I guess i am a little surprised at the length of the 2nd extension - almost comical that a 3 month trial period can be granted in total 4 months of extensions!
After the LCK announcement suggesting they were requesting a further extension/suspension i had inquired with the company and the DPC. I received cryptic responses from the company, and the DPC told me they would require a Freedom of Information Request to divulge info to me. As the time between that announcement and yesterdays publishing of the extension/suspension went on, i had assumed that the suspension had conditional approval (for lack of a better term), and am thinking perhaps the company couldn't announce it until the government did so. I dont see any malice in the lack of news from the company, they are at the mercy of the DPC and all parties would understand this PCD has been over regulated for good reason. For me, the DPC publishing the suspension/extension yesterday, which appeared to be the day the previous extension + initial 90 days had elapsed, tells me LCK are very close to resource upgrade / commercial flows (combined withe other data we have already seen). I say this as though i think the DPC probably gave them the green light re extension behind closed doors, but didn't want to formally grant it if they had achieved their 18,000 m3 flow rate (if that is even the right number now ha ha!). Yesterday being the day the trial period had expired kind of forced the hand of the DPC. (all my opinion, not trying to say anything inflammatory or defamatory here).
Further - i think there is a tendency on here to see the flow data as the key metric for commercial viability, and while i do agree it is important (as is the quality of gas), i think in terms of resource upgrade the proof will be in how much gas they can recover per ton of coal, not how fast they can recover it. i.e., speed of recovery = flow, recovery per unit coal dictates the size of the upgraded resource statement. The flow they ultimately report is just from one well pair.
We have already seen with the EOI advertisement they are confident they can sell 50 PJ/a of pipeline quality methane gas, and previous estimates were that this is a 20-30 year project for PEL650 alone - 50 PJ pa * 20 year = 1000 PJ, which is reflected in yesterdays funding announcement. As has been the case with options the company has placed - they strike price/time has always been easily achievable , so for me (and i am an optimist), i think the resources is minimum 1000 PJ, and in all likelihood even more (dont ask me how much more). Remember the coal deposit for PEL650 is something like 385m tons of coal, and lab estimates were something lie 15 GJ per ton of coal (without flicking back through JORC and PRMS statements from wayback), and this is why i say the recovery of gas per ton of coal (all salable constituent gasses, not just methane) will show how big this monster deposit is. the 3000PJ number came from a consultatn who applied a dozen factors widdling away the deposit - i've posted them before, they are in both the JORC and PRMS statements from 2016.
For me the one thing that the flow rate will dictate is how many well pairs the company needs to invest in to supply gas to the fertiliser and explosive facility and any pipeline quality gas customers. Its a big area, big deposit, no reason they cant put a dozen well pairs out there - and we know they cost as little as $20m each, plus time to establish (if im not mistaken that's what the PCD infrastructure cost).
I recall Stateone Stockbrokers coming to a target price of $0.66 ps a couple years back, based upon 75% risk weighting and an NPV10 of $2.64 ps, factoring some dilution to the tune of $1.2B, if im not mistaken.
For me once the resource is upgraded the risk is all but gone for the commercial project.
Then i find myself grabbing the nearest envelope and writing this on the back:
50 PJ = 50,000,000 GJ Methane = $8/GJ (ball park, use your own figure)
50,000,000 GJ/pa * $8 = $400,000,000
factor in what ever commercial project costs you like (pipelines, x number of well pairs )
****That is just for the 50PJ/pa the company have already suggested is 'Surplus to Requirements for the Fertiliser and Explosives manufacturing Facility***
P.S. i dont want to enter into a debate about the current price of gas and the greens and ... blah blah blah, just some food for thought
This is not even the key salable product at the moment............Surplus to requirements !
For those who have sold recently, completely understand, it has been frustrating watching the constant delays upon delays, however the LCK team are more keen than anyone to see this thing a success - they make up the bulk of the share holder registry!
I hope you at least keep LCK on your watch list / notification list - plenty of upside to be had in under 3 months
LCK Price at posting:
11.0¢ Sentiment: Buy Disclosure: Held
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