Po's and Con"s, page-47

HOW TO VOTE?

Well, the question is what to do re the vote, for or against the company’s motion re Strandline?

I had thought it was pretty hard to decide one way or another – there are pros and cons both ways. I appreciate what Bill Bloking has been able to draw out of our situation via the Sandline proposed deal. Well done, BB! And some impressive new people coming on board, and blue sky potential projects.

But today’s announcement (which is a credit to BB and his team) re the Western Areas Farm-in for Fowlers Bay seals the issue for me – it has to be a NO vote. Here is my logic....and it is all about the question of DILUTION. We need to avoid this massive dilution which the Strandline deal brings.

Firstly, our Coburn asset. To my mind, Coburn is unfortunately dead in the water until the global supply and demand for zircon and other mineral sands improves. It doesn’t matter who is at the helm of our company in terms of personalities or pedigree or background, who we bring in with what connections, or whatever. Companies like Posco just won’t sign up at Board level to Coburn so long as the price and demand outlook globally is unfavourable, no matter who we have in the negotiations, where our people come from, or who they know. It comes down to a Board decision in some foreign country. As we so painfully found out recently when Posco walked away at the eleventh hour. So, with or without Strandline, Coburn is dependent on the global mineral sands situation improving, so it can be effectively taken out of the equation for now. It gets up or not, independent of what we do via the Strandline deal. Therefore, why dilute – If we ever get Coburn up it will be independent of being with Strandline. So, why dilute?

Secondly, our Mt. Gunson copper asset. The feasibility study on the shallow copper deposits MG 14 & Windabout is coming along well, as reflected in the article in The Australian. It is less risky & more valuable at this stage of knowledge than Tanzania. Tanzania is too costly and too far in the future, and there is huge uncertainty/ risk. Mt. Gunson will proceed along the lines of the feasibility study with or without Strandline. So, Mt Gunson copper is a potentially huge asset for us, but we don’t need Strandline to move it along. So, why dilute?

Thirdly, our Fowlers Bay asset. Until today’s announcement, I thought that the funds and momentum that seem to come with the Strandline deal were a good incentive to go with them, and vote YES, in order to get Fowlers Bay exploration up and running. Well, guess what – we now have this exploration going as per today’s announcement, so with or without the Strandline deal, we will be exploring for nickel at the very exciting Fowlers Bay. So, why dilute?

Fourthly, the African assets. Sure, these offer some incentive for ‘blue sky’ potential, so this in itself is a reason to go with the Strandline deal, at face value. But, surely we should not do this at the expense of the massive dilution, given the risk of the African assets. Also, consider that the Australian dollar is falling (good for Australian projects) whereas the African assets will be tied to the US dollar. Most currency traders would think the depreciating Australian dollar would favour Australian projects over African ones, as most African currencies tend to be more tied to the US dollar, with the exception of South Africa, which has a very weak currency. Of note, the US dollar is at the start of a rising cycle as the US economy finally starts an upward trend in its recovery following the GFC.

I realise that against what I am saying, we have the question of cash flow and capital raisings; and there is no doubt that the Strandline proposal brings funding and other benefits with it – I don’t dispute that. But I think our funding situation can be managed, without the massive dilution of the Strandline deal. Of note with the Strandline offer, in relation to dilution, consider this, as it points to the extent of the dilution. Strandlines gets 166.7 million shares free of charge as a consideration for vending in the Tanzania Project, 57% of Gunson’s issued capital (293.5 million shares). On top of that, 146.7 million shares are issued at 1.5 cents each in a placement to clients of the broking firm supporting Strandlines and a further 66.7 million shares in a SPP to Gunson shareholders, also at 1.5 cents each. The SPP is capped at 66.7 million shares. Total issued shares in Gunson after all these transaction, over double the current issued shares at 673.5 million, or 2.3 times. Whatever the Strandline option brings via the African potential is all risky and unknown. And we – that is, the current management team - are getting our most important assets (Mt Gunson copper and Fowlers Bay nickel exploration) up and running independent of Strandline. And we will still have the Coburn project which may or may not get up depending on the global sands market, but which in any case is not going to be influenced one way or another by any deal with Strandline.

I think that the dilution issue is the most important consideration for us in our vote on the company proposals.

So, my conclusion? Vote...... NO. Avoid this massive dilution.