Linc inks major deal with Adani

LINC Energy sold its undeveloped Galilee Basin thermal coal tenement to Indian conglomerate Adani Group for $A500 million in cash plus a royalties agreement which Linc expects to provide a total cash stream of $3 billion.

Blair Price

Subsidiary Adani Mining agreed to pay a $2 per tonne royalty on future coal from the tenement for the first 20 years of production.

This rate is also linked to Australia’s consumer price index to make sure it keeps pace with inflation.

Linc said Adani already received Foreign Investment Review Board approval and “indicative approval” for the sale from the Queensland state government.

Once the state government approves the tenement transfer, Linc will receive the $500 million up-front payment, which is already deposited into escrow.

The Galilee tenement holds a total of 7.8 billion tonnes of resources, including 7.3Bt inferred and 500 million tonnes indicated.

Linc said this tenement is capable of producing up to 60Mt per annum once fully operational.

“The sale to Adani represents the largest single investment by an Indian company into Australia,” Linc said.

Linc also gained the exclusive right to negotiate with Adani over joint development of any future underground coal gasification opportunities in the Galilee tenement.

"This is an exciting day for Linc Energy and its shareholders. We have worked tirelessly over many months to maximise the outcome of this first coal sale for our shareholders,” Linc CEO Peter Bond said.

“The royalty agreement gives Linc Energy the flexibility to monetise the royalty agreement into cash now, or hold it and receive the full benefit of 20 years of cash flow,” he said.

“The transaction provides shareholders with a net present value of approximately $1.5 billion, with the opportunity to earn over $3 billion in revenue over the life of the royalty, which is undoubtedly a great result for the company.”

Linc is also selling the Theresa (Emerald) and Pentland tenements in the state as part of its non-core coal asset sales program.

Bond is confident a deal will soon be made for the undeveloped Theresa metallurgical coal asset.

“The other significant achievement today is that we can now move quickly onto completing the Theresa (Emerald) coal sale, for which we have been receiving considerable interest,” he said.

“I’m about to commence drilling additional holes at Theresa to further quantify and expand the resource and its quality, and once these drill results have been finalised we can progress quickly to a conclusion.

“The value of the Galilee tenement and the strong interest in the other coal tenements held by the company are just indicators of the depth, quality and potential of Linc Energy.

“This sale becomes a springboard from which the company can now aggressively pursue its commercial aspirations within Australia and other parts of the world.”

Adani is a leading Indian coal importer and is keen to expand into Australia.

Recently the state-owned North Queensland Bulk Ports Corporation selected Adani along with Dalrymple Bay Coal Terminal Management as the preferred proponents to develop new coal export terminal facilities at Dudgeon Point near Hay Point.

But considerable investment is also required for rail infrastructure in the unexploited Galilee Basin, where mining magnates Clive Palmer and Gina Rinehart are also working on major thermal coal projects.

A conceptual mine development study has been completed by MineCraft Consulting on the Theresa project on the Emerald tenement in the Bowen Basin.

The study identified a 3.8 million tonne per annum underground longwall mine development with a mine life of 30 years.

Of the annual output, 2.5Mtpa would be semi-soft coking coal and 1.3Mtpa thermal coal.

MineCraft Consulting, which carried out the study, valued the project at $529 million.

Linc shares have come out of this morning's trading halt and are up half a cent to $186.5.

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