spuza12,All good points. Thanks. Those are definately the...

spuza12,

All good points. Thanks. Those are definately the upsides to the deal. Got to look at the downsides as well so I hope you don't mind me pointing out a few of my concerns about the deal for balance only. I'm on the fence at this point in time as I see both pros and cons.

1. When you say "we are getting up to an additional 4.5bln tonnes", it is important to note that this 4.5 billion additional tonnes is simply an exploration target that Idalia has for those tenements and isn't a indicated or measured resource. In other words nobody has the foggiest idea if there is actually 4 billion tonnes there or not. I understand that of the 4.5 billion total that they hope to show is there, they have only so far managed to get 440 million classified as inferred and none as either indicated or measured. Thats 200mt in EPC 1398 and 240mt in EPC 1399. Idalia seem to be a very long way from getting a JORC for 1 billion in any category, let alone 4.5 billion.

EER on the other hand have spend lots of money and time proving up most of their 2 billion tonnes and currently has 1.7 billion categorised as indicated or inferred.

Also note the specific language used to describe the Idalia resource as "a drill identified JORC Exploration
Target in the order of 4.0 to 4.5 billion tonnes*1 in the
Idalia EPC’s".


2. Valuation of Idalia at $40mil. Their actual classified resource is so far only 440 mil as described above with seams as low as 30cm in places. EER has a classified resource 4 times the size and is valued by the market at around $20mil. The aggrement is issue the EER stock to the vendor at a nominal price of 20c thus valuing EER at only $33mil. Is Adalia really worth 25% more than EER given its current state? Is the Adalia resource based on what they hope to find worth so much more than EERs resource based on what they have actually found and still may find?


3. Idalia currently holds a whole stack is EPCs but intends to currender most of them as they are obviously no good. They intend to hand over EPCs 1398, 1399 and 1400 as part of the transaction. We know about the 200mt and 240mt in 1398 and 1399 but nothing about 1400. More interestingly Idalia also holds blocks 1405 and 1410 yet these are excluded fromt he transaction for some reason which isn't explained. While this is described as an acquisition of Idalia, it looks like we are buying just three of thier blocks.

4. Loan reconstruction. Try to figure that one out. Recently (sept 2012) Nobel setup the loan facility for EER to borrow via their Idalia entity. So Nobel lend the money to Idalia and then Idalia lend it to EER. Nobel wants to now loan the money directly to EER so that EER can repay Idalia and Adalia can repay Nobel. They want to do all of their rather than simply valuing each entity based on its current assets / cash / libailities. Of the $11mil loan facility it looks like EER has already drawn down about $3mil. Where did the $3mil go between last Sept when the facility was setup and now ?

5. Interest rate. Bank Bill Swap Rate plus a margin of 7% ! No wonder Noble want to loan EER the money. given that they have security over billions of tonnes of coal as security and they control half the company and are thus responsible for the decisions, is charging such a high rate reasonable? No wonder they are hoping to do a debt restructure on such terms.

6. Conflict of interest. Our two largest shareholders and thus a good chunk of our board are proposing this transaction at a time that our SP is distressed. These are the same people who are responsible for driving the company forward with a plan to get our existing 2 billion tonnes to market. Are we being asked to buy something that we don't actually need and reshuffle the deck chairs or are we getting something that adds value to what we already have? What I know for sure is that it will take a lot of time and money to find out if these tenements actually have anywhere near 4 billion tonnes of coal and what quality and extraction costs it is and we will have to fund that. Just not sure that interests are all that well aligned here.

All opinion only of course and I'm not completely against the idea. Just not sure the structure of the transaction is very fair. whats the old saying about 1 in the hand vs 2 in the bush?

PS. How are we spending $1mil per month for the last few months? I sincerely hope a good chunk of that money hasn't gone to lawyers to pay for this deal to be structured.