Thanks psi81, insightful posts as always. There is too much...

Thanks psi81, insightful posts as always.

There is too much reference to Jacka funding its share of Tunisia I feel. It simply cannot afford to take this asset on. It could bust the company. Tunisia could be a very material asset, but it will require a set of bigger partners to test the potential. Jacka must pass on their stake to a stronger company, and look to retain a small free carry, say 5%. The impact on the share price could be significant if we can start to value Tunisia with positive option value, instead of current situation where the market seems to be valuing the asset at a negative $7.5m.

We are the shareholders, we own the company. Management has changed since we took ownership. Therefore new management must, in great detail, justify to shareholders why such a tiny company should make a material financial commitment. The justification should be validated by bigger partners such as Dragon also clarifying the risk/reward. I repeat that the potential could be significant. But the company needs to look at the cost in relation to the company resources.

I met Dragon management one year before the start of the challenged Tunisia drill. The CEO justified taking on the complex project because the potential was vast and it would only cost them $20m if it failed. Spending $20m to potentially create hundreds of millions of value indeed made sense. But bear in mind that this was a company with USD $1.5bn cash on its balance sheet and generating over USD$1bn annually. Why would Dragon not take on such a high impact project were the CEO remarks. As it happened it cost Dragon more than $20m, but but did not even make a dent in their business.

It remains that a further effort on this asset could generate material value. For a big group, a small outlay could create hundreds of millions of value with small downside risk. For Jacka, the outcome would be binary. Success would see the company increase multiple fold. Failure could wipe them out. I certainly did not buy into Jacka shares for a binary gamble.

Therefore, as part owners of this business, I do not think we should simply resign ourselves to the company spending most of their cash on one asset. I would hope to see a bigger group take on the burden, with Jacka retaining a small carry. A small carry can be material for a small company. I look forward to Tunisia positively impacting the share price.