LINC ENERGY LTD // 2009 ANNUAL REPORT

01
CHAIRMAN’S
MESSAGE
To our shareholders,
On behalf of your Board, I am pleased to report that
the 2008–2009 financial year has been a period of
achievement for Linc Energy and its shareholders,
business partners and stakeholders. It has been a
year of considerable milestones for the development
of our company, our technology and the shared vision
to provide new, environmentally superior energy
solutions for Australia and other countries across
the world. I thank you for your support and I am
pleased that the vision of an Underground Coal
Gasification (UCG) to Gas to Liquids (GTL) industry
is closer to being realised.
For Linc Energy, a profitable future lies ahead.
The past year was volatile and unpredictable, yet
one strong message remains: Linc Energy has a clear
vision to provide energy from coal using its UCG and
GTL technologies. Accessing coal deep underground
is Linc Energy’s unique competitive advantage. Coal
suitable for UCG is inaccessible by conventional mining
methods. UCG technology can provide an innovative,
new energy source that will emerge to help satisfy
growing global energy demands in an environment
where oil and other commodity prices are volatile
and continue to rise. Energy security for nations such
as Australia, where a reliance on imported oil and oil
products exists, is paramount. Linc Energy has led
the way for greater national energy security by proving
that coal, from deep underground, can be successfully
gasified and used as a feedstock in the GTL process for
the production of liquid hydrocarbons. Obtaining liquid
hydrocarbons is a precursory step for the production
of fuels such as diesel and jet fuel. Not only is the
combination of UCG and GTL technologies economically
sound, it can be environmentally responsible as well.
As a relatively young company leading an up-and-coming
UCG to GTL industry, Linc Energy has a great deal to be
proud of. Linc Energy added to its already talented and
committed executive management team with the addition
of strategic roles including Commercial Manager, and
GTL and UCG General Managers. Introducing such
roles emphasises the commitment to its vision and to
become the world leader in UCG to GTL technology.
The wider Linc Energy team has also grown, with
additional specialist technology roles and a greater
systems and support network. Staff numbers are
now well over 100 employees.
Alongside growth in employee numbers and experience,
Linc Energy has also executed a significant drilling and
exploration program to prove up resources within its
tenements. This drilling and exploration program has
resulted in resources being defined (in accordance with
the JORC Code) in Chinchilla, Dalby, Emerald, Galilee
and Pentland in Queensland. Where these coal assets
are not suitable for UCG, Linc Energy has taken
appropriate steps for their divestment, engaging the
UBS Investment Bank to manage the sales process.
This divestment strategy will provide positive results
for shareholders and a solid platform for Linc Energy
to build its UCG to GTL commercial operations.
Delivering a world-first
One of the most rewarding milestones in the history of Linc
Energy to date is the completion and commissioning of the
UCG to GTL pilot plant at the Chinchilla Demonstration Facility.
In this rural location, Linc Energy has proven, for the first time
in the world, that UCG synthesis gas is a suitable feedstock for
the GTL process. The first liquid hydrocarbons or syncrude
was produced from combined UCG to GTL technologies on 14
October 2008. Six months later, it was my pleasure to welcome
the Federal Minister for Resources and Energy, the Honourable
Martin Ferguson AM MP to officially open the Chinchilla
Demonstration Facility.
Combined UCG to GTL operations at the Chinchilla
Demonstration Facility have enabled the technical teams
to further refine Linc Energy’s production processes in the
lead up to developing its first commercial operation.
National and global expansion
During February 2009, the Queensland Government
announced a policy to halt Underground Coal Gasification
commercial developments in the state until further scientific
analysis could be conducted. Findings from these studies are
expected to be released around 2011 or 2012. The Chinchilla
Demonstration Facility continues to operate in demonstration
mode under its Mineral Development Licence. The facility
will remain a source of competitive advantage as Linc Energy
continues to refine and validate its technical capability.
Linc Energy demonstrated commercial foresight in its merger
with South Australian petroleum and oil explorer, SAPEX
Limited. The acquisition of SAPEX, completed on 15 October
2008, has provided Linc Energy with access to vast areas of
coal tenements in the Arckaringa and St Vincent Basins in
South Australia. A drilling and exploration program is underway
in these areas to validate original data and determine suitable
locations for Linc Energy’s commercial development phase.
Linc Energy took its first steps into other potentially suitable
UCG locations during the year. Countries such as the United
States and Vietnam have high energy demands, yet are reliant
on imported energy sources and are facing even higher energy
demands in the future.
In April 2009, Linc Energy signed a business cooperation
contract with VINACOMIN (the Vietnam National Coal
and Mineral Industries Group) and Marubeni Corporation
(a Japanese company) to start the Tonkin Project, a trial
UCG project in the Red River Delta, about 60 kilometres
south-east of Hanoi. In May 2009, Linc Energy also signed
a purchase agreement with GasTech Inc for over 92,000
acres of Powder River Basin coal tenements in Wyoming,
USA. That purchase acquisition is now complete. The
Yerostigaz operations in Uzbekistan continue to produce
solid UCG synthesis gas results, providing Linc Energy
with exclusive access to confidential UCG technological
information. The UCG synthesis gas provided is the
feedstock for the nearby Angren Power Station.
Towards commercialisation
The Linc Energy team is clearly focused on the
commercialisation of its UCG to GTL technologies for
the production of cleaner, economic energy solutions.
Combined UCG to GTL was successfully demonstrated
for the first time in the world at the Chinchilla Demonstration
Facility. Work will progress to plan the development of
Linc Energy’s first commercial UCG to GTL operation.
I would like to thank my fellow Board members, Mr
Ken Dark and Mr Peter Bond for their contribution over
the past financial year. Thank you also to the executive
management team for their dedication and for supporting
Linc Energy’s vision. To all Linc Energy staff, thank you for
your commitment and passion for this developing industry.
It is wonderful to see Linc Energy supported by so many
talented individuals. The year ahead is expected to be
especially successful.
Yours sincerely
Brian Johnson
Chairman
14 15