THE extraordinary general meeting of Lincoln Minerals in Melbourne last Friday pushed the Punter into reassessing his shares in the would-be graphite miner.
Sell, taking a small loss, sit tight, or buy more?
Lincoln (ASX code LML) has one of the world’s top 10 graphite resources, at Kookaburra Gully, 35 kilometres north of Port Lincoln in South Australia. Its two-million-tonne resource doesn’t include anything that may be in the 8km Kookaburra Gully extension, though 70 of the 100 exploration holes drilled in the extension this year have hit paydirt. That sounds like a buy.
Graphite prices have begun rising strongly, and are now between $US700 and $US1,700 a tonne, depending on grade, thanks mainly to the growth in demand for lithium ion batteries.
Lincoln hopes to produce up to 40,000 tonnes a year of this black gold. Buy!
Sell, taking a small loss, sit tight, or buy more?
The application for environmental approval is the only regulatory hurdle left. Given the South Australian government’s pro-mining stance, the company hopes to start digging around the end of the year. Buy!
But at the end of June, Lincoln had only $2.2m in the bank and expected to spend almost half of that by the end of September.
At that rate, the company would be scratching to buy a garden spade by the end of the year. Sell!
However, last Friday, shareholders voted 134 to 3 to accept an offer of $9.6m from Lincoln’s chairman Yubo Jin, and vice-chairman James Zhang.
That’s a massive vote of confidence from two men who must know the company well. Buy!
Stantons International, commissioned to give an independent assessment on the deal, reckon LML should be worth between 8.10 cents and 18.09c a share. Current market price: 4.2c. Buy!
After the deal, the top six shareholders in Lincoln will own 67 per cent of the company. The market for the shares will be very small. Sell!
For the money, the two directors will be issued 150m shares each.
That slashes the value of the Punter’s 25,000 shares by cutting his stake in any future profits by nearly 40 per cent. Sigh.
Sold.
Correction: Last week’s column gave the ASX code for CropLogic as CPL. It is in fact CPI.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
