material capital raising, page-17

Elkers,

Inially when I read the report I was very dissapointed however after reflecting all afternoon I dont believe we can make an informed decsion until the Directors let us know how much they are raising, why they are raising? and how the raising will be conducted.

Firstly they have mentioned 'Material' so I would expect a large placement. So what if a large player wanted equity exposure to a EOR company such as ELK. A major placement say 50% of the company could be provided in return for a discounted CO2 contract or several mature oil fields. This would be an advantage to holders.

The other alternative is a rights issue and the only reason they would change their corporate stategy is that the directors believe it is in the best interests of holders. G28 could be right and that ELK has decided to go Grieve alone with a Chemical flood. With a $4m raising they would be able to fund the first stage and if successful get project finance for the rest. This would also create value as previously ELK was looking at giving >50% of the field to the JV partner.

The good news is that for SH to stump up a lot of cash they will need to provide a lot of details of the economics of the investment.

I lean towards the positives as ELK have an undrawn debt facility, the directors have large holdings and finally if it was really bad news Im sure the SP would already be below Doolang's 10c target.

Anxious yet positive.
DJ