LINC ENERGY LTD // 2009 ANNUAL REPORT

06
DIRECTORS’
REPORT
The Directors present their report on the consolidated
entity (referred to hereafter as the Group) consisting of Linc
Energy Ltd (the Company) and the entities it controlled at
the end of, or during, the year ended 30 June 2009.
Directors
Unless otherwise stated, the following persons were
Directors of the Company during the whole of the financial
year and up to the date of this report:
• Mr B. Johnson (Chairman)
• Mr P. Bond (Managing Director)
• Mr K. Dark (Non-Executive Director)
Qualifications and experience of
Directors and Company Secretary
Further information in relation to the qualifications and
experience of the Directors and Company Secretary is set
out on pages 36 to 40.
Principal activities
During the period the principal continuing activities of the
Group consisted of:
• Exploration for coal resources; and
• Development and commercialisation of coal to
liquids processes through the combined utilisation
of Underground Coal Gasification (UCG) and Gas to
Liquids (GTL) technologies.
UCG and GTL technologies when combined can
economically convert deep underground coal deposits into
cleaner, sulphur-free diesel and jet fuels.
There were no significant changes in the nature of the
activities of the Group during the year.
Dividends - Linc Energy Ltd
No dividends were declared or paid by the Company during
the year or up to the date of this report.
Review of operations
Information on the operations of the Group and its business
strategies and prospects is set out in the Review of
Operations on pages 26 to 35 of this Annual Report.
The Group recorded a net loss attributable to equity holders
of Linc Energy Ltd of $42,176,000 for the year ended 30
June 2009 (2008: $4,244,000). Basic and diluted earnings
per share amounted to a loss of 10.36 cents per share (2008:
loss of 1.21 cents). Included in the net loss was $15,153,000
(2008: $Nil) of non-cash amortisation expenses attributable
to the coal to liquids development costs intangible asset.
This asset has been estimated to have a useful life of three
years, with ongoing development expenditure having been
expensed as incurred since the commissioning of the
Chinchilla Demonstration Facility in October 2008.
The Group experienced a significant increase in staff
numbers during the financial year as it ramped up its UCG
and GTL technology and operations teams and strengthened
the corporate support functions throughout the business.
Staff numbers increased from less than 20 at the beginning
of 2008 to over 100 during the current year, with employee
benefits expenses increasing from $6,720,000 in 2008 to
$22,334,000 in 2009. Included within this amount were
non-cash share-based payments of $9,172,000 (2008:
$3,446,000) reflecting the fair value of options granted to
new staff under the Employee Option Plan in the current
and prior years. The value of these grants is expensed over
the three year vesting period with a higher amount of the
expense included in the initial years due to the differing
lengths of the vesting periods for each tranche of each
grant. Refer to note 27 to the financial statements for more
information about the Linc Energy Employee Option Plan.
At 30 June 2009 the Group had net assets of $154,737,000
(2008: $146,900,000). Total liabilities at 30 June 2009 were
$24,164,000 (2008: $21,320,000), of which $13,091,000
(2008: $Nil) related to convertible notes outstanding
at year end.
Significant changes in the
state of affairs
Significant changes in the state of affairs of the Group
during the year were as follows:
• Completion of the placement of 27,027,027 shares on 2
July 2008 raising $100,000,000
• Purchase of new shares representing an additional
13 per cent interest in JSPC Yerostigaz for $368,000
• Acquisition of all the issued capital of SAPEX Limited via
an off-market scheme of arrangement at a total cost of
$102,151,000
• Placement of 5,862,069 shares on 14 October 2008
raising $17,000,000
• The Company entered into a convertible note facility
agreement totalling $36,000,000 with investment bank
BBY Limited. Twenty-two notes were drawn down during
the year providing total funding of $20,200,000, net
of fees. Nine notes were converted to shares during
the year.
Matters subsequent to the end
of the financial year
On 3 August 2009 the Company announced that it had
raised $57,400,000 via the completion of a share placement
to sophisticated investors of 41,000,000 shares at $1.40 per
share. On 16 September the Company announced it had
raised a further $7,708,000 (5,505,998 shares) from eligible
shareholders via a share purchase plan.
In conjunction with the share placement, on 31 July 2009
the Company agreed with BBY Limited and the respective
note holders to redeem nine convertible notes that were
outstanding at 30 June 2009. The cash cost of redemption
of the notes was paid out of the proceeds of the share
placement and totalled $10,890,000, representing a face
value of $9,000,000 million, accrued interest of $240,000
and redemption fees of $1,650,000.
On 4 September 2009 the Company announced it
had completed the acquisition of 92,059 acres of coal
tenements in the Powder River Basin in the state of
Wyoming, USA, from Gastech Inc, for the purposes
of exploration and commercial exploitation via UCG.
The acquisition had a total cost of US$5,162,086
(AUD$6,231,393).
There were no other matters subsequent to the end
of the financial year that may impact the Group’s
future operations.
Likely developments and expected
results of operations
Comments on likely developments and expected results of
operations of the Group are included in this Annual Report
under the Review of Operations section on pages 26 to 35.
Further information on likely developments in the operations
of the Group and the expected results of operations have
not been included in this Annual Report because the
Directors believe it would be likely to result in unreasonable
prejudice to the Group.
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