re: 3.6c headlock Some people don't seem to understand, or are...

re: 3.6c headlock Some people don't seem to understand, or are pretending not to understand re the significance of both Findlays' holdings and its extremely favourable position. The significance has been highlighted by others and myself in previous posts. Findlays are doing what any rational person/entity would do if placed in the same position as Findlays.

The loan facility is now re $7 million. As RRS draw on the funds the conversion formula applies to determine what Findlays get for each drawdown. Originally, as per the announcement of 25/07/06 at page 3, it was a share at 80% of 10 day vwap with a max conversion value of 3.2cents, the conversion being "within 60 days". The 26/09/06 EGM doc states, at pge 24 point 8. re resolution 10, that the facility has been extended (from $4 mil) to $7mil with the conversion rate set at the lower of a) 80% of the market price of the shares over the last 5 days prior to the date being 60 days after the drawdown. and b) $0.032.

By way of Resolution 10. the company seeks approval to issue the shares and the free attached options. The words "The company proposes to draw down on the loan facility and apply the funds..." imply that the funds have not yet been drawn down.

Most observers predict that the company will have sufficient numbers to ensure that all the resolutions will be passed. And let's be frank, the company has little coming in, plenty going out and needs the money to keep things going.

The effect (whether intended or not) of the conversion formula is that it gives Findlays an incentive to keep the sp below $0.04. If it goes above that point they still get the shares at conversion rate of $0.032, but if it is below $0.04 then they get the shares at a better/cheaper rate of conversion e.g. $0.024 if the sp is $0.03 ave mkt price for the 5 day measurement period. The money they make selling shares below $0.04 can be used to buy in at the discounted rate upon conversion. Nice game if you can get in on it.

At page 30 of the EGM doc the company provides an estimate of how many shares Findlays may get for the $7mill. At a transaction value of $0.0256 (based on an ave sp of $0.032 over the measurement period) they would get 273,437,500 shares (at $0.032 thats $8.75mil worth of shares)

They also get 273,437,500 free attached options which at say $0.012 would be worth a total of $3.28mil.

Thing is, Findlays will be well aware of the relevant drawdown dates and will know for sure when the relevant 5 day ave period falls.

So that $7mil will cost the company over $12 mil in issued share value. That's like the company paying 70% interest on that money. That's fine I guess if the cash keeps things going long enough to get some healthy jvs up and running (and aren't we close to the first of many).

People need to understand that it is not really the company paying interest on a loan, it is the shareholders that have bought on market and that have no access to the Findlays discount conversion shares and free attached options that are funding this by way of copping the effects of dilution.

Resolution 2 will authorise the company to issue a further 20,000,000 shares and 30,000,000 options to Findlays for free. At values of say $0.032 and $0.012 respectively that will be approx $1mil worth of shares in payment for the provision of corporate advisory sevices re capital raising services. Must have been a hell of a lot of advice.

Just note too, after the 5 day ave period falls, if the shares do break the $0.04 headlock and head north in the next 3 months (looking more and more likely each day) due to sucessful JV(s) with Canmex and others and aim listing, then Findlays will really be sitting pretty.

The conversion share and option issue and the issue of shares and options to Findlays will be issued "..no later than 3 months after the date of the GM (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules)". Just say everything falls into place and RRS takes off and hits $0.20c on a pre-consolidation basis by mid Jan, those $0.032 max-priced shares (worth over $50mil) with free attaching options (worth over $40 mil) would mean that Findlays, having lent out $7mil, would receive over $90 mil in shares and options.

Hoping the above will help people to understand why, even on all the good news of the MOU with Canmex and the high quality teams assembled at RRS and Canmex, the sp is struggling in the $0.03 area with heaps of sellers listed all through the $0.03 to $0.039 range.

Can't wait for the sp to be unleashed so that it can head north on current and future good news