Ann: Lake Torrens IOCG Project - Drilling Update, page-84

Hi sb,

TAS only hold ca. 30% of EDE. Although having said this GS and family do hold an additional ca. 4.3% of EDE.

As you can see from the above, at the tops, TAS, GS and family only hold 34% of EDE which is long way from a majority holding, although they do have total control of EDE's running at the moment. However, in the event of a TO, this would change.

My thought was (it was meant to be no more than this), if TAS received a lump sum payment of say A$250 million i.e. FMG bought TAS's 10% stake in Vulcan for A$250 miilion (or the entire 20% of stake for A$500 million?), TAS would have an awful lot of cash in the Bank.

TAS could thus undertake a so-called "reverse float" or share "buy-back" with EDE i.e. buy back a large portion of the huge amount of EDE shares that are currently on issue. This would significantly reduce the huge number of EDE shares that are currently available to trade on the ASX i.e. there would be less shares in free float.

To potential, as well as existing investors, a reduction in the free float is always good i.e. with fewer shares left to trade, the SP will always be far better supported.

Up until now, EDE has been constantly issuing new shares, which has been continually diluting the worth of EDE as well as TAS's shareholding. A "reverse float" or share "buy-back" would stop this trend completely.

After such a "reverse float" or share "buy-back" TAS would also still have a enough cash on hand to be able to support EDE financially.

Of course there is another option und that is a complete "reverse float" where all EDE shareholder would be offered TAS shares as a share swap (here again this is no more than just a thought). In such a case this would simply be a merger of two companies, which happens very often on the world of M&A (I was involved in one of these myself).

Considering that in the event that FMG did buy TAS's entire 20% of stake for A$500 million, this would mean that the TAS SP would be worth about 82.5 cent, including their CNJ holding, cash etc. (TAS currently has about 707 million shares on issue). Therefore, in a stock swap, with EDE's current SP being worth 3.3 cents at yesterday's close, EDE investors would receive 1 TAS share for every 25 EDE shares they own (as so-called 1/25 stock swap). Please note: this is a back of the fold down airplane table napkin calculation, so it may be wrong, however, you will still get the idea.

The advantage here is that EDE would be 100% controlled by TAS and fully financed by TAS. EDE would also no longer be required to carry any debt. There would also be other important synergies, particularly a significant decrease in operating costs i.e. less staff, less administration, as well as less auditing and accounting, less reporting, a smaller BOD, etc. etc.

One of the main problems that I have recently highlighted is the fact that EDE currently have over 2 billion shares on issue, which, IMVHO at least 3 times as many shares as they should have on issue. One way to quickly change all this is to have a 10:1 share consolidation or "reverse stock split" (the same thing). This means that for every 10 shares you own this will be reduced to 1 share i.e. after such a share consolidation a EDE shareholder with 100,000 EDE shares would then have 10,000 EDE shares. For EDE, this would mean that they would only have 200 million shares in issue instead of 2 billion!

The major problem with reverse stock splits is that there are no synergies or cost savings at all. Not good!

In addition, it has been my experience that companies often attempt to pass reverse stock splits off as a positive event. When in reality it is just the opposite. Companies who have been having regular share placements which have led to the SP steadily decreasing for an extended period of time (sound familiar?) may execute a reverse stock split in an attempt to "cover up" this fact. In reality, a reverse stock split is often a signal that a company is in poor financial health (sound familiar?). Here again, it has been my experience that retail investors simply do not like to see the number of shares they own decrease, even though the total dollar value of their shareholding does not change one bit. On top of this, investors would rather buy 100 shares @ 50 cents a share, rather that 10 shares at 5.00 a share which may put downward pressure on the SP after the reverse stock split has taken place and trading has resumed under the new conditions. This is simple investor behaviour or human psychology.

I hope I haven't bored you to tears with this way too lengthy post (I am currently sitting alone in a half emptly plane on my way to Dubai with bugger all to do).

Wishing you and all other TAS holders a much better day today than yesterday.

Cheers!