EGM documents due this week

If the General Meeting is to be held "no later than 17 November, 2014" as per the original announcement by EGO on 1st September, the documents will need to be dispatched this week, so we should see an ASX announcement soon or the meeting will need to be delayed.

The deal makes sense to me, as ERM needs to focus on its downstream assets and the risk profile of E&P does not help it in gaining access to ongoing cheap funding. From an EGO perspective, they get a supportive major shareholder, with future funding capacity, and become masters of their own destiny with 100% ownership of the larger part of the portfolio. They also have a well credentialed board and management team to facilitate the growth in the future.

While I like the deal, I do not like the structure. The debt to ERM, when stacked onto the Alcoa facility and the existing short term loan will be a nightmare, as gearing and small E&P companies are not good dance partners. Dare I say, look at Nexus as an outcome. In my view, the existing deal leaves EGO with too much debt. This negative could be exacerbated in the current market conditions.

I would much prefer a deal where the transaction is shares only to ERM, with a small capital raising to pay back the ST debt to ERM and to add some funds for a drilling campaign. That is not currently on the table, but it would be much more palatable than the existing proposal.

I bought some stock this week after a lot of research. Just a toe in the water. I am keen to have an interest in the project if it is structured differently and will likely vote yes to the deal.

A NO vote could cause some heartache, as I would be concerned what would happen if ERM asked for its money back when it is due. Has anyone here considered this outcome?

Happy to discuss.

DYOR

Cheers, Al