Love the post Freehold, T/U from me, excellent summary of...

Love the post Freehold, T/U from me, excellent summary of previous events and future potential.

A few more what I call, 'soft' factors at play for AJQ is the Lakes Oil investment, they own large parts of Lakes Oil's gas exploration tenements as well as a decent whack of their FPO's, the current exploration well of Yallourn-1 has not really had positive results as of yet (no flow rates announced etc), and the continued Victorian fraccing ban isn't helping, however there exists what I believe to be substantial indirect upside via Lakes Oil. There is an interesting coincidence that one of Gina Rhinehart's Hancock Prospecting holds approximately 18.6% interest in Lakes Oil via the convertible bonds, which is matched by Armour Energy's 18.6% interest in LKO via convertible bonds (AJQ holds a few FPO's as well if I recall correctly).

If you look at the timeline of Arrow Energy (available on their website), the Arrow energy management team back when it was listed on the ASX (the crew running Armour Energy today), were not afraid of scaling up by taking over other companies, and investing in downstream assets such as pipelines or power stations. Perhaps after a potential farm out of the QLD assets as outlined by Freehold (maybe even with financing from Hancock Prospecting???), they will focus their efforts on the Northern Territory assets as well as the Victorian potential.

DIRTY SPECULATION COMING UP: (treat as an act of pure fiction until proven otherwise)

If you have been reading anything about Gina recently and the trust fund for her children, she isn't one to share her wealth, and if she identifies Armour Energy as a good investment there isn't too much stopping her from either paying cash or raising debt and simply taking over AJQ. I for one can't see too many besides perhaps management who would decline a takeover offer of $1 per share tomorrow (especially given the current financial shakes in the market).

I for one respect what Gina has made with the iron ore assets she started with, she is a smart lady and I've heard some sneaky market rumours that she likes the idea of shale oil, and this is potentially reflected in her bond position in LKO.

HOWEVER, on the 11th of June 2013, there was a conversion of 55,348 listed unsecured notes converting into fully paid ordinary shares, now I'm not sure as to WHO converted the bonds (55,348 worth into 276,740,000 FPO's) but they are going to miss the next interest payment on the bonds, and you'd have to assume AJQ hasn't done such (as they could use the 'free' cash). This could be Gina's subsidiary converting to FPO's to then sell down after rumours of a Rhinehart company taking an interest in LKO, or it could be completely unrelated (the announcement provides no confirmation). Hancock Prospecting bought approximately 425,000 shares in the bond issue on 29th of January, so even if it was Hancock converting and selling, they still would hold the majority of their purchases in the less liquid bonds.

Of course the holding in LKO by Gina could be a play to earn a few hundred thousand on the side by providing some expensive financing with equity kickers to LKO.

JM.