new director appt's, page-8

G?day Reiner.
Unfortunately ?us? would probably be the majority in number of holders, but not in shares held. Last top 20 from 13 Sep. 2010 showed 34.5%, with only a few individuals. Latest preso shows 5 new instos that weren?t there in Sep with a further 10%. We?ll have to wait until they release the new top 20, but my bet would be instos at least 40%; probably >50%. Management only 2.4% which is a bit surprising. Although all options would be exercised & that takes management to 5% (175m FML fully diluted).

Australian instos are the weakest instos on the planet. They roll all too easily. Remember MIM, North BH, WMC, etc. Instos will sell, believe me & not necessarily at a price we think is fair. I?ve been taken out early in several great little companies. OK, makes a nice profit, but you lose the huge upside; like we have now.
Fortunately we?re too small to interest any of the overseas majors, but someone mentioned Avoca & we would be just right for them. I hope they?re busy digesting their other take overs for some time. What?s their balance sheet look like these days? Not one I follow. But they can always do a 100% scrip bid. AQG mkt cap 10 times FML, so a 1:9, 1:8 could do it.

I don?t see a T/O near term (although one never knows). But if it did come, we wouldn?t get much of a premium. We need them to throw that hole down Nepean & float it off. If TI looks good/great, then drill the #### out of it. Same with other better prospects. Only defence is to significantly increase value & fast. Ironically, that will eventually make us big enough to be of interest to the majors, but by then we will have seen much of the upside.

The one thing that ?us? can do, is to hopefully make up 10% with management. So that?s 175m, which isn?t beyond the realms of possibility. These days, acquires want total control & that needs 90% to compulsorily acquire the last 10%. So a blocking stake of 10% becomes critical to squeeze max value out of any bid.

If a T/O does emerge, we can do a count & see just how many ?us? do hold.
Of course the board don?t want one, but it?s beyond their control as well.
We are absolutely open & vulnerable to a take over. It?s really beyond our control. We just hope it doesn?t come for a few years.

Cheers,
ned