esteon, page-10

Hi jwfc,

SBR may prove to be a bargain at current prices but I cannot recommend it because management is directed by a substantial shareholder and has not performed over the last 6 months. Future frustration can be guaranteed but the copper deposits look promising.

A UK listed company (KEFI) exploring for gold & copper in Saudi and now Ethiopia (having bought 75% of Nyota's (NYO) principal asset) stands in sharp contrast in having 2 projects backed by JORC compliant 'indicated' resources (gold). Kefi has received backing from Odey Asset Management. The management has published timelines and has delivered against them. Ian Plimer is a non-exec and an enthusiastic supporter (representing the company on the other side of the globe, for instance). This month should see a revised plan and final estimate for the Ethiopian project and they are bound to step up PR in advance of funding it. I have a large position.

If they secure funding for the project in Ethiopia over the next few months (they have had preliminary talks with prospective funders and are sufficiently confident to have stated that they expect 90% debt and royalty sale funding), the company should be re-rated by the market. But, of course, what should happen and what will happen may be different.

You need to have a 5 year time horizon for this type of investment. I've already "suffered" 3 of the 5 years with Kefi. They need both a very good project AND committed and effective management that is prepared to go the extra mile and keep brokers and professional fund managers informed and interested. AUT was Jon Stewart's success and, to my mind, it was his surrender of the CEO role (release 18 October 2012) that led to the current sale of the company at an under-value. Baytex can see the future additional value and that's why it is buying it.

As to AUT at this stage of the takeover: I still see 20 May (the day before the meeting to approve the scheme) as a deadline. It is looking unlikely that MRO will make a counter-bid but their conference call on the Q1 results is today and they've not quite finished their reporting yet. Certainly the market is signalling that the game is over.