dilution, page-12

I disagree it has been bungled.

It has been a mere 2 weeks since the production license was finally granted. When it was MEL struck while the iron was hot.

I do agree it's unpleasant being diluted but gas exploration/production is a capital-intensive business and it presents major difficulties when you have discovered a massive resource but are a small under-capitalized company which wants to be a producer.

Cash on hand: <$10m

'Rosella' + seismic: $8m?
3 dual lateral wells: $3m?
4 core exploration wells:$2m?
Pipelaying for dairy GSA: $2m?
6 months working capital cash burn: $3m

Total: $15 - $20m approx?

Mmmmm. $5m-$10m short already AND they want to complete the seismic and drill 'Rosella' in January.

AND the contractors will want to be sure they are going to be paid.

I speculate MEL cut their cash position too fine last year because they thought they had a farm-in/JV which collapsed at the last minute.

The Board would never forget that blunder.

Same as right now the s/p collapsed; in last year's June case well below the SSP price. The CR was still oversubscribed with a considerable scale-back.

I remember it clearly because I had just landed in London and woke up to what appeared at first sight to be a disaster.

But then, thinking about it, what had actually changed?

Answer: nothing.

I had and have complete confidence in our much reviled management.

AND the Board would never forget the "Lehman" crisis - which started the GFC - 4 years ago this month.

It's quite possible that the resultant shortage of liquidity at that time had MEL close to sacking all staff & shutting their doors forever.

So now you know all this when would you have done it?

The answer is it doesn't matter when. It's all about planning and managing risk - and that is what they are doing.

Another fact to remember is that you and I don't have all the facts - but they do.

Ultimately, all that really matters is MEL have enough cash ($40m?) for another year.

hs