L&M Group

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Background

The L&M Group is made up of a number of companies with interests in the minerals and energy sectors. The “L&M” dates back to the original company founded in 1935, “Lime & Marble Ltd”. Since then the company has been through various iterations involving mineral, coal, gold and petroleum exploration and mining. In 2005 L&M restructured and the group then comprised six operating companies: L&M Mining Ltd, L&M Lignite Ltd, L&M Coal Ltd, L&M Coal Seam Gas Ltd, L&M Petroleum Ltd, and Mintago Investments Ltd. All were owned by Hong Kong based company, Auriferous Mining Ltd. The present companies in the Group are almost wholly overseas owned and hold prospecting rights over thousands of square kilometres of the New Zealand mainland. In a presentation to the 2012 conference “Excellence in Oil & Gas”, L&M Energy gave reasons for New Zealand exploration that included a supportive government and a favourable royalty regime.

Role of the Chairman

Geoffrey Loudon, New Zealand Chairman and Director of Auriferous Mining, and a major shareholder in the company (he owned one-third of the shares in December 2009), has a key role in the L&M Group. Among other positions, he holds the chairmanship of the L&M Group and of L&M Energy, and is the sole director of L&M Mining (Sep 2012). In addition he is the sole director of each of the five New Zealand registered companies (such as L&M Lignite Mataura Limited) owned by L&M Southland Lignite Holdings Ltd, which is itself registered in Belize. Mr Loudon had a pivotal role in gold mining in Papua New Guinea and in 2006 was described as having, “broad ambitions for his New Zealand investments which take in a billion-dollar plan to be a large-scale producer of synthetic fuels from lignite, coal-seam methane and coal, plus a petroleum exploration float and a possible revival of alluvial gold mining on the South Island.”

Activities of the Group

The makeup of the L&M Group changes frequently and there are significant overlaps of shareholders and directors. In the past, the L&M Group has focused on gold-mining but on its website (apparently last updated in 2010) it states that it has, “downsized our gold operations and, recognising the increasing demand and value in the energy markets, changed our focus to energy resources.” [Although it was announced in November 2012 that Geoff Loudon would take a 50% stake of the rights in a gold and silver prospect near the Martha Hill mine in the Coromandel] “We have identified and obtained mineral exploration permits, and have begun exploration of a number of coal, coal seam gas (CSG) and lignite leads.” The company’s aim is to “become one of New Zealand’s primary energy resource producers and exporters" but in 2012 there was little evidence that any commercial extraction of resources was actually being carried out by L&M companies. In June 2012, for example, the Director’s report stated that although work had continued on the Ohai Coal Seam Gas (CSG) pilot project, the results had been “disappointing” and commercial rates of gas flow had not been achieved. L&M Energy’s 6 month financial report (30 June 2012) reported an overall loss of $2.1 million. Historically L&M has obtained permits, explored, prospected and drilled, prepared prospects for commercialisation and then sold them – as it did with the Denniston Escarpment site that was sold to Bathurst Resources. Consequently, there must be a strong incentive to present an optimistic view of the company’s activities and L&M Energy’s website continues to do this when describing the prospects for commercialization of CSG, electricity generation and liquefied natural gas projects. A 2009 article on the Ministry of Economic Development’s website stated that L&M Coal Seam Gas’s total potential in-ground gas resources in its New Zealand permits (given as 1.2 trillion cubic feet of gas) were the largest resource figure published by any CSG explorer.

In 2010 there was a merger between L&M Petroleum (which held three joint-venture permits in the Taranaki Basin plus South Island exploration permits including one in the Te Anau basin and L&M Coal Seam Gas, forming a new company, L&M Energy. Geoffrey Loudon and Gregory Ross Hogan are the only significant New Zealand based shareholders in the company; approximately 73% of the shares are held by overseas investors. The formation of L&M Energy was intended to “underpin an aggressive more than year-long drilling programme targeting coal seam gas in Otago and Southland.” (Other sources refer to L&M Energy’s acquisition of L&M Coal Seam Gas, rather than to a merger.)

Also in 2010, Bathurst Resources Limited acquired L&M Coal Limited. L&M Coal Limited was renamed Buller Coal Holdings Limited which was a wholly owned subsidiary of Bathurst. In February 2011, Buller Coal Holdings Limited was renamed Buller Coal Limited.

L&M companies have significant investments in lignite and hold rights over about a third of Southland and Otago lignite deposits. (State-owned Solid Energy has rights over another third of the deposits.) L&M Group has exploration permits covering more than 20,000 ha over the Hawkdun, Benhar, Mataura, Edendale, and Ashers deposits.

Yet another L&M Group venture is the formation in 2012 of Chatham Phosphate Ltd of which it owns 90%. The permit is for seafloor phosphate exploration near the Chatham Islands east of Christchurch.

Financial status

In June 2012 the Director’s report for L&M Energy stated that there had been a loss of $2.1 million during the preceding six months. Chairman and major shareholder, Geoff Loudon, provided a loan of A$5 million to ensure that the company could meet its current commitments. L&M stated that it would be giving up two of its prospecting licences, but did not indicate which ones. The Group appeared to face an uncertain future as on p13 of the report it is stated that, “the nature of the Group’s business is such that there is material uncertainty around the ability of the Group to obtain further funding which may cast significant doubts on the Group’s ability to continue as a growing concern.” A new player then entered the game when New Dawn Energy (NDE) launched a takeover bid for L&M Energy. NDE, however, is wholly owned by Geoff Loudon, who also owns a 28 per cent stake in L&M Energy. He planned to delist L&M from the ASX and NZX if the takeover bid was successful. By the end of 2012, NDE had acquired more than 82% of the shares in L&M Energy whose chief executive, Kent Anson (appointed 2010), had decided to return to Australia “for personal and family reasons”.

Coal related projects – past and present

NB L&M’s websites do not appear to be regularly updated so it is often unclear whether information provided is still current.
MT – million tonnes

Ashers Waituna Coalfield Exploration Permit

This permit (EP 40–359) is described as current on L&M Lignite’s website but appears to have expired on 24 January 2008. It was transferred from Kenham Holdings Ltd to L&M Lignite Ltd in March 2005 and covered 4,900 ha (49.0 sq km) in eastern Southland, 20 km east of Invercargill with a resource of 880 MT of lignite B. L&M drilled over 90 exploration holes, carried out coal quality assessments and commenced feasibility studies into liquid fuel and petrochemical production. An L&M report indicated that the coal quality was highly suitable for gasification and proposed a mine to feed a plant producing low-sulfur naptha and diesel using the Fisher-Tropsch process. A Southland Times article (18.06.12) stated that the permit had expired in the previous January but that L&M Lignite Ashers-Waituna (formerly named L&M Southland Lignite Limited, formerly named L&M Lignite Limited, formerly named L&M Petroleum (Waiau) Limited), had applied for an extension. L&M exploration director, David Manhire, was reported as saying that plans for a lignite mine and diesel conversion plant hadn’t been abandoned but that it was a large project, still in the evaluation phase.

A 1998 Department of Conservation publication stated, “There is the possibility that large scale open cast mining in the Waituna-Ashers area could occur. A large lignite deposit has been identified. Lignite mining activity would be likely to have a significant impact on the lands administered by the Department in the area, particularly the Waituna Wetlands Scientific Reserve and Seaward Moss Conservation Land.” An L&M Lignite report, Ashers-Waituna and Hawkdun lignite deposits: their resources and use potential, acknowledged that, “The environmental cost is similar to that of higher ranked coals in all respects other than the CO2 emissions which, due to the low conversion efficiency as a "result of having to dry the coal, is high.” There are other significant environmental concerns about proposals to mine in this area, as stated in a 2005 presentation by director, David Manhire, in which he makes reference to concerns about the impact on Waituna lagoon (which is part of a RAMSAR protected site) and on ground water. He also stated that it was planned for Stage 1 of the plant to become operational by mid-2010, and that after a 22 year mine life there would be a 200 ha “final void”. In an address to a 2008 mining conference, L&M Group chairman told the meeting that if the southern deposits were mined over which L&M has permits, then the rehabilitation would be recreational lakes.

Buller Coal Field

In 2008 L&M Coal Ltd, a subsidiary of the L&M Group, announced that it was preparing a mining application for its 18,740 ha block in the Buller coal field near Stockton on the West Coast of the South Island. The Buller exploration permit, granted in 2005, contained an escarpment block estimated to contain 5 MT of high quality coking and thermal coal. L&M stated that the company had established a potential coal resource of 45 million tones in the Buller coal field. In September 2010 L&M Coal applied to the Buller District Council and West Coast Regional Council for 24 resource consents relating to the Escarpment Mine Project (EMP), Denniston Plateau and Fairdown. The company also required an access agreement from the Department of Conservation. Once L&M Coal had been acquired by Bathurst Resources, its joint venture partner, the company was renamed Buller Coal Ltd.

Canterbury Coal Prospect

A prospecting permit for thermal/semi-soft coking coal and lignite for an area of 2972 sq km, west and southwest of Christchurch, was granted to L&M Coal Mount Somers Ltd in January 2012 with a duration of two years. The company proposes to carry out data compilation, field mapping and sampling followed by extensive drilling and feasibility studies.

Edendale Coalfield Exploration Permit

Permit EP 40-634 (expired 12 January 2010) covered three coalfields between Gore and Invercargill in Southland. The permit area was 2,303 ha (23.0 sq km) with a resource size of 2,940 MT of lignite B. Ninety exploration holes have been drilled since 1976 and L&M carried out coal quality assessments and updated the resource estimate.

Hawkdun lignite field

In 2005 the Coal Association of New Zealand announced in its newsletter that L&M Lignite Ltd had been awarded its second permit over the large Hawkdun lignite field in Central Otago near St Bathans, 60 km from Alexandra. The new 8700 hectare permit almost surrounded another of the company's blocks, the 1180 hectare one that was granted a 10-year permit in 1998 and acquired by L&M from Kenham Holdings Ltd in March 2005. (Until May 2005, Kenham Holdings was the name of the company which became L&M Petroleum Ltd, which in Jan 2010 became L&M Energy Ltd.) The Hawkdun fields contain about a billion tonnes of lignite that the company considered had a good potential for converting into liquid fuels. A conceptual plan showed a multibillion refinery covering 70 ha. (L&M Lignite Ltd had recently commenced a project to evaluate the potential of Southland and Otago’s large lignite resources as a high-quality chemical feedstock.) Lignite use was being considered as a source of hydrogen fuel, low sulphur diesel, fertiliser, methanol and electricity generation.In 2009, Kent Anson, newly appointed chief executive of L&E Coal Seam Gas stated that a pilot programme would be drilled on the site.

In May 2010 L&M Group financial controller, Ms Shirley Herridge, announced that the proposed Hawkdun lignite mine was at the environmental study stage. If approved, it would employ 2700 contractors during three years of construction and 675 permanent staff. Potential obstacles to development included transport routes and the cost of "sensitive design" in an area of outstanding natural landscape, she said. (The Hawkdun range is depicted in some of Graham Sydney’s most iconic paintings such as “Timeless Land”.) Mining of the Hawkdun deposits was a controversial issue, especially in the light of claims made the previous February that L&M had bought pressure to bear on Energy Minister Gerry Brownlee in order to have a 200 ha Crown-owned block in the upper Manuherikia excluded from the Oteake Conservation Park set up in 2009. Brownlee denied any pressure from L&M Mining when stating, “We made the decision to keep 200 ha out on the basis that it may have significant mineral deposits, mainly lignite."

Kaitangata Coal Prospect

L&M Lignite Kaitangata Ltd has a prospecting permit (EP 40¬626) for a 25.8 sq km (2,575 ha) location 65 km south of Dunedin on the east coast of the South Island. The company refers to the target as being Lignite A to Sub-Bituminous B grade coal and states that the exploration licence expires on January 10, 2014. The company states that the project contains 50 MT of coal of which 10 MT is opencastable. Preliminary drilling and evaluation have been carried out.

Kaitangata Coal Seam Gas Permit

L&M Energy holds a 1,114 sq km permit (PEP38219 – Kaitangata) in an area well known for gas occurrences. (Kaitangata underground mine was the site of a major explosion in 1870.) More than 500 exploration wells had been drilled in the area before L&M acquired the permit and drilled a further six exploration wells and carried out water/gas production tests. In 2008 2D seismic studies were carried out in order to determine the structure in the selected pilot area and in April 2009 L&M Coal Seam Gas Ltd announced that it had commenced test production from the pilot wells. Exploratory drilling was continuing in 2012.

King Country Coal Seam Gas permit

In 2009 Permit PEP 51244 was awarded to L&M Coal Seam Gas (now a subsidiary of L&M Energy) for an area of 1055 sq km in the King Country north and south of Taumarunui. The company applied to an extension for the area in this project, which it is referring to as Ohura River.

Maramarua Coal Prospect

The exploration permit, EP 40-627, is located 55km south of Auckland and approximately 35 km north of Huntly Power Station. The permit owner is L&M Coal Maramarua Ltd. The L&M Group website states that the permit has an expiry date of November 16, 2014 and it is estimated that the area contains 15 million tonnes of sub-bituminous coal of which 2.1 million tonnes is under less than 100 metres of overburden. Preliminary drilling and data evaluation have been carried out.

Mataura Coalfield Exploration Permit

Permit 40-663 covered 1,346 ha (13.5 sq km) in Southland and expired on 12 January 2010. The resource potential is described as 2,500 MT of lignite B. L&M Lignite’s brochure “Energy For Our Future” stated that over 130 exploration holes had been drilled since 1976 and that the company had carried out coal quality assessments and updated the resource estimate.

Morton Mains

L&M Lignite’s website states that it has an exploration permit in Morton Mains in Southland. A Ministry of Economic Development factsheet, “New Zealand Coal Resources”, states that Morton Mains has a recoverable resource of 507 MT of lignite.

L&M Personnel

Geoff Loudon is a mining professional with Australian qualifications in geology, engineering and international finance. He is Chairman of the L&M Group and of L&M Energy; was a Director of L&M Petroleum at the time when it existed as a separate company; director and founder of Lihir Gold Ltd, a Papua New Guinea gold mine; the NZ chairman and director of Nautilus Minerals, a company set up to exploit high grade mineral ores in the Western Pacific a founder and investor in Peru Copper Inc; and a cornerstone investor in European based fuel cell, information technology and industrial companies.

Greg Hogan is General Manager of the L&M Group and was instrumental in reengineering it from a gold mining company to an energy group. He was a Director of L&M Petroleum at the time when it existed as a separate company. Mr Hogan has commercial and management experience in gold mining, coal mining and petroleum businesses and is also a non-executive director of L&E Energy.

Kent Anson was the Managing Director of L&M Energy from 2008 until the end of 2012. His background is in the exploration and development of coal seam gas projects. In 2010 Mr Anson’s remuneration was 428,500 NZD.

Bruce McGregor has been the Chief Financial Officer of L&M Energy since 2007. He has held senior accounting and finance roles with a number of international public companies.

David Manhire has been the L&M Group Exploration Manager since 1990. He has been involved in exploration for coal, oil and gas, and gold principally in New Zealand, South America and Australia.

Shirley Herridge became the Financial Controller of the L&M Group in 2005. Her background is in tax consultancy.

Douglas Ellenor is a Canadian-based non-executive Independent Director of L&M Energy. He is a geologist with extensive experience in the petroleum exploration and production industry.

Charles Lutyens is a UK-based non-executive Independent Director of L&E Energy who has worked in the oil, gas and coal sectors as well as in ferrous and non-ferrous metals, gold and timber.

Trevor Taylor is a non-executive Independent Director of L&E Energy. Taylor is a management professional with experience in the New Zealand and international petroleum industry.

Contact details

L&M Group
Level 2, 190 Armagh Street
PO Box 13-442
Christchurch, New Zealand
Phone: +64 (0)3 377-0045
Fax: +64 (0)3 377-0049
Mobile: +64 (0)21 935 185
Email: greghogan AT lmgroup.net.nz
Website: http://www.lmgroup.net.nz/page7f10.html

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