Hi Harlee,I don't think BHP has their eyes on EXT specifically,...

Hi Harlee,

I don't think BHP has their eyes on EXT specifically, I think they are watching RIO and Chinalco.

The last thing BHP want is for their major "partner" in pushing up iron ore prices (RIO) falling into bed with their major customer interested in pushing down iron ore prices.

Marius will be seeing a nasty future where RIO will be getting preferential treatment in exchange for keeping prices suppressed.

Therefore I think it is possible that BHP will be calculating what a future like that could cost them in opportunity cost and comparing it to the immediate cost of beating the Chinalco offer.

I think it is entirely possible that BHP will allow the resistance to build to the Chinalco deal (and even promote resistance as they no doubt have been doing via a dentist and Barnaby Joyce with those TV spots).

When the time is right and the two opposing camps are teetering this way and that, that is exactly when BHP will ride in and not only provide a bigger and better offer but also take away any FIRB concerns or Federal government political ramifications.

When they do that I can see a huge wave of support for the BHP deal which Albanese and the board will have trouble suppressing, infact I will go so far as to say that if they oppose it too vigorously in favour of Chinalco then that will mean the end of their tenure.

As EXT shareholders we can potentially benefit from this in a fashion that exceeds all other expectations. Here's the scenario.

RIO make a scip-only offer which is hit back and forth over the net until an agreement is struck. Let's say an equivalent value to Aus$13 per share. Given RIO has been trading in the range of 45-50 that should mean about 4 EXT shares for each RIO share.

This would be even better if it came in before RIO went ex-dividend in early September. RIO has a 95% chance of paying out a dividend between $1.90 and $2 according to Comsec.

You all know how many EXT shares you hold so divide by 4 and then multiply by $1.90 to see what sort of dividend you would get FULLY FRANKED.

OK so at that point in time everyone is very happy but then it gets even better.

BHP come in and better the Chinalco offer. Australian support is overwhelming, there is only the EU to overcome but I can see BHP NOT offering 3.4 BHP shares like last time but perhaps somewhere around 2.6 this time around which they will sweeten to 2.8 when they want to close the deal once and for all.

So whatever amount of EXT shares you start with, divide by 4 for a rough idea of how many RIO shares you will hold and then multiply by 2.8 to determine ROUGHLY how many BHP shares you will be left holding.

Let me just say that Harlee is 100% correct. BHP need to do this. They are in a historically strong position. They are price makers, they are cashed up during a world economic crisis (very little debt) and their major competitor is going around with a begging bowl.

It doesn't get any better than this. BHP can now catapult itself into an unassailable position but they NEED to stop the Chinalco deal.

If it is all timed right, we as EXT shareholders can benefit more than anyone.