Ann: Corporate Update, page-35

$38m buy-back at $1.51 (with the big assumption that we could do so without the SP rising) would lead to 10% less shares on issue.

Which leads to 11.1% higher dividends to residual shareholders if profit is the same as if we had re-invested the cash.

That is the fundamental change from the buy-back, unless you're hoping to manipulate the SP up in the shorter term to protect against a take-over, or in advance of an IPO, or simply for personal benefit.

Now, since the fundamental value of the buy-back is 11.1% (ignoring the loss of cash), then it must be considered whether re-investing $38m would lead to >11.1% higher profits, making it superior to the buy-back.

$38m can go a long way towards: 2nd plant, prospect B development, exploration, lower cost energy plant, debt repayment.

Would these lead to >11.1% higher profit than if we had lost the $38m? It seems realistic that they would.


Buy-back - means dividends divided by 10% fewer shares, but does the loss of $38m and far lower re-investment into the business mean significantly lower profit to divide by these 90% remaining shares? Quite possibly. And it leaves the company higher leveraged and more risky.


So pushing for buy-backs is not so clear-cut, especially when the 2nd plant is not running.


But maybe people are thinking in terms of a small buy-back. Say 0.5% of shares total. $1-2m worth.


We trade 1-5m shares per week. $50-100k per week would last for 3-6+ months, so not just a sugar hit.

Call it $75k = 50k shares, on top of say 2.5m shares traded per week. It would add 2% buy orders on top of the total buys and sells. It's probably enough to push the balance toward a rising SP.

So if considering the buy-back from a fundamental perspective, it might not make sense. But if from a protective perspective (takeover, IPO, self-interest) then it could make sense in a limited fashion.


If the buy-back drove the SP up from $1.51 to something higher, then the return due to reduction in shares would be even less than 11.1%, so the barrier for re-investment to beat would be even lower.