Ann: Operations and Exploration Update , page-14

Vainglorious,

"The only downside to this new issue of convertible notes is the dilution aspect. IF the conversion price is set at, say, 20c we have another 125 million shares on issue."

We don't know what the conversioun price is. It could be a lot less. The biggest concern is that the management of BSM don't appear to be concerned with the size of the dilution, particularly when 1. it appears that $10M of the raising may be unnecessary, and 2. the balance will, over the next six months be used to pay out the existing debt. Based on projected cash flows none of this is need. What is need is just a short term loan to cover the next 2 months with a contingency established, so that if things go pear shape, further funds can be raised when required.

"Hellyer is just the opening act for the tailings project which, using POx, has an after-tax NPV(12.5%) of $250-300m (you will have to trust me on that)."

Yes. However that will require an estimated $116M in capital plus working capital. If BSM finances it the same way it is planning on financing this short term working cash flow problem, you can expect significant further dilution apart from the cash BSM has generated itself to contribute to those capital and working capital requirements (est at this stage $49M plus possibly another $20M from Fossey East).

I notice they have not mentioned the Direct Cyanidation option which required estimated capital of only $49M. This could have been funded next year from BSM's cash flow. I estimate that, based on current metal prices, this would have generated $62M cash profit Before tax per annum from that investment with a bayback in just 10 months.

I know the Pressure Oxidation is more profitable (est. $99M cash profit per annum) but it will require finance, with the most likely outcome been significant dilution for existing shareholders if the current management mindset were to continue into this financing decision. A Direct Cyanidation plant could have self funded the Pressure Oxidation plant when it was up and running without any dilution to existing shareholders.

My 20 cents worth anyway!