I know a lot of people would like to see this resource is being...

I know a lot of people would like to see this resource is being developed for mining while some would be very happy for a takeover price of from $6 to $8.

Let's be realistic, and think strategically about the high grade world class potash resource we are exploring atm.

Firstly, let's look at the numbers and let them talk for us;

ELM's resource will reach to 1.5bt at year end

ELM has already explored 800mt high grade potash resource. I am sure that it will explore another 800mt by the Phase-2 drilling, and will have a high grade resource of 1.5bt till end of this year.

1.5bt high grade potash resource is such a big thing if will definitly attract any of the major miners like BHP, Rio Tinto, Vale, Chinese, Indian or anyone else who is looking for potash.

1.5bt with 30% KCl grade makes = 450mt pure KCl
Recovery rate of u/g mining at 35% = 157mt KCl

Sales value $500pt x 157mt pure KCL = $78.5 billion
Cost value $150pt x 157mt pure KCL = $23.5 billion
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Profit of mining this resource over the years: $55 billion

It can be mined from 3mt to 10mt per year. It is up to the miner.

3mt per year for 157mt resource= 52 years
5mt per year for 157mt resource= 30 years
10mt per year for 157mt resource= 15 years

TAKEOVER of ELM's world class JORC compliant potash asset is unavoidable

Now let's be realistic; how would ELM be able to keep this huge world class resource in its hand for the purpose of developing it by refusing very sweet friendly takeover offers or surviving against hostile takeover bids?

I think this is not possible.

While the world is in food crises, the potash prices are still climbing, the major miners and existing potash producers are all looking for quality new potash assets,
a TAKEOVER for ELM's world class JORC compliant potash asset should be unavoidable.

Which strategy to genuinely follow; development or takeover

From this point, as an exploration company, ELM should chose its prime strategy and direct its operations and activities according to this strategy.

ELM has two options for choosing a strategy here;
1) Setting up the activities for developing the mine or,
2) Setting up the activities for selling the resource to the best takeover offer.

The management should chose one of them as the strategic target and give a lot more weight for the activities of that one. Otherwise company shareholders will face some substantial amount of damage if we play on both of them.

The shared stages of both strategies are exploration and feasibility study. These activities will take another 20 months as said by management. Those has to be done in any case whether we chose to develop the mine or not. And that's what we are doing now. So, no problem from this point.

ELM management now says that their target is to develop the mine. That's OK, I'd love it if we could do it,.. our stock price would go up to $20 in next 3-4 years even though we issue another 300m shares.

But how we would be able to refuse the sweet friendly takeover offers or survive the hostile takeover offers or bidding wars? Do you know any other exploration company which could survive from the hands of those big majors before?

Best startegy is to be in preparation for takeover

Yes.., I thought some part of the management were preparing for the same thing, but by a little difference; they want to issue a lot of shares which would dilute our shares. The share price of the takeover would be very little for us; something around $3, instead of $6 or $8.

IMO, the best strategy would be; ELM should prove as much as possible high grade potash resource while making the feasibility study for mine. While slowing down the activities towards the end of 2012, we may try to sell the resource to the highest bidder in 2012. ELM should issue as little as possible shares for maximizing the shareholder value on a possible takeover offer. The maximum amount of shares and options should not be any more than 250m. (now it is around 183m)

If we setup of our strategy for developing the mine, yes we need to make huge capital raisings. Funds should be made ready much earlier than they would be needed. And we may also get caught in 2015 when the oversupply and overtrading is very possible (A lot of projects will be online at that year).

Btw, we may have many other problems during 2013 and 2014. IMO, 2013-2014 will be the years when a deep crisis will happen due to the high inflation in the world scale. So, IMO, preparing the mine for development and planning the fund raising would be very dangerous for our investments. There is a country risk as well. We need to step out from ROC as soon as possible without being to much greedy. You can't isolate yourself from world events and keep working only for your own targets. Dramatically changing world events, crisis and booms may damage or ramp all of your activities and targets. So managements should have strategic thinking skills which consider all world economic and political activities in macro scale.

I.Macpherson says on the last anns; "...it is not merely the immediate financing requirement that is at stake, but perhaps more importantly, the ability to continually finance the future phases of the project through the delivery of long lead items, construction of long lead infrastructure and of course the development of the mine itself."

Good idea! But the management still don't mention about our exploration targets atm? This mine is getting bigger and bigger. We started with 300mt, now it has reached to 800mt, and now we will go for 1.5bt..!

This resource would be able to produce 3mt per year. That's for sure. Do we know what would be the cost of this project for 3mt production? It would be around $2 billion! Is it possible to raise this much capital without being diluted 10 times or taken over?

No it's not possible IMO. We all know that. Yes this is very profitable business but needs very high Capex cost. So it is big boys' business.

Macpherson also says; "Failure to implement a comprehensive funding strategy and to take easy short term options will almost inevitably lead to the project stalling, possibly compromising the overarching objective of being a near term producer."

He is making the point of issuing 30m more shares, and then another 50m shares, and then another 40m shares, and then... So on.

Is it Ian Stalker talking there?

I am not scared!

Yes, ELM will be definitely taken over IMO. The takeover offer may be competed by other punters as well. That might create a bidding war and we would definitly get a few multiple of the current SP if it would happen in the short term or long term (3 to 12 months).

ELM should issue as little as possible shares for maximizing the shareholder value on a possible takeover offer. The maximum amount of shares and options should not be any more than 250m.

ELM is still A STRONG BUY for smart investors.