Ann: SER Business Review 2011 , page-32

Sunman, let me put it another way for you:

Let's say you own Uley and you agree to sell it to Mega as a private company in return for 33% of their issued stock.

Mega successfully develops Uley and start selling boat loads of high quality graphite for $3500t.

Congratulations, money is rolling in.

However, in the interim the 66% owners of the private company Mega decided to do a one for one capital raising. Unfortunately they decided to limit participation to Nth American SH's and to also allow them to bid for any other options not taken up. (Before you say that's not going to happen go have a look at your latest Oz prospectus, most of which exclude Nth American SH's and they are LISTED companies).

You effectively just lost half of Uley as your Mega equity is down to 16.5%.

You say "Bugger this! I'm selling now before they do it again. Small problem - who are you going to sell to? Good luck finding any third parties to purchase private equity at fair value, particularly after a dilution. Oh well, I'll have to sell it to the other Mega SH's ......and you think there going to offer fair value?

Meantime the Directors (owners) of Mega have all bought McMansions thru the company, 8 Lambos & Ferrari's as company cars and three Lear jets. You voted the finance budget down at the last AGM but they all laughed and went back to discussing the paint jobs on the Mega jets.

Not happy, but then Mega make another Ann that they've made a mega purchase of a sensational "can't fail" exploration property called "Little Burger" for $1.5B. Don't worry about it being above the Artic Circle, just trust us. Oh, and we are using all the Mega cash, and borrowing a billion which will tie up the Uley revenue stream for a few years, to fund the cash purchase of this outstanding prospect.

And just who are the previous owners of "Little Burger"? Goodness, it's a company registered in the Bahamas. That's funny, didn't the Mega Directors wives just buy three islands, a cruise liner and a Mickey Mouse theme park down there?

I repeat, with your emphasis: "there HAS to be an IPO or MERGER WITH A LISTED COMPANY or this deal will definitely not proceed". The merger option has always been part of the deal so I'm not sure what's "dawning" on who.

No sophisticated investor is going to approve the Mega deal as it stands unless the above condition is met. And if you think they have access to cash why haven't they just done a cash deal? They couldn't stump up $32.5M first time around and now they are struggling to justify the assets to complete their latest deal and no listed company is going to merge with Mega unless they can justify the valuations to their existing SH's.

You keep referring to Mega "amassing its portfolio of graphite projects" but what are they worth in reality? As far as I can see they've done a couple of paper exchanges for a couple of cow paddocks and a technology/marketing exchange with an Indian family company, always reputable and reliable to deal with. They may be all great deals but what are they worth beyond hype on a website? Put some dollar values on them????

Sorry, but this is really looking like a "wing and a prayer" exercise but with the markets recovering, and I think we may have a good run from here, and risk appetite returning they may just pull it off.

Certainly hope so, for your sake, my sake and all other SH's.

Of course the longer this goes on the more chance that SER could receive an alternate offer. Uley isn't going anywhere until we vote.