General comments/chat, page-10325

HW - As I have said before, I have been looking at theopportunity presented by MEP to leverage the potential of the Great WhiteKaolin Project (“GWKP”). However, since this is an ADN thread, and we should want to promote investment in ADN, I feel I need to set straight a couple ofyour statements.

“If MEP were double its current shareprice, it would still be trading at a significant discount to ADN.”

If MEP’s share price were to double, so would itsmarket cap to $43.3m. ADN’s market cap is $128.3m, so 33% (i.e. MEP 25% vs. ADN 75%) of that is $42.8m – so MEP would not be trading at a discount. (This is before considering the issue of a minority discount attaching to MEP's interest in GWKP)

I accept that currently MEP has 49%, but given ADN's recent expenditure, and the likelihood that GWKP will be mined, then it is reasonable to assume that ADN will control 75% in short order. If this analysis were done on a 51% ADN / 49% MEP split, then your comments are accurate - but only for the present moment.

"There's a potential 2X Bags within the month"

There are the three major differences betweenADN and MEP:

(1) MEP’s25% interest in GWKP is a minority – few rights, no control, littleinfluence.As a result, MEP’s interest would be valued at a discount to ADN’s – rather than on a pro-rata basis.

Being generous to MEP, let’s assume such a discount is 25%.(Note: I am not considering the value on a takeover, but just as both companies currently trade)

(2) ADNhas a 100% interest in Mt Hope.While it does not look as promising as Great White and Hammerhead, it would nonetheless contribute some value to ADN, as expressed in its current market cap.

Being conservative, let’s assume that Mt Hope represents 5% of ADN’s value. (Note: Mt Hope’s Ultra-Bright and Halloysite Zones (in MT) equates to 34% of Great White Deposit (Carey’s Well) Halloysite-Kaolin hybrid resource)

(3) Othernon-kaolin prospects.MEP got some poor results today on two of their prospects, maybe ADN will as well once drilling results come in – or maybe these results will be positive.

For the sake of keeping the focus on GWKP, let’s say that these other activities cancel each other out.

So by my estimation, based on the assumptionsabove, the current MEP arbitrage opportunity is around 40% - or 0.4 bags.All IMO of course, so please DYOR.

		Mkt Cap
1		$M
2	ADN	128.3
3	less Mt Hope @ 5% of MC	-6.4
4	less Other @ 0% of MC	0
5	Adjusted ADN	121.9
6	MEP	21.7
7
8	MEP @ 33% of ADN	40.6
9	less Minority Discount @ 25%	-10.2
10	Adjusted MEP (based on ADN)	30.5
11
12	Potential Arbitrage Gain	41%
13	Bags	0.4

As noted above, if this analysis below were done on a 51% ADN / 49%MEP split, then your comments re 2 bags are accurate - but only for the presentmoment and not into the near future.