Ann: Southern Cooper Basin Gas Project Operations Update, page-41

"Trying to think of what could go wrong now that they seem to have been perfecting the process to draw out the gas? If they;"

* can't maintain the water threshold due to cavitation, pump failure, structure failure???

Any risks now lie with engineering IMO. They have tested the reservoir many times with the recent pumping regime and understand it fully. The reservoir is good (great). They are now testing their technically ability. The good thing is they have 3 different pump set-ups on line in April. And they will have a 4th (ESP) in June. They are covering the downside somewhat on engineering risk as a result.

* can't get similar gas saturation across K4 & K5 ?

Extremely unlikely given Le Chiffre is as good , if not better, than Klebb wells. And Davenport / Marsden were also very similar. It is a massive, contiguous coal play. Also, in the last announcement they said "This indicates that the average reservoir pressure around the Klebb wells of around 2,300psi is approaching the average critical desorption pressure." This suggests the coals are very highly saturated.

* can't easily raise funding and we're badly diluted?

Possible but I think management are lucky that they have a set of circumstances that allow for various different avenues to funding - such as offtake agreements, farm-out, CR, pre-payments for supply. Given the east coast gas supply issues at hand, i think this allows them to get this far more advanced using non-traditional funding methods than would normally be the case. I do think a CR is a distinct possibility in the short term but I doubt it would be in the category of "Badly diluted", more likely something small to get them through to Orica development funding or gas sales from proposed processing plant.

* equipment failure and long delays

as per the first point you made

* get bought out

I dont see anyone buying this out until its proven, and at that point i suspect we wont be trading at 12 cents. Then you have the fact that more than 30% of the company is locked up with directors / larger shareholders that have been around for a long time. I dont see them folding unless it is a very good price. it would be hard to execute I suspect with the top 20 owning 38% currently.


* GFC3

Always possible. I doubt it is the next year or so though (IMO) . And that is all the time STX needs to get this thing really moving.