The next 249D

This situation is a mess. And it’s going to get worse before it gets better.

The good news is; EAR is the target. Ernst, Mick, the Chinese… everybody wants this. Shareholders have something of real value. And finally, now is the right time.

The bad news is; dilution is a killer. When you most want it, you won’t get a look in. It’s engineered that way. Plus, it’s easy to trick ordinary money.

The events ongoing behind the scenes are unreal. I sharing some of what I know because it’s really freaking important that ordinary money (including me) get it straight. I’ll skip a bunch of stuff (the past, other players) and just focus on Ernst and Mick now.

If you’re a short term punter looking for the next happy-feely leg-up post, this is not for you.

3.5 years ago I invested $110,000 in EAR. Based on the >1moz Julius upside, Ernst’s geology cred, and the big deal names I saw on the register. I’ve been talking to Ernst for 3.5 years, for maybe 10-12 long conversations.

The first 2yrs I bought in to the market-version exploration plan i.e. “we are exploring for a discovery”. It was great to see all the big grade hits. And great to see the price spikes. But extremely frustrated it wasn’t capitalised on i.e. raising larger sums of money, deeper DC drilling, and really going after it.

Fed up with the go slow approach, I think, a large and important pro-exploration shareholder sold out in Nov-14.

This is how Nov-14 Mick got his 2nd stake and lodged his first 249D. So I started talking to Mick too… his plans, what he wanted to do, how he was going to do it etc. We’ve had maybe 3-4 long conversations in the last 12mths or so.

I am not going to recount the arguments of both sides, you know them already.

I will say this.

Ernst explained the go slow approach some time back. There is a large block of the register that would have preferred to go even slower while the markets were so tough, to wait for the gold price to recover and exploration capital to free up so the risk/reward of dilution/discovery was a better bet.

I think that time is now, or at least very near. The gold price is running and I think the dilution risk of deeper discovery drilling at Julius is a much, much better bet now. If Ernst can’t step on it from here, he probably deserves to lose it.

I also understand the Chinese are pro the discovery-story and have the money and interest to support meaningful campaigns. Consider that after due diligence, including reviewing the Julius dataset they paid 15c or implied $21m. Julius is very valuable according to them.

As a side point regarding the takeover; Ernst I believe wanted to sell at 15c, he wasn’t obstructing to hang onto a salary. That statement is just rubbish.

Anyway, the register I understand is more pro-exploration than it has ever been before. Except Mick’s agitation won.

Mick’s vision of the future I believe is a mining tie up with Bronzewing and probably flip it to a Chinese buyer before mining starts.

He’s been bullish on Julius for years. He first bought in 3.5yrs ago. And in the past he’s told me how the scale of Julius was easily big enough for Bronzewing.

He recently paid $1.3m at 10c for a 10% stake. His 3rd crack at it. It marks his view as $14m mktcap is good enough to buy.

So last week I talked to Mick to congratulate him on getting control and ask him what his plans are now. Bear in mind Mick hasn’t been in the EAR office yet. He hasn’t reviewed the Julius dataset yet. Ernst hasn’t handed over yet.

I was gobsmacked with what he had to say. View of EAR and Julius seems to have back flipped.

I am not going to share what he said because I fear the legal repercussions.

So moving on, I pose a hypothetical to you the reader;

If you thought EAR was worth as little as 2c, was possibly a BreX style fraud and only had 65,000 low grade oz’s would you buy 10% of the company at 10c?

Forget about the Chinese team that reviewed the lot, problems and all, and paid 15c.

Would you pay 10c if you thought EAR was worth 2c?

Would you pursue it for years with several large stakes and spoil for control if you thought Julius was a BreX style fraud?

Why make all that effort, why keep coming back? Why would you pay 5x it’s worth? It’s doesn’t make sense.

Unless of course your crazy behaviour did make sense….

So leaving the hypothetical, for EAR shareholders, we’ll get the progress you voted for... eventually, but I don’t think it’ll matter.

I smell an absolute drumming coming for EAR, the message to market is about to get very dark; cash running out, a low ball jorc, tenement issues inflated and everything blamed on the outgoing MD. The baby is going to get throttled and hurled from the bathwater.

When the recapitalisation comes at 2-3c you won’t want it, convinced Julius and EAR are worthless. For those that do want it, it’ll be a closed-shop, invitees only.

And with ownership concentrated and the price crushed, a merger offer for trumped up MKO scrip (up 120% since Mick got control of EAR) will further concentrate ownership of EAR’s value.

So when the combined company is sold it’ll be a massive success, Mick will make millions, but you’ll struggle to break even because you were fooled then diluted to buggery 9mths earlier.

Don’t believe me, ring around, really talk to the people involved, think about it and join the dots yourself.

Ernst decision to slow things down frustrated the hell out of me but I knew he’d get going when gold picked up. I think people voted for progress, which is fair. But I don't you realise what else you got. I think the current situation is much, much worse. It’s just crazy.