Bye MEL

So have had a look at the BYE investment and here are some thoughts:

BYE's share price before this announcement was $0.12 with a market cap of around $28M and cash of around $3.3M. It has three projects SM/6 and SM70/71 and Bivouac Creek which is basically exploration acreage. In December they sold a 50% interest in SM/6 and SM70/71 and a 45% interest in Bivouac Creek to Otto Energy for $17.3M.

So what's MEL getting for its $7.8M?
- The announcement is conspicuously unclear about what rights it's acquiring over SM70/71.
- MEL is committed to pay $7.8M to fund development at SM70/71. In return it DOES NOT get any ownership rights over SM70/71 OR any rights to future production over SM70/71. The announcement says there is a registered interest over these leases - but what is it? I assume the rights are only secured until the Convertible Note is converted.
- farm in rights for a 10% working interest in a completely different on-shore exploration project - the Bivouac Creek Littoral project - for an additional cost to MEL of $1.3M
- 10 million unlisted options with an exercise price of $0.25 - for an additional cost to MEL of $2.5M
- The right to convert its $7.8M investment in BYE in 18 months time to equity at a 10% discount.
- So potentially an all up cost to MEL shareholders of $11.6M

So basically MEL shareholders take all the risk of the production drilling at SM70/71 and have no secured rights over the field. While the production drilling is underway MEL has security but once its completed MEL has NO RIGHTS over the field.

MEL merely has rights to exercise 10 million options and put another $2.5Million into BYE to acquire an ownership of 3% of BYE and convert its $7.8M into shares in BYE at a share price presumably higher than it is today since it has funded the field development. That's why the announcement says MEL has an "indirect exposure" to SM70/71. No kidding its indirect because the only ownership rights MEL can ever have are in shares in BYE.

That is UNLESS BYE decides to buy MEL out at 105% of the $7.8M which it can do with one month's notice.

Sounds like a great deal for BYE. MEL funds all the risk, has no rights in the asset that its funding and BYE gets all the upside. There's no farm in here its a "Staged Financial Investment". Are these weasel words for smash and grab raid on MEL shareholders cash? No wonder Peter Henderson left the company.

To put this in context BYE just raised $3.6M for 15% of the company issued at a massive 18% discount to VWAP and couldn't complete its SPP. How much of BYE with a market cap of $28M would $11.6M have acquired?

Anyway - just my thoughts...