all over red rover, page-12

Firstly, I'm sorry to anyone that was left holding these when they went into trading halt, suspension and then administration all in the space of a week, while still feeding shareholders absolute rubbish about the prospects of Mugello and the disposal of the West African assets.

In my opinion, they knew Mugello was a duster last Thursday (actually they probably knew it two weeks earlier when they completed the original drill and before even doing the flow tests). They also knew at that time that they were going to have trouble making payments to their Colombian partners. That goes pretty close to the definition of insolvent and begs the question of whether they thought they could trade out of it with a bit of leniency from the Colombians and some luck offloading the African assets.

Again, in my opinion (and as I indicated last week and earlier this week), they were always going to have trouble ever getting this thing back into a reasonable state, able to remain a viable operation, and recapture some of the potential squandered on huge salaries, extravagant lifestyles and poor management decisions.

Will we ever hear the whole story - wart's and all? Not a chance. There are too many people with too much to lose and the Baraka story is far to close the the "normal" way of operating for most or these cowboys that they will do whatever is necessary to hide the truth from the great unwashed masses.

As recently as 3 weeks ago, there were probably viable options for this company. Through some misguided or poor judgement, the clear thinkers on the Board were outvoted by the less clear thinking and by the smooth talking executives into perpetuating the mistakes already made.

Think about that carefully for just a moment!!! With a little less unearned pride and a little more humility, this situation could have been avoided.

There are probably some members of the Board who will be devastated by this situation, knowing that their advice and judgement was ignored. They will now be tarred with the same brush as those members of the Board who are still sitting there with vacant expressions, trying to work out what happened (while looking for their next meal ticket).

It would be nice to get the opportunity to ask management exactly what they knew and when they knew it but I doubt you'll get any answers from them now. It's all in the hands of the Administrators and they are no longer responsible. The Administrators will be very careful about releasing any information about what actually happened as it might effect the outcome for the secured creditors. They won't want law suits from disgruntled shareholders ruining the chances of secured creditors getting all their money back.

If you can be bothered trying to contact anyone in the company, ask them whether the Colombians issued a default notice and if so when did that happen. I reckon it happened last week but there was no mention of it in Monday's announcement requesting a trading halt. Not that it would have made any difference as it has not traded at all this week.

So, what happens from here. Well there will be a hierarchy for the carving up and disposal of assets with the last ones in that line being the shareholders.

The biggest problem for shareholders will be that the assets in West Africa will probably be on a short fuse whereby default on any payments owing will result in the other partners having the right to resume ownership in satisfaction of debt. This means that if the Administrator cannot find a buyer willing to pay Baraka as well as take over the cost of the assets before the other partners declare them in default, then Baraka may lose the entire asset with no monetary recompense.

I think this may have already happened to some extent in Colombia.

Will Baraka have any assets left - probably not. Will they ever trade again - maybe, but if they do 3c will look like a million bucks compared to where it will be trading at.

For those of you still holding and not familiar with the process of administration and possible winding up of a company (and trust me Baraka will not be the only one this happens to - it's just the first one in this current wave) I'll try to give you some idea of how things might pan out.

First, be aware that you are stuck with these worthless and untradeable shares until either the company is officially wound up, or manages to reconstruct itself and begin trading again. Either of these options is likely to take a significant amount of time (possibly years) and in the mean time you cannot write off the shares to claim your capital losses.

There are a couple of possible alternatives none of which are all that attractive. I believe there are a couple of organisations that will buy shares of companies that are in administration on the basis that they will hold them until either they trade again or they are wound up and the organisation can get something for them (sell them or claim the loss). They of course will pay you a minuscule amount for your shares (0.1 of a cent or less) because they are taking on the risk. The benefit to you is that you have actually crystallised your loss and can then claim it through your tax as a Capital Loss offsetting other Capital Gains (or carried forward until you actually make some Capital Gains).

I believe that there are also circumstances where the Administrator can advise the ATO that the shares are unlikely to ever trade again and this will allow you to claim your loss. That said, this is not a likely short term decision by the Administrator and will not happen early in the process.

Not very attractive options really but at least you can rest easy in the knowledge that those two floors of extravagant office space in Perth will probably be easy to re-rent to a company that can afford them, thereby reducing Baraka's immediate cash bleed.

Once again, sorry to those left holding the bag.

Cheers

Badfish