lnc investor and sufferer, page-42

Hi moneyvacuum and sholtz

First a disclaimer and an explanation.

* I think LNC is potentially a great Co.

* I have backed off from posting much on the Linc page because I did spell out my sentiments and I have no desire to earbash people. But along comes this post where somebody is hurting.

I can relate to that. I went through the last episode and suffered. I spent a year juggling bills and getting into debt all the while scrimping and saving to buy LNC because I knew the price was wrong. So I responded to 'moneyvacuum's' post.

Linc is a company with truly extraordinary assets. A few years ago, when Linc were conducting the 'limelight' investor forums I believe it was Ken Dark who explained that the coal leases alone, which Linc control, on an oil equivalent basis represent a greater reserve than Shell and BP put together. Since then Co has moved along and is even more asset rich.

So how come the SP is ~80 cents and trending lower? It makes no logical sense and in terms of the Co's intrinsic value it is an affront to one's intelligence.

Well to go over old ground:-

The last episode of short selling revealed a long term buyer. Credit Suisse posted a significant holder statement. [They will be acting for somebody else, who is using CS to hide their identity.]

All while the SP traded between ~50 cents and ~70 cents is when the accumulation happened.

The volumes currently being traded are too large to be retail investors. In fact CS has provided, to the market, changes to their position. Initially it dropped down to a little over 5% and the latest puts their holding above 8%.

'Bonehead1000' analysed the numbers and he proved that CS are manipulating the price ... CS Australia is trading with CS Hong Kong in a systematic way and forcing the SP down. I have no doubt they are acting on behalf of a buyer and it is probably the same one.

Bones put up a link today that relates to a court ruling regarding stock manipulation. The article does not give enough details to know how it might relate to what is happening to Linc .... but it strengthens the accusation being made for some time now that the Australian Stock Market is being manipulated across a number of stocks. ASIC, the only watchdog, is now embroiled in a scandal involving the Commonwealth Bank [no less] where ASIC sat on incriminating insider supplied information for 16 months, taking no action, all the while the bank, it seems, orchestrated a coverup. As retail punters we are definitely on our own.

My belief is ...it is because Linc is such a good company that it is getting this kind of treatment. Somebody wants it and they are buying .... but on their terms.

Moneyvacuum owns LYC. I have been watching that fairly closely. That is another example of things defying all reason. The prices for rare earths are depressed atm ... but ... LYC is a vertically integrated Co [from mine to final product] which is based on the richest rare earth deposit of its kind on the planet, in production and assured of selling everything it can produce ... yet it is trading on a market cap which is less than the cost of the factory in Malaysia.

I suspect LYC is further down the path than LNC but the story might be the same. Next step in the acquisition process of LYC might be board changes as the significant holders start throwing their weight around. Later will come the takeover offer, at some stupid price which, surprise surprise, the board recommends. Who gets shafted in all of this. The retail investors .... us.

Never mind that Peter Bond owns 40% of LNC. If the company is forced into needing more money it will be highly dilutive capital raisings ... PB will not have the money to maintain his percentage holding. The recently issued corporate bonds are the perfect weapon to use against the Co ... because they provide ample stock to short the company. The big laugh is ... unlike normal short selling there is very little risk, because the bonds convert to shares at no more than $3.40 [and probably after adjustments about $2.80]. If the stock runs away from them and goes stratospheric that is of absolutely no concern to them.

Which brings me to my reply to sholtz ....

# "May I ask what you believe qualifies you to advise members that they are gambling as opposed to investing." #

As I said earlier I am not advising ... but I am calling it as I see it.

* Umiat ...

A report came to light on this forum from the University of Alaska Fairbanks. Linc participated in this report so all of the information was known to them.

To cut a long story short. The report highlights the many technical difficulties which might be encountered in attempting to pump commercial quantities from Umiat. A major unknown was the effect the ice might have on achievable flow rates.

The oil is mostly trapped within the permafrost layer and the field in general is low pressure. As the oil moves to the well, through the permafrost, it might easily drag ice with it ... thereby choking the well and preventing production.

What happened? Linc got initial oil to the surface and then it stopped flowing. The company has not offered any further explanation .... so like me, draw your own conclusions.

Further, because the field is low pressure it needs to be artificially stimulated by gas injection. It was a necessary part of the drilling campaign to find gas lower down. Result ... the gas is not there. What gas is there is held in tight formations and is of no practical use. There is gas in other locations but not where it is needed.

There are still the unknowns about how the field will behave even with gas stimulation ... again how is the ice going to act?

The project is not commercially viable for Linc unless the Co can demonstrate the realistic capacity to produce 50,000BPD .... in order for the Alaska Govt to put up $500 million for infrastructure.

So far Linc has spent $50 million and will probably spend something similar next campaign. This is a high risk venture where, according to the University report, drilling for oil in these circumstances has never been attempted before. To my eyes that looks a lot like gambling.

But it does not end there ....

Linc is confident they have oil in the subsalt of their oil leases in the Gulf. Sounds good .... but when you look into the technicals of drilling through salt the picture starts to alter.

Drilling through salt has all kinds of special problems. As an example ... as the drill bit emerges from the salt and encounters rock, the bit has to meet the rock at a 90 degree angle. That in itself is a neat trick to accomplish when you are down several thousand feet. The success rate for drilling through salt and getting a good result is 25%. The cost per hole can easily be 10 to 15 Million. And of course you have to hit the oil ... if it is there. That also looks remarkably like a punt to me.

Both these projects are high risk high reward. I have no privileged information and so I am willing to trust the Co. However, as an outsider looking in, it is pretty obvious to me that Linc is not a large enough company to be taking on these high risks. If they fail it will be crippling to the company's finances. THAT definitely is gambling in my book.

Drawing all of the above together:-

I suspect the company is currently engaged in a battle for its life. Somebody is paying CS to do their dirty work by driving the price down and they are busy accumulating stock. Meanwhile the company might very well be playing into their hands by taking large risks which do not pay off. Who is going to bear the most pain? Small punters like myself who in the end might get a pitiful offer for my shares which in no way reflects the actual intrinsic value of the company .... I used LYC as the possible example to illustrate my worries.

Lastly .... yes I have bought CNX.... because UCG is a future major industry [IMO] ... and yes CNX has its own unique set of risks. It is all a judgement call, which ever way you go.

In one post I put forward the conditions in which I would happily reinvest into Linc.

I see a desperate need for the company to consolidate itself. It would do well to sell out of its oil positions in the US and clear those outstanding US bond debts.

It also needs to address its corporate governance protocols.

Under those circumstances, if the Co is indeed under some kind of corporate attack it will be able to fend off the aggressor... because its finances will be strong enough to avoid any capital raisings. The water will be safe enough for the little guys .... like me.

So there are my thoughts and my reasons. Like so much else it is a matter of perception. I am not claiming to be correct in any of this. If I am wrong then I have made an investment blunder, but at least I am being transparent with you on what I think and why.