CMM funds are running low and will need to top up later this...

CMM funds are running low and will need to top up later this year, even if they do not proceed with developing a mine. That would mean shareholder dilution.

If they manage to get a funding package for the construction of a mill/mine there would also be more dilution - probably another 600-800m shares. With 1.2-1.6 billion shares on issue the upside above 11.4 cents per share would be pretty limited even if everything went to plan. If it did not go to plan then just have a look at what has happened to small fry like GCY, BLK, BDR to get a feel for the likely shareholder returns. The upside would be from a much higher AUD POG and/or being very lucky with the drill.

In the scheme of things this is a reasonable deal for existing shareholders who would get the benefit of:

1. Top class management team;
2. Able to execute to plan and actually achieve the targetted outcomes;
3. Some upside from the current project (if there is any), on a massively diluted basis;
4. considerable upside from RRL's next major development in NSW that will increase production by around 50% pa
5. access to fully franked dividends payable twice yearly, without having to wait years;
6. participate in RRL's growth story, and rising share price as it expands and/or market sentiment improves.

Buying CMM shares at 9 cents (which I did today) is a pretty cheap way to enter into RRL, assuming all goes to paln. This represents a 21% discount on RRL's share price should the takeover proceed at the proposed 11.4 cents. If CMM shareholders manage to get a better deal from RRL then the discount would be higher, but I am not counting on that.

On the other hand if the proposal falls through then the share price will be punished and we will see 6 cents pretty quickly.

I am betting on RRL and Hawkes Point reaching an acceptable compromise.

loki