gbe and sumich in the sydney morning herald, page-8

Boff,

While I think those points have some validity I believe you have missed the single critical issue which has been at the heart of almost all concerns about this deal.

The real issue at the heart of this is control. Management are handing over complete control of our company by giving away 51% of our company. Had the deal been for 30-40% then we would only have been arguing over price.

Now ECE has agreed their offer was low ball (and the new one still is) and have agreed to pay more per share. I should point out they wouldn't be offering more if we hadn't kicked up a stink about it.

The thing that annoys me is that instead of changing the deal to inject the same amount of capital but getting less shares they intend to put in more capital for the same number of shares. Had they done the former the control issue would largely have been eradicated because they would end up with just over 40% ownership. Instead they intend to antagonise us with the demand for 51% control.

Now this might seem trivial however I believe it is at the heart of the problem here. Even with 40% they pretty much control the company however if they did something that is directly opposed to the interests of every other shareholder then we could still block it. With 51% control they can do pretty much whatever they like and we can't stop it.

Now if Mark throught we only need $41 why is he now accepting an extra $6.85mil from ECE in preference to resolving the control issue that is the sticking point ? Take the original amount of money and resolve the control issue and the tension goes away.

Concider this: Australia imposes strict provisions for public companies which prohibits a shareholder from taking control of a company without making a formal offer to shareholders. Normally you arn't allowed to buy more than 20% of a company before being forced to make an offer. These rules are in place to protect small shareholders whose interests are often disregarded when they have no voting rights. The principle is "if you wish to take control then make a fair offer to all shareholders".

I ask everybody to consider why Australia has rules like this. Surely the rules weren't put in place because somebody thought it made for interesting reading in the corporations act. They were implemented because there were many instances where minority shareholders got completely screwed over once a majority shareholder took control. These rules were needed and hard fought for.

Sadly we are all asked to take a leap of faith and hand over complete control with no ability to do anything but sell our stock dirt cheap if ECE is forced to tow the line with regards to the Chinese Rare Earths Marketing Boards export quotas which by now we should all be well aware of.

Even if ECE have all the best intentions we have to recognise the genuine political risk that we are being exposed to. The Chinese govt don't provide Chinese companies with opt in scemes and as we will be controlled by a chinese company he had to consider the real implications.

With only a minor adjustment to reduce the ECE ownership percentage we can raise the same amount of capital as was originally intended and provide a legitimate voting buffer to protect other shareholders in the worst case scenario.

Too much to ask ? My answer is what have ECE got to lose ? With 40% they control the board and they would have to do something which annoyed the crap out of every single other shareholder to vote against them otherwise they would still get there way. Why are they so adament that we should not have this protection ? If they are adament they need absolute control why not make us an offer ?

Sorry guys but I think the offer is unreasonable on this basis alone. Sadly the legislation provides back doors and this placement is one of them.