habanero 3, page-15

Hello,

HP, not getting nervous yet, although I have been reducing my GDYO position since late November, simply to raise the cash to excercise the options I have left. In the interim I have been placing the funds in PAX and GDY FPOs.

Nightspore, regarding your 3 scenarios (specifically the third scenario), the options are a derivative, in that they derive their value from the FPO price. There is no way for this mechanism to reverse itself, ever, under any circumstances. That GDY is falling simply represents the valid market fear of another sheared drill stem or spalling debacle.

It is likely that the target-depth overshoot (an ever-morphing figure around 200m now) will reduce or remove the spalling issues, so our only real concern is another sheared drill stem. The update on Tuesday regarding the new down-hole arrangements and bit-testing will be exceptionally enlightening, should the company choose to share the information.

The likely scenario is that HAB1/HAB3 demonstrate hydraulic communication before the excercise date on the options (I expect 2nd-3rd week of Jan). By my own standards, I add a 25% risk premium to the SP before the target depth is reached, and I'm an optimist. If the market has added a more pessimistic (and larger) risk premium, then hydraulic communication/target depth should add considerably to the SP.

Origin saw fit to invest $150 000 000 in GDY for a mere 30% stake in one project. As a shareholder, my expectation is GDY 250c by the end of January, and GDYO 95c-100c.

Regards

Tawny