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LINC Energy Ltd (LNC) has sold its entire interest in the Galilee coal tenement to an Indian miner in a deal worth up to $3 billion over the next 20 years.
The purchase agreement with Adani Mining Pty Ltd includes a $500 million cash transaction and a $2 per tonne royalty for the first 20 years of coal production. The sale represents the largest single investment by an Indian company into Australia.
Adani has obtained approval from the Foreign Investment Review Board for the acquisition and today deposited the up-front payment into escrow to be transferred to Link upon approval from the Queensland State Government.
Linc Energy CEO Peter Bond, said in a statement to the ASX that it is an ‘exciting day’ for the company and its shareholders.
“We have worked tirelessly over many months to maximise the outcome of this first coal sale for our shareholders,” he says.
“The royalty agreement gives Linc Energy the flexibility to monetise the royalty now, or hold it and receive the full benefit of 20 years of cash-flow.
“This transaction provides shareholders with a net present value of approx $1.5 billion with the opportunity to earn over $3 billion in revenue over the life of the royalty. This is undoubtedly a great result for the company.”
Linc energy has also secured the exclusive rights to negotiate with Adani on the joint development of any proposed future underground coal gasification operations within the Galilee tenement.
Bond says the deal is an indicator of Linc’s potential and provides the company with the capital to further diversify its portfolio of energy investments.
“The value of the Galilee tenement and the strong interest in the other coal tenements held by the company are just indicators of the depth, quality and potential of Linc Energy,” he says.
“This sale becomes a springboard from which the company can now aggressively pursue its commercial aspirations within Australia and other parts of the world.”
The Galilee tenement has a resource statement of 7.8 billion tonnes of coal and Adani is reportedly planning to begin thermal coal production from the site from 2014.
LNC shares are trading at $1.77.
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