big buyers, page-6

Delboy

Let's say I hold 500k LOM, post consolidation, and I take up my full 250k LOMO loyalty options for a fee of $250.

If we discover a Type lla kimberlite and soon after we get an offer of $500m takeover, under the current full dilution, assuming a 100% take-up of the loyalty options, shareholders would receive $1.874/share, and LOMO holders would receive $1.574/option.

So, if shareholders approved the $500m takeover, I would receive a cheque for:

(500,000 x $1.874) + (250,000 x $1.574) = $1,330,500

If I didn't take up my loyalty options, I would only receive 500,000 x $1.874 = $937,000.

I would effectively lose out on 250,000 x $1.574 = $393,500 for a lousy fee of $250.

So, hedging against a takeover which occurs prior to the exercise date of the LOMOs is a form of protection of my investment.