LCK - FA - KJ

LCK - Leigh Creek Energy Ltd KJ

Project notes KJ

• The Leigh Creek site has historically been used for mining
• Coal Depth is 600m from the surface
• The water at depth is saline, as opposed to fresh water which lowers contamination risk
• The site is over 200km from the nearest gas pipeline
• Top 20 shareholders own 52%

Methodology KJ

In-situ gasification (ISG aka Undergound coal gasification aka UCG)
This is the method that LCK will use to extract gas. Developed during the 19^th century but didn’t catch on due to the high cost of extraction, although technological developments have now rendered this to no longer be the case. A full explanation - https://www.studentenergy.org/topics/in-situ-gasification
This method has been regarded as troublesome due to perceived negative impacts upon the environment. This seems to be why LCK have started referring to it as ISG as opposed to USG, effectively rebranding the method.

KJ

The most pertinent recent example of the troubles with UCG is Linc energy. The following article gives an overview of what happened with Linc in the context of the LCK project - https://www.abc.net.au/news/2018-09...chnology-approved-in-south-australia/10196388
As mentioned in the article, the LCK project is supported by Energy and Mining minister Dan Van Holst Pellekaan who was re-elected for a third time in 2018. The next South Australian state election won’t be scheduled until 2022, so it is presumable that this position will remain stable until that time and decrease the likelihood of political changes having an impact on the LCK project.

KJ

Another example of UCG being used in Australia is Cougar Energy’s Chinchilla project. This project was shut down after a toxic chemical was found in the groundwater on site.
With these recent flawed projects it is likely to keep some investors on the back foot and some likely to take profit before it gets to a stage where water contamination can become a factor.

It should also be noted that Leigh Creek is more remote than the other locations mentioned so LCK wouldn’t be running the same risk of a population-damaging contamination.


Resource Size KJ


The current 2P is 1153 PJ, or 1092833 million cubic feet, which -- at today’s gas price ($USD 2.694 -natural gas, source - oil price website) - is worth $USD2.94 billion

The current 2C is 2964PJ, or 2809329 million cubic feet, which -- at today’s gas price ($USD 2.694 -natural gas, source - oil price website) - is worth $USD 7.57 billion

KJ

To put the resource in perspective (LCK have a $164m MC @ 33cents) with other ASX gas companies:
SXY - $538m MC - HY sales revenue of $44m. 2P Resource size of 673PJ. Over 100 wells up and running. Pipelines in place.
CTP - $100m MC - 2P Resource size of 168.73PJ + 0.97MMbbl. Just under $3m in Gas Sales and over $40m in oil sales in previous HY. Sales of over 1000TJ of gas per month. $19m loss for the HY.
BPT - $4.7bn MC - 2P resource equivalent of 1820PJ. $279m NPAT for the half year.

After converting a modest 38.9% of the 2C to 2P it potentially gives LCK a very large resource compared to other companies in the market.


Resource Upgrades - COMPARISON KJ

ASX listed COI had a 2C of 232PJ (Own 40% of the project, their share – 93PJ) - at this time (they were trading around 5c-7.5c. Then in March 06^th (price:27c) 2018 the 2c was upgraded to a net 2P of 172PJ (NOTE: Their 40% was upgraded to 172, the 2C at the time had been upgraded to 385PJ total resource at time, 66% gain on the 2C), Price reached 32.5 (20.4% increase). When this was announced COI gapped up on open, and came back to close the gap within 7 trading days. Went on to set a high of 42c (55%) on 2^nd July 18 – roughly 4 months. Currently trading in the low 30s. **NB : COI is also a producer.

IT should be noted that LCK have only updated a portion of their 2C resource so will be unlikely to show the same type of % gains initially that COI (double-edged sword) saw as expectations seem to have reached what I would call the madness stage (Read: extraordinary popular delusions and the madness of crowds) .

ASX listed PVE saw their 2C converted to 2P at their Teodorico field last year. The announcement had little impact on the market but the reserves announced were reduced from previous expectations and this had been communicated to the market ahead of time. This was also not their only project, although it is their largest one.

ASX listed KEY are an example of what happens when the 2C fails to get converted promptly. They announced their 2C quantities back in 2015, spiking to a high of 3.3c. Since then they have failed to upgrade their resource to a 2P and the share price has steadily moved down and then sideways. It now trades around 0.007.


HoAs KJ

In 2015 they signed a HoA with APA. In 2016 they signed a HoA with Shanghai Electric Power Group. In December 2018 they signed a HoA with China Communications Construction Company. In 2019 they signed a HoA with African Carbon Energy. As of yet none of these HoAs have shown any concrete benefit with the APA and SEPG agreements not having been mentioned for a while.

EndP1.