ucl 9 for 1 bid, page-32

Makattack, hi again.

"Why do you think MAKs marketcap is over $50mill and UCLs is around $10mill?"

The short answer is UCL has a great deal more liquidity risk (the risk of running out of cash) and a great deal more dilution risk than MAK already in its share price. Since both of those risks are linked to each other and since both are driven by the attractiveness or unattractiveness of the prospective returns on the project (imagine if we can get a DSO up and running with mining costs of $26 a tonne and get away with not having to do any further processing) then the scope for UCL's share price to go absolutely ballistic is huge. The sort of thing that might reduce both the liquidity and dilution risk at a stroke would be an offtake agreement announcement on Monday! (I haven't a clue if it will happen or not of course: sod's law is it won't.). UCL also has some deal-completion risk (MAK doesn't have that?) since UCL hasn't paid for Sandpiper in full yet. I would argue both companies have similar exploration risk (both can't be certain what they think they've got will be suitable for sale in an offtake agreement: we both hope there aren't any nasty contaminants?). Other risks should be similar at both companies (title/permitting risk: okay Australia is safer than Namibia, but Namibia does have a good reputation on licences, etc. and we don't have Aboriginal land rights problems?).

On technical matters I would argue mining off the sea bed (even if it hasn't been done before for phosphate) is not rocket science. It is ancient Greek science perhaps (Archimedes principle?). Airlift suction (no impeller to get clogged) works because the weight of the compressed air bubbles, water and phosphatic sediment in the vacuuming tube at any one time is lighter that the weight of the water it displaces, so it is lifted up the tube into the ship. You can see how airlift pumps work by searching for a film of one on Youtube. I think that's about it then. So it is differences in dilution and liquidity risk that acoount for the difference in mkt. cap. in my view.