$1.50, page-5

Hi bigal

We run the risk of making ourselves rather unpopular here .... but here goes. [this was in reply to your earlier post which I could not directly reply to after you had it moderated][BTW I once asked the investor relations person at Linc if PB ever read HC ... the answer was No .... although the Co does monitor the discussions]


Yes PB is the problem .... or rather the insufficient corporate governance. PB clearly is one of the Co's main assets but he has his weaknesses, which he does not allow for by providing internal checks and balances in the decision making process. He is good at buying stuff but not so good at selling. He did very well with Adani but that is rapidly becoming ancient history.

Nothing wrong with PB becoming the richest person in Oz [personally I thought he was on track for a podium place next to bill], but he has gone after the prize in a way which has destroyed value in the Co.

The special div was OK [I happened to get some of that and it was very welcome at the time] ... I do not see that as him looking after No 1 particularly.

*1 Teresa ... we probably will never know the details here. Perhaps events ran against the expectations of the day. However, I do hold the opinion that PB just does not give enough to the other party in negotiations. My opinion is summarized by the old saying ... "when you are selling something you have to leave a little meat on the bone". My impression is he fails in that regard.

*2 The oil assets have not been an unreasonable venture but Umiat definitely has been a disaster so far ... it has the potential to completely break the Co it if fails again next season. When the $500 mill was in the bank, careful husbanding of that and a commitment to UCG would have been the patient, company building approach. 20/20 hindsight confirms that, but I do not hold it against him that he went with US oil. However, now that it is clear that it was not the wisest choice it is up to PB to admit a mistake. If he fails to do so then he is confirming to my mind that he is not fully competent as the CEO. The EOR in Wyoming looks promising, but somehow the cash is never there to get it going. The subsalt is another high risk venture [my reading has informed me that 25% success rate is about standard], so overall Linc has to pull its head in on these adventures and get out or at minimum JV it. The US bonds complicate matters though.

*3 Umiat ... my main argument here is that it might be an excellent prospect [at this point in time nobody knows either way for sure], but, it is a project too big for Linc at this stage. Linc can not absorb the financial loss if it is a failure. Why jeopardize the prosperity of the entire Co [and all of its good assets and prospects] on such a high stakes roll of the dice? It is reckless. [Corporate governace protocols would have helped here]

*4 The buyback seemed OK when the money was in the bank ... but then suddenly that money just vanished.

*5 The admin costs are unavoidable in the context of running a conglomerate ... you need all of that talent to get things done. Acceptable if the income is there, but it is not. Linc is in debt and burning cash very quickly. It has turned into a situation where everything must go well. Any stuff ups and it come crashing down very quickly. However, even if it does go according to projections the payoff is still a long way down the track. It is not Co building in my opinion. It is grandiose empire building and it has put me right off, personally.

Exxaro is dragging out. Nerve racking.

On the general topic of deals and JV's. Potential partners will be looking to see sound business acumen being displayed by Linc ... the bigger the potential partner the more that will be the requirement.

Since selling out of LNC, I have redeployed my funds and I am doing quite well. This time last year I was 100% a fan of LNC, but I am beginning to think that I was just a little lucky.

Linc is in the right business with UCG. The great Qld [NSW] stuff up of CSG is going to haunt Australia for years to come. It has to unravel some time down the track. UCG is the natural successor. But it is probably some years still before it becomes screamingly obvious to all concerned. In the meantime Linc has to survive [if not prosper]. Linc will become a suitable investment, in my opinion, if management admit mistakes and restructure the Co. The current situation is the Co is lurching from one big gamble to the next ...which is why the price is what it is. All very good if a big bet succeeds ... but it is not how a company is reliably built. [It is not how Bill got rich, for instance]