Linc turns Carmichael royalty into cash to focus on core assets
PERTH (miningweekly.com) – Singapore listed Linc Energy has agreed to sell its royalty in the Carmichael coal mine to Indian developer Adani, for A$155-million, as part of a strategy to reduce debt and strengthen its balance sheet.
Linc sold the Queensland-based Carmichael coal project to Adani nearly four years ago, for A$500-million, but maintained a royalty of A$2/t for the product produced from the mine.
In July this year, the federal government approved the A$16.5-billion Carmichael coal mine and rail, paving the way for Adani to develop an opencut and underground mine, which is expected to produce about 60-million tonnes a year of thermal coal over 90 years.
Linc CEO and MD Peter Bond said royalty sale was of benefit to shareholders, given the current coal market conditions, as well as the projected time to first production from Carmichael.
“The reality is the price of steaming coal has nearly halved since we sold the Carmichael coal asset to Adani four years ago, and the risk of holding the royalty long-term versus what we can do with the cash today doesn’t add up,” Bond said.
He pointed out that the company was focusing on its key assets, like the 16-million contiguous acres of shale, which could potentially yield some 103-billion barrels of oil equivalent resource.
“Simply put, we are selling our noncore good assets and cashing up, so that we as a group can focus on our great core assets.”
Under the terms of the agreement, Adani would pay Linc the cash consideration in two tranches with the first A$90-million payment due within five days of the exercise of the option. The balance of A$65-million would be payable before 12 months from the date of signing a deed of assignment and assumption.
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