Coal prices are down more than oil prices in recent times which...

Coal prices are down more than oil prices in recent times which probably makes value adding through GTL a bit more attractive for GCL coal deal IMO.

The idea of digging thermal coal for power stations is still relevant but as prices decline GCL will be looking at alternative uses of coal that generate optimal $ per ton. Obviously UCG wins when you convert otherwise "stranded" resource into $ but in the right circumstances the PXE gasifier technology combined with LNC GTL could also convert mined surface coal into fuel.

There is also a central govt lever in the form of national strategic push towards lowering risk to the economy and national security associated with dependance on imports of crude and fuels. So in this imagination armchair a deal with LNC makes sense. One hopes GCL Projects, the LNC board, BKK and PB can get this saga to have a happy ending - it could lead to big things for LNC&GCL JV in China.

GCL is experiencing falling export volumes and increasing competition in its solar business and also globally softening thermal coal demand and prices. Distallate fuel made in a GCL JV would be consumed by Chinese and Mongolian domestic demand (which should hold up better than exports) and potentially be a good value add for GCL coal resources. In times of poor coal prices relative to oil/fuel they can look at expanded GTL on the non-stranded resources if the equation makes more money than mining for thermal coal in power stations.



The last guidance for timing was "We remain confident that the deal will conclude in the second half of 2012" which means we could be waiting quite a while for an announcement but its a good thing that PB is conservative with time estimates so long as he delivers the goods. Of course LNC can give us a nice surprise if it comes in soon (please!)