
Its balance sheet remains strong with cash and cash equivalents of $67.4 million.
LNC has a lot on the go at the moment in various geographical spaces.
The company has plenty of growth potential from its US strategy and the monetisation of its Queensland coal assets.
Higher coal prices and higher demand for coal will also be key growth drivers as Japan looks to rebuild and nuclear power becomes less attractive.
With significant coal deposits suitable for UCG technology, LNC can provide alternative sources of liquid fuels and power generation well into the foreseeable future.