Ann: LCK Produces First Syngas, page-53

Well why not. Putting pen to paper for my own file might as well rabbit on here to do it


Hi Dewmont. Stay firm, first rule of invest club is that the stock market is a device for transferring money from the impatient to the patient. (said best by Warren Buffett)

The market needs time to digest this, its hard to factor in because the enormity is so big that most will discount that this could be possible.

Lets look at the steps LCK took get where it is today. These were the objections that kept the share price low. Granted there was real risk this would not get this far

A. You won't raise $30m to fund this- well they did
B. You won't get government approval to do this - well they did
C. You won't get greens/ aboriginal approval to do this - well they did
D. You won't flare- you don't know how to do it and no gas will come out - well they did and it did

What it will move onto is, and this is what the market is discounting today, a day of major sell off and panic on global equity markets, where traders are more focused on avoiding red than buying green of all days

1. Your results won't be good - well define "good" please
2. You won't get PRMS upgrade - yeah I guess that could be possible
3. You will pollute the environment - this is a trial so lets see, but if they do create pollution, what is there to actually pollute but yes I am keen to see these results too
4. You won't be economically viable- basic math suggests they will have monster IRR
5. You won't find a $b to build a big fertiliser or gas plant - if it is viable $then 1b is a drop in a bucket
6. You won't get permission to do it - If there is no "bad" pollution then this won't be blocked. The Mid north of SA needs it as does Olympic Dam, Roxby Downs never mind the local member the Resources Minister. But if anyone thinks the SA politicians won't be licking raisings to get over $1b of infrastructure built and 30 years of royalty then, anyway. And there is no Native Title over the site either. Everyone will be there for their royalty cheques as they always are

So for sure LCK still has risks, which is the only reason the market is hesitant and it isn't above 50c today. At least for fund manages. So far the buyers have been smaller players. And fair enough

What events will be the game changer for LCK?

i. Showing a couple of weeks of flow data. This would be an "hmm, okay" moment
ii. Advising market that they have submitted data to PRMS for upgrade
iii. Getting the upgrade from 2C Resource to a 2P Reserve (this is the biggest one IMO)
iv. Off take agreement with big player(s)- "you mean BHP and Santos are talking to them? hmm okay"
v. Statement about funding from Chinese parent - who dropped $30m into a trial and run fertiliser plants, power stations and steel mills, Shareholder #2 is the Chinese Govt.
vi. Demonstrating no unexpected pollution- I would like to understand when this is verifiable/ a known

LCK have one by one ticked off what everyone said they would never achieve. albeit taken longer than we all expected. Technically they are now a Gas Producer. Gas is in extreme shortage in Australia. So much so sentences being bandied include words such as national security and force majeure and when they started this gas was what, $6 but is now closer to $12-$14.

They have a huge amount of potential gas. This is still a calculated risk of sorts but if it is worth $4-$7 as others suggest, then at 26c we are over 90% discounted. Every day between now and "then" LCK will remove reasons for discount and it will rate upwards

The big move comes from the fund managers who buy so much that it moves the share price in 10 cent blocks. They know that almost all onshore East Coast gas comes from Coal and understand the politics and economics of projects like this getting away. As i to vi are done/ removed the share price will go up.

LCK is not like a driller that can announce a surprise discovery of 65 grams of gold per tonne 1 metre below sandy surface. Its not an immediate thing, for them more like a sunrise, you can't say when it becomes light but its 7am and you realise your in full daylight. Maybe not the best analogy because there are still real risks to manage but we can see the SP go up gradually is my comment.

So LCK is not a stock to put your house on, its still your punt money, and in the resources space. But every day its looking better and better, and its fair to say we are over the hump and major hurdles.

Plenty of gas and energy plays have gone from cents to dollars inside of a year. Don't bet the house but don't expect it right away, keep an eye on it but be as prepared to press Buy as you are Sell, and vice versa

Oh, and watch out for someone to lob a take-over bid. When FOMO hits it will run faster than a belly in Delhi. There is only so long waters can be held back