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Here's an interesting perspective from the Malaysians: Investor...

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    Here's an interesting perspective from the Malaysians:



    Investor Central: Did tax office dispute prompt sale of Carmichael Mine royalties?

    September 22, 2014

    • It will pay the remaining A$65 million in cash within a year of signing of the Deed of Assignment and Assumption.

    Linc Energy sold Carmichael coal tenement to Adani Mining Pty Ltd for A$500 million cash in August 2010.
    At that time, Adani Mining had agreed to pay to Linc Energy a royalty of A$2 per tonne for the first 20 years of production at the Carmichael mine project in Queensland, Australia.
    Adani Mining is expected to commence production at the Carmichael mine in 2017.
    Therefore, Linc Energy would have received royalty payments from 2017 onwards.
    That's about three years from now.
    According to Linc Energy's Q1 FY14 earnings report, Adani Mining is looking to ramp up the full production at the Carmichael mine project to 60 million tonnes per annum by 2023.
    On July 31, Linc Energy announced that it had received government approval for the Carmichael Mine project.
    It anticipated annual royalty income of A$133 million at peak production.
    So, the royalty income of Linc Energy over a 20-years period would be pretty significant.
    Investor Central. We keep your investments honest.
    1. Is it the dispute with the Australian Tax Office that forced it to sell the Carmichael Mine royalty rights?
    Earlier in the year, Investor Central produced a Dog or Darling report on Linc Energy's IPO.
    In its prospectus, Linc Energy revealed that the Australian Tax Office (ATO) formed a preliminary view in October 2013 that the market value of the royalty deed between the company and Adani Mining should be taxable in FY11.
    As a result, the ATO decided to commence an audit.
    Linc Energy says it has legal and tax advice to support its stand in the FY2011 tax return lodged with the ATO that the value of the future amounts receivable under the deed should not be taxable upfront, but rather assessed on receipt over 20 years from 2017.
    So far, Linc Energy does not appear to have made any provision for the resultant tax liability.
    And now, it is selling the royalty rights to Adani Group.
    Therefore that makes us curious if it was the tax dispute that forced the company to sell the royalty rights.
    And how would the sale of the royalty rights impact the on-going dispute with the ATO?
    Further, how much tax will Linc Energy have to pay on the A$155 million sale proceeds?
    2. Why the need for a “binding Option Deed”?
    We are scratching our heads wondering what was the need for a 'binding Option Deed' when it is predetermined to be exercised between 50 and 65 days from August 28.
    Why didn't Linc Energy Ltd and Adani Group directly enter into a Deed of Assignment and Assumption?
    Are there more tax implications, perhaps?
    All honest questions we don’t know the answers to.
    3. Why is it not seeking shareholders' approval for the transaction?
    Linc Energy is selling the Carmichael Mine royalty rights for A$155 million.
    Based on its 587,820,177 outstanding shares (as at June 19) and its stock price of S$1.24 on August 27, Linc Energy's market capitalisation works out to be about S$728.9 million.
    That means, the A$155 million consideration works out to be about 24.8 per cent of Linc Energy's market capitalisation.
    Maybe we’re missing something, but by our calculation that makes it a major transaction as per Rule 1014 of the Mainboard Listing Rules of SGX.
    Which means, Linc Energy could not sell the Carmichael Mine royalty rights without the approval by its shareholders in a general meeting.
    To our surprise, Linc Energy's August 28 announcement didn't even acknowledge that the sale of royalty rights was a major transaction.
    We wonder how it can sell the Carmichael Mine royalty rights without seeking its shareholders' approval.
    4. How did it arrive at an A$155 million price tag for the royalty rights?
    As already highlighted, Adani Group will commence production at the Carmichael Mine in 2017 and it expects to reach full production of 60 tonnes per annum by 2023.
    At about A$2/tonne, Linc Energy could have earned a royalty income of about a couple of billion Australian dollars over the initial 20 years of production at the Carmichael Mine.
    But instead of a future income of an about A$2 billion, Linc Energy has settled for an A$155 million upfront.
    That too, payable in two instalments over the next 15 months.
    Speaking to The Courier Mail, Linc Energy's CEO and controlling shareholder Peter Bond said that he can turn the A$155 million consideration into a billion dollars by the time Carmichael Mine commences production in 2017.
    That would, of course, be a remarkable achievement.
    But irrespective of this claim, any reasonable investor would want to know how Linc Energy arrived at a A$155 million valuation of its royalty rights related to the Carmichael Mine.
    Also, why did it agree to the payment of the consideration in two instalments over 15 months?
    Linc Energy's shareholders would like to sincerely know the maths behind the deal.
    5. Why don't the number of its outstanding shares add up?
    On June 12, Genting Strategic Investments (Singapore) Pte Ltd exercised the option to acquire 10,750,000 new shares of Linc Energy for S$1.20 per share.
    Genting Strategic Investments (Singapore) Pte Ltd is a wholly-owned subsidiary of Genting Bhd.
    The option was granted to Genting Bhd at the time of Linc Energy's IPO in December last year.
    On June 19, the new shares were allotted to Genting Strategic Investments (Singapore) Pte Ltd.
    According to page 5 of the announcement, as a result of the allotment of new shares, its outstanding shares increased from 577,219,997 on May 14 to 587,820,177 on June 19.
    That's an increase of 10,600,180 shares, not 10,750,000 shares.
    Therefore, what happened to the remaining 149,820 shares?
    We have invited the company ([email protected], [email protected]) to an on-camera interview, and/or to reply to our questions in writing.
    At the time of publication we have not received a reply (which is why you are seeing this message).
    We will update this report if we do. ― Investor Central
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    - See more at: http://www.themalaymailonline.com/m...-of-carmichael-mine-roya#sthash.tQWjhLDa.dpuf
 
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