Anybody read the details in the Explanatory Statement of the announcement?
IMO i think this company will rock.
Last date for proxy vote 25th July.
GM 27th July.
Allotment of Placement Securities 3rd Aug.
Completion of Longreach Acquisition 7th Aug.
Allotment of Vendor Securities 13th Aug.
The Vendor Securities for Longreach will be made up of
114mln ord shares
114mln options
114mln performance shares
Placement
40mln Ord shares to raise $2mln
The Performance Shares look extremely attractive given that there are 3 equal tranches.
Tranche 1) Farmin Agreement whereby they must spend $20mln
or VWAP over 20 days being at least .40 cents
Tranche 2) That the ATP's contain at least 200 bcf of gas
or VWAP over 20 days being at least .50 cents
Tranche 3) That the ATP's contain at least 1 tcf of gas
or VWAP over 20 days being at least .60 cents
Both the Vendor Shares and Options will be quoted on the ASX within 3mths of the GM.
The Performance Shares will not be listed on the ASX.
When i first looked at this i thought massive dilution.
Well, in some ways, Yes.
However, currently we have $5mln cash and will be purchasing a massive opportunity for that dilution to take effect.
As well, we will have a further $2mln with the 40mln placement of shares unfortunately to sophisticated investors at a good discount.
Having said that, what really sold me was the way the Tranches of the Performance Shares have been set out.
To reach the first tranche .40 cents they have to at least have a Farmin agreement or the VWAP over 20 days of .40 cents.
Well, lets face it, right now we are sitting on 13.5 cents.
That to me says its a great long term proposition no matter how bad the market goes.
What makes it even more appealing are the options currently sitting on 3.6 cents with a strike price of .20 cents 31st March 2011. 1 year 9 mths till expiry.
Realistically speaking, if a farmin agreement were to occur prior to the option expiry date, the options would have to be at least .36 - .39 cents or .16 - .19 cents (in the money) according to the Tranche 1) Performance Scale.
IMO, the options are grossly undervalued given the key objects of management especially in the medium term which is where i would expect a farmin agreement to eventuate.
In other words around 6 mths.
I have a fair few in my SMSF.
Food for thought!!
Cheers markco2
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