options controversy, page-12

I think you need to consider more carefully the implications of this story in the Australian.

I would agree that it would be better if GGG focused a little more on the positive aspects of their bid:

1) AZX's alleged plan for only 1 rig

2) The lack of timescale associated with the 194km drilling programme

3) AZX's lack of funding to execute on the plan

4) The need for AZX?s shareholders to be significantly diluted to raise the mooted $25m, even at the currently unlikely price of 73c/share, although that may be more credible when the JORC comes out.

5) GGG already has AIM and ASX listings and can meet the needs of both sets of shareholders.

6) The scope for reductions in the costs of management and other corporate overheads through consolidating into one company.

Therefore, the real argument is that GGG want to deliver more shareholder value more quickly and already have funds in place to deliver. The bidder's statement could drive that home harder I think.


But, AZX's strategy relies upon raising a further $25m and obtaining a secondary listing on AIM.

The interesting question is how this behaviour by the AZX directors will be viewed by the UK authorities.

It is easy to imagine that they may decide that the AZX directors are not "fit and proper" persons to be carrying out regulated functions in the UK. Aside from the fact they are under a takeover bid, I think these revelations make it much less likely that AZX would be able to get a float away on AIM.

The consequence of that is that AZX can't gain "currency" with which to woo UK GGG investors and it means they will face an uphill struggle to raise money to execute the 194km drilling programme.

So, on the face of it, AZX is talking a good game but they have shot themselves in the foot and are in no position to execute their strategy.

Time to negotiate terms I think.