please explain share buy back?, page-6

Iceman thank you for your considered reply.

"I am not sure what your motives are with this question"

I am just amazed at the implementation and want to try and understand the real reasoning.

"but I would have thought that it was very obvious why they are buying back shares."

What is obvious to you may not be obvious to me or someone else ;-)

"Management are of the belief that the share price is undervalued"

Now at $2ish or before at $5ish?

"and therefore buy CDU shares at today's prices and cancel them. Assuming management are correct in their beliefs then when the share price rises it will rise even further because there are less shares on issue."

This idea failed pre-JORC.

"In this case Id predict that management would have made a decision that for example CDU financing, mining licence and DFS will come out positive which will see the share price significantly higher. If their predictions are correct it adds to shareholder wealth if there are say 10 million less shares on issue."

Possibly, BUT they still have to re-raise this capital. As it is at the moment they have to raise even more to cover the losses pre-JORC buy back.

"People could rightfully argue that the share price is significantly lower than pre-JORC where the buy back was implemented. A fair comment however we have not since issued shares below that pre-JORC level yet so if were to rise back above it this would merely be an exceptional time to implement the buy back."

I fail to see the point here.

"In regards to what other companies do share buy backs, there are way too many to mention so just do a google search."

These are traditionally with companies in a cash positive situations that are generating income. Yes, it is very common but I fail to recall any company using venture capital to do this.

"The share buy back strategy above is huge in the USA and the repurchased shares are referred to as on "treasury account". In the USA companies accumulate their own stock at lower prices and sell them into the market (or re-issue the stock) at higher prices. They are virtually speculating on their share price."

Yep, see my above comments.

"I hope this satisfies your query"

Not really. I struggle to understand the reason for using venture capital that has been raised which necessitates the re-raising of more. In the face of a paper loss they continue to do it.

".. as if you are confident in management this management buy back is not unusual at all."

With this and other stunts I have seen management implement I personally would have very little confidence in them.

I am the Iceman!

Yes you would be if you are coolly holding this stock :-)

Thanks again for your comments.