Ann: Becoming a substantial holder-MEL.AX, page-4

So the shareholders are happy getting 20% above market for their shares....but Lawndale are likely to be ecstatic, because they've gained such a large holding without having to bid up the price before Byron commences drilling Bivouac Peak in about seven months.

Check BYE's presentation of 16th July '16. On page 8 they show the NPV (10% pa discount) of the reserves recently established in nearby GOM SMI 71 field - that works out at about US$12 per BOE pre-tax, assuming an average price of US$55 /bbl and US$2.60 per mcf for the seven years from commencement of production in about March next year. (BYE's production of 'sweet' oil will be priced at a 10% premium to WTI.)

Page 15 of the presentation shows the likely size of the initial Bivouac Peak prospect....roughly double the size of SM71. MEL will acquire a 7.45% Working Interest in Biv Peak with an outlay of only three million for its share of the drilling and development costs (development costs are extremely low with pipelines and processing plant nearby, and on-shore.) We will know if BYE's prospective resource estimates are accurate after Biv Peak is drilled, but on past performance with the company's vast GOM experience, the chances are that Biv Peak will come in higher than estimated. Production would begin in 12 months. Prospective resources add another 50%.

Using the SMI 71 results as comparison, the value of MEL's 7.45% NWI in Biv Peak would be around US$20 mill Present Value, before tax. Depending on MEL's tax situation, this translates to a value of 5-6 c per MEL share. Alternatively, at US$50 per bbl, MEL's share of first year production will be worth about A$5 mill before tax. Valuing this at six times gives a share price of 7.5c - the same value as Lawndale have paid. So, Lawndale will get MEL's cash return of 2.5c in six or eight weeks plus remaining cash of about 3.7c for nothing.

On top of the initial gains, MEL is exposed to upside from the Biv Peak Deeps prospect plus the opportunity to gain 10% of BYE equity in any future equity raisings.

In summary, we can buy MEL today for about six cents, get 2.5c back in a month or two and then hold shares worth 3.7c in cash and liquid investments. In eight months with successful drilling at Biv Peak we would see commitment of production within 12 months worth 5-8 c per MEL share. So after cash-back your net cost of buying today is ~ 3.5c, the shares will have a cash/liquids backing of 3.7c and a forecast value of O&G production of 5-8c in less than eighteen months - so your shares are likely to be worth 2-3 times the net cost without (IMO) great risk.

Seems like Lawndale have similar views....and they, or others, may try to take over MEL before these gains are obvious to all.

MEL is very cheap at the moment, especially if you consider that Lawndale would have gone through a similar extensive valuation exercise and see that an investment for them at 7.5c per share will give a high rate of return....so MEL tomorrow should be valued at 7.5c!!!