option a or option b

Option A = the current deal on the table by Shandong.

Option B = $30M Cap Raising.

Which do you choose?

New Chairmans Letter for Option B in Dec-12.

Dear Shareholders,

As you are aware, the Shandong Deal has been voted down at the recently held AGM. As such, we are now offerring a SPP to raise $30M at 3.2cps (a 14% discount to the 30 day volume weighted average).

We will be issuing 917M new shares in the company and using the capital to continue to maintain current production levels which yield negative cash flow each quarter. The money should last us 2-3 quarters at best. Any production increases will be delayed until we can have a further cap raising at approx 2.5cps in mid 2014. Additionally, we will be increasing our debt facility to $20M and drawing down the additional $12M in the Dec Qtr as we foresaw that Shandong Cash arriving in time to meet our current liability commitments.

We have had to suspend our exploration on TI due to cash flow restrictions as development and production are more important to us at this time. This ties in with the fact that Dean Goodwin will be leaving FML as we cannot fund drill rigs for him to explore and he is sick and tired of sitting in the hammock.

END

Now, whether you like the deal or not, you have to consider something like the above happening - and very quickly if this doesn't proceed. If this does happen, are we all going to be saying "you beaut - I am buying more at 3.2cps", or will we be saying "Management has no clue - again".

Management have made some poorly timed decisions in the past. They have bitten off more than they can chew. The result for me is that I am showing a paper loss. If the deal falls through, I will be heading for the door quicker a new tax is thought up for aussies.

Apart from having a new / different suitor and changing the current offer (time is running out), then the above cap raising is a reality (ready - certainty).

I am really trying my best to understand the other side of the story and consider changing my vote. Every time I look at FML, their cash position, liabilities, forecasts and actual profit, I see dire straights if this doesn't come off.

I am totally over the 49%/51% thing. If another deal comes through for 49% with a similar offering, you bet, i will jump ship straight away, but if it doesn't, it makes me feel sick for Option B above to prevail.