share tips from investors chronicle, page-12

Some thoughts on the buyback, LRL bought back 1.9m recently, this amount just so happens to keep Newmont on the substantial shareholder list with 5.02% post buyback, there were no notices lodged by Newmont for ceasing to be a substantial shareholder after the 10m issued to Camac put them just below 5%. I know a lot of the Aussie corporate guys have moved on from Newmont in the last two years (dyor), this probably keeps LRL off Newmont's assessment radar, and it always looks good having them as a substantial holder.

Buyback in the holster for now, in my opinion

Drill update or results should be expected prior to the AGM next Friday. I recall Paul Abernethy mentioning drill results December in a webinar, contrary to the subsequently released quarterly activities that stood by November results. Anyway I won't be surprised if we get an update before the AGM but 'real' results the week later. Hope I'm wrong and it's a 1-3.8tcf resource firmed up before then.

Some speculation on what a 1-3.8tcf is worth with a 60% equity retained, well 3.8tcf is approx 1 Billion NPV fully appraised and viable according to LRL, however the valuation following the current drill needs to factor in risk of the appraisal not fulfilling investment criteria, i.e. appraisal = fail. I've got a model that outputs approx 1b for 3.8tcf, and so on for 1tcf etc, its actually +-20% of that depending on gas price assumptions, I've discounted the present resource value by 75% to account for the time value of cash flows, crude envelope calcs I know, its really just to factor in future capex and the payback period required.

What I have not figured out yet is the risk of appraisal =fail, the brokers seem to have assigned a discount value according to Investors Chronicle Report, post drill results what we need to be estimating is the risk that appraisal does not lead to production, to know whether to sell at 60c if 1tcf or buy at 60c.... (hypothetically). I have some thoughts on why appraisal=fail, such as change in political situation and price, any gas experts want to put there input in though please coz quantifiable industry estimate stats are better than non-quantifiable x factors obviously?

Facts
*11 of 15 wells in the neighbours patch with the same drill team, same geology hit gas, (more than our 3.8tcf)
*Not cool Camac bailed, my research indicates they need cash elsewhere though. Bird in the hand pays bonuses theory
*Cash backing after the first 3 wells is circa 16.5-17c / share
*Max Upside is $4 if 3.8tcf and appraisal = green light

On a traders note, looks like Citi have been playing the arbitrage between AIM and ASX, we saw large volume on the asx @ 23c yet now no support, I suspect Citi are playing games and on both exchanges, a lot of bot action on the AIM, short term issues only and really just aid in matching prices on both exchanges, though any arbitrage is Citi's bread and butter, again short term stuff only. JP Morgan Cash Income a/c says short term holder for me, I reckon those 2m they hold are gone post drill either way.

Fingers crossed, heck we are in such the right area, with cash backing and a good team who know how to realise money on Chinese assets, referring to of course the gold asset sale a few years back that brought most of this current cash!