lnc cxy article

http://www.theaustralian.com.au/business/bond-hits-pay-dirt-with-controversial-mining-technique/story-e6frg8zx-1225902296719

HERE'S one of many contradictions of Peter Bond. He has just done the biggest business deal between an Australian and an Indian company.
But he is also one of the most vocal champions of a mining technology which, in the past few weeks, has caused tremendous division in the wider community and become a major political issue.

And this up-and-coming Queensland miner is moving most of his operations out of Queensland, one of Australia's two boom mining states, and concentrating instead on operations in South Australia, the US and Vietnam, none of which is exactly a mining magnet at the moment.

Bond broke cover this week when the company of which he is chief executive and the biggest shareholder, Linc Energy, sold a coal seam in the Galilee Basin to the Adani Group in a deal estimated to be worth $3 billion over 20 years.

Start of sidebar. Skip to end of sidebar.
Related CoverageIndians seal Linc coal permit deal Courier Mail, 3 days ago
Linc, Adani strike record deal The Australian, 3 days ago
Linc shares soar on coal deal with Adani The Australian, 4 days ago
Linc talking with Adani on sale Adelaide Now, 4 days ago
India steps up with $1bn coal purchase The Australian, 5 days ago
.End of sidebar. Return to start of sidebar.
Linc is seeking to sell the Theresa tenements near Emerald in central Queensland and another tenement in the Bowen Basin. Bond pegged out all three and has firmed up the resource, but Linc's core business is not conventional coalmining, hence the decision to sell.

This is a good time to be in the market, with Chinese and Indian interests in particular taking a close interest in Australian coal. In September 2008, Linc had a tentative agreement with Chinese company Xinwen Mining Group to sell Theresa for $1.5bn, but then the global financial crisis hit.

Now, the company claims to have buyers for each of these tenements.

Bond is known as a bit of a spruiker and many in the market have doubted his ability to pull off a deal. The company's share price has fluctuated wildly during the past two years, with speculation of deals pushing the stock sharply higher, only to see it fall equally as fast when nothing concrete has emerged.

This week a deal was finally done and, if Linc can pull together another like the one with Adani, which is based on an upfront payment of $500 million and royalties calculated at an indexed $2.5bn over 20 years, it will be a highly lucrative mining company with this money coming from mines it doesn't actually operate.

Last year was not a good year for Bond, with Linc's share price dropping 40 per cent as the market became impatient about the asset sales. But these things are all relative: when your net worth drops from $469m in 2009 to $259m, the wolf's still a long way from your door.

With the recovery in the company's share price this week to $1.87, Bond, who owns about 40 per cent of Linc, has a net worth of about $400m.

But Bond is certainly not a mining magnate without a mine. His ambition is to build a diversified resource company, with an income stream from oil, gas and coal. But where the company is most active in its actual mining is in the controversial technique of underground coal gasification, a method that has been in the news for all the wrong reasons.

The Queensland government has closed a pilot plant run by Cougar Energy at Kingaroy and using UCG, and has asked the other two companies licensed to conduct UCG trials in Queensland for more information. One of these is Linc.

The formal position is that the Queensland government won't make a final decisionuntil the end of 2012, but at the moment, political considerations would indicate that UCG doesn't have much of a future in Queensland.

But Bond and Linc are ahead of this curve. Two years ago, Linc was involved in a dispute with coal-seam gas company Queensland Gas over the one tenement near Chinchilla in western Queensland and, following an aggressive campaign from Queensland Gas, the government ruled in favour of the coal-seam gas company.

At the time, Linc was still building its pilot plant near Chinchilla, but Bond declared his intention to move out of Queensland and has dutifully set up in SA, where he is well advanced in plans to build a UCG refinery at Orroroo, about 250km north of Adelaide, in as little as 18 months.

"It's highly unlikely that we're going to be developing commercially in Queensland. We don't want to be tied to any one regulator who may or may not be regulating," he said.

He says that he has never had any trouble with the SA government, and can't understand why Cougar had its operations suspended. He dismisses any notion that the politicians might be acting out of community concern, saying that anyone who acquainted themselves with the facts of UCG would see its environmental advantages. "I just think the regulator overstepped the mark. We have no trouble at all with our landowners," he said.

Bond's faith in UCG is such that he is looking at UCG projects overseas. Linc has a joint venture in UCG in Vietnam with a state-owned energy company, and interests in Wyoming and Alaska, where it is planning further UCG projects.

Linc is not relying solely on the sale of the Queensland tenements to fund this expansion. The company has also been out raising money: $77.4m from the market last year and this year $81.5m from US-based institutional investor SpringTree Global Investors.

Bond got his start in the business by literally getting his hands dirty. He spent his formative years in Camden, on Sydney's southern outskirts, and in 1985, aged 22, saw a load of coal being dumped. He used a garden shovel and hose to clean the coal and, after a month, sold it for $17,500. He used the money to start a coal contracting business, and moved to Queensland about a decade ago, before buying into Linc in 2004.

Linc has a curious past. The original head of the company was Len Walker, the pioneer of UCG technology in Australia, who is now the head of Cougar Energy. Bond was originally a lender to the company, but before the company floated in 2006, converted his loans to stock ahead of the group's stockmarket float -- at 25c a share -- in May 2006. At this stage the company was chaired by former National Party premier Mike Ahern. But Bond and Walker had a falling out, which led to Walker leaving with his technology.

This week saw a big contrast between the two. Walker was desperately trying to find finance to keep Cougar alive, having to already lay off half the staff. At the same time, Bond was able to publicly announce the Adani deal and then undertake a roadshow to Sydney and Melbourne markets to spruik the virtues of his tenements and his offshore businesses.

"We've got 341 tenements all around the world," said Bond. "It's a good position to be in."