Ann: MAK Recommends Shareholders Reject UCL's, page-2

re: Ann: MAK: MAK Recommends Shareholders Rej... An understandable response but I would question the accuracy of some of the statements and definitely the logical consistency in the arguments. I've reproduced parts of each argument to shorten but compare with the full for context and appended my comments. It is a long post:

The reasons for Minemakers’ Board recommendation to REJECT THE UCL OFFER are as follows:
• The UCL Offer represents a discount to Minemakers medium and longer term trading values....
o 46.0% discount to the 12 month VWAP of Minemakers shares.

My Comment: 30 day and 3 month not such a disturbing discount but you would like to see a premium of course as a MAK holder. 12 month VWAP looks bad but MAK didn't use the 12 month VWAP for UCL to support their offer for us - only went out to 3 months in the original offer. The reason of course that a 12 month VWAP would have been well over their offer.

• ...Minemakers shareholders will have a lower shareholding in the surviving entity than they would have had under the Minemakers Offer for UCL....UCL’s own independent expert also declared the Minemakers Offer fair and reasonable for UCL’s shareholders.

My comment: The independent expert conclusion was actually rather inconclusive. They stated that the new offer came within the range of the current valuation for UCL as it is and that was all. They also found a number of reasons why UCL holders might not want to take the offer. They did not make any comment re shareholding levels in end structure.

I note MAK's comment here that the new structure disadvantages MAK shareholders - this mirrors the concerns UCL had in reverse.


• The UCL Board’s recent conduct raises questions about its ability to lead the combined group: The UCL Board has:
o historically been highly critical of the Wonarah Project ... refused to engage in discussions regarding an acceptable merger ratio on Minemakers Offer or any other combination of UCL and Minemakers which included the Wonarah Project. ... UCL ... offer for Minemakers (including the Wonarah Project) is inconsistent with its historical position;

My comment: Logically flawed because based on a false statement. UCL have not been highly critical of the Wonarah Project, at least not publicly. They have been highly critical of the management of the Wonarah Project. There is a significant difference. It is not at all inconsistent to consider Wonarah to have value whilst at the same criticising the management for their complete failure to meet their promises on Wonarah.

If MAK are revealing some aspect of confidential discussions it is highly selective as I note they are very careful to avoid discussing the various options that UCL have apparently put to them that they have rejected - presumably because they did not involve MAK taking over UCL.


o diluted the holding of UCL shareholders through a placement to MBHolding Company LLC (MBHolding)...capital...may not have been required to be raised at the current low prices ... the Minemakers Offer;

My comment: The capital raised in the placement to MB Holdings has been raised at a level above the current price and significantly above the 19 cents UCL was when MB first agreed to the deal according to UCL statements. The capital needed to be raised and has been done in the process of securing a seriously cash up long term strategic investor.

My additional comment: The statement "may not have been required to be raised at the current low prices..." is a highly speculative hypothetical. Even if MAK was successful there is still major capital to be raised and they have seriously disappointed the market so necessary raising may equally have ended up being worse.

o forced both companies to incur a further set of transaction costs...;

My comment: Forced both to incur one set of transaction costs. MAK is responsible for the other set. UCL would probably argue they are partly responsible for the 2nd set too for the uncertainty and disharmony they've introduced into the JV which make it better to try and get rid of them?


o published a project development timetable which ... in Minemakers’ view, is unlikely to be achieved. Minemakers believes this conduct has the potential to damage the credibility of the Sandpiper Project with ... investors.

My comment: It is hard to imagine how MAK have any credibility on timetables! Nevertheless UCL has been the main driver of the Sandpiper project and the JV has come in on time on the Definitive Feasibility Study which itself defines a timetable. One would suggest that in fact UCL should be respected for their opinion on timetabling. I note that yet again MAK are yet again undermining the public image of the Sandpiper project and am bemused they think UCLs timetable could possibly match the damage they are causing.

• Offering cash ...when Minemakers is trading at historically low prices is not attractive: ... not given Minemakers shareholders the option to exchange their entire exposure ... during a period of weakness in the market when Minemakers is trading at historically low prices. This sale will also occur at a material discount to the valuation of Minemakers’ assets assessed by UCL’s own independent expert.

My comment: Cash is bad? And bad when times are bad?? How ridiculous!!! If MAK had offered a decent amount of cash in their bid then this whole thing would probably already be done and dusted under their control. They look to get things on the cheap and they failed for doing so. Cash is always king and they should understand that.

Additional comments: The statement re market weakness is astonishing. They are effectively criticising UCL for moving on them when prices are weak when they bid for us at a cynically opportune time! This is hypocritically inconsistent.
The comment re material discount is fair in my opinion - I do tend to the opinion that the offer could be higher.
The comment re not having an option to exchange is odd - if I accept the offer for all my shares then I have fully exchanged? Perhaps they mean getting part as cash means I don't have an actual share holding for that 4.5cents but that actually gives me more options structuring this way as I can buy more UCL with it or keep some exposure and have some cash without doing anything or sell down.

• The Offer is not conditional on achieving .. 100% ... leaves open ... complicated cross-shareholdings...

My comment: Fair comment. Potentially it could be complicated at the register level but the management/control level would be clear enough ie current MAK board would be basically gone.

• Minemakers is the preferred vehicle in which to consolidate ownership of the Sandpiper project: Minemakers has a TSX listing which may provide significant opportunity for raising capital.... loss of this listing.

My comment: LOL LOL LOL LOL. What a joke. Why would MAK be the preferred vehicle? They have shown nothing to say they can do it. The TSX is a complete red herring which is tested in the immortal taunt from Jerry Maguire - Show me the money! Where is the capital commitment MAK? Where are all the interested North American parties? Who have you got interested? Why are you so worried that you can't raise capital? MAK behaviour suggests they don't really understand Sandpiper or it's markets. UCL does and thus has secured Twynam and MB Holdings to MAK's no one at all. Sandpiper's markets will be in their own region to begin with and people who understand the region will be providing the money - I note that neither Twynam nor MB Holdings are listed on the TSX>

• The planned convertible note used to fund the cash component of the UCL Offer is not an attractive instrument....;

My comment; Seems to me that 7.5%, which is quite close to home loan interest rates in Australia, is rather cheaper terms than the 20% with less time that MAK charged Beaconsfield. MAK charges 20% and thinks it's a good return but objects to UCL paying 15%????

o it will result in further dilution of UCL shareholders when this debt is either repaid or converted;

My comment: Really? What a surprise. All new capital risks dilution. The question is not dilution but whether the dilution is fair and reasonable to existing shareholders. My position is that given what it represents I am content.

o the conversion price of A$0.25 is a discount to the prevailing UCL market price, effectively providing a free option for MBHolding;

My comment: it's also a significant discount to the 30 cents placement price that MB Holdings have just paid at a premium to the market and a very large premium on the 19 cents we were when they apparently first agreed. I'm personally not perturbed by this or the concept of a free option given the evident long term commitment they are making to Sandpiper. Show me the money MAK - have you got someone to back you yet and not hold us up?

o upon conversion of the note, MBHolding would have a 17%3 shareholding in UCL. In this scenario, UCL will have two large strategic shareholders... combined shareholding of 28%.4 ... potential to deter other institutional investors from investing in UCL.

My comment: Well this is very very interesting - it is a bad thing to have 2 large strategic shareholders!!! MAK seem to be arguing that it is better to have no cornerstone investors than 2! Do they think that the banks would look more favourably on UCL if no big money was prepared to back us? This one is nutso. They argued Twynam would deter others, well MB Holdings has since come on and UCL tell us there are others interested.