Noront Resources

DuckButt,

The blocking of the deal and who is actually the blocker is a based on which bidding side one is looking upon the current events from. I am sure Noront feels that the Cliff's cheap private placements are meant to block Noront's bid effort (by diluting the share base) and Cliff's would see Noront's offer as standing in the way of their long term plan of acquiring the company through the blessing of the FWR board.

It is important to remember that this is not an all or nothing auction at the moment. It is not like the BOD makes a decision on which suitor to accept and the company is sold. Each shareholder must make a decision as to which suitor, if any, they wish to tender their shares to. The tendering of shares is important as it allows a suitor to have more control over the decisions made by the company.

Option One: Tendor to Noront
Option Two: Tendor to Cliffs
Option Three: Do nothing and hold onto your shares.

Both Cliff's and Noront need people to tender their shares to them (in exchange for shares in their respective companies) so that they will accumulate enough voting shares in FWR to influence future decision regarding FWR. If Noront accumulates enough FWR shares, both in its corporate holdings and in partnership with pro-Noront institutional investors who hold FreeWest shares, then Noront can propose that the current FWR board be dismissed and a new pro-Noront board be established (sound familiar?). The current FWR board does not want this for obvious reasons, and that is they lose control of the company and based on their current actions, likely their jobs. Once the board is dismissed, the likely route that most tender situations take is the establishment of a final deadline to tender remaining shares, to Noront in the case of option one, before an eventual delisting of FWR shares from the exchange.

If Cliff's is successful due to having a majority voting control, then they will will likely follow the same process, with the exception of dismissing the Cliff's friendly board. Instead, a deadline will be set to tender shares to Cliffs and then the stock will become delisted. The corporation will then be dissolved, and the current FWR board walks away with the generous cash for options plan that Cliffs will provide to them.

To do nothing means that one does not tender their shares to either Cliffs or Noront. This is the biggest gamble at the moment as values of both the Cliff's offer and Noront offer are known, while a future share price is not. Some continue to hold with the belief that a larger suitor will come on board with a bigger bid. Others hold believing that if either current bidder cannot gain enough shares to delist the shares of FWR, then they will have to bid higher, or buy up shares on the open market which leads to price appreciation.

This approach has risk as FWR can issue hundreds of millions of shares to Cliff (depending on what they are authorized to issue) in order to dilute the pro-friendly NOT voting base and ensure Cliff's a majority. It is a back room means of enabling the so called poison pill or shareholders rights plan, with the exception of not providing an opportunity for the other shareholders to buy into these newly issued shares at favorable terms. This would be my main beef with the current FWR / Cliffs arrangement if I was an FWR shareholder. That of circumventing the shareholders rights plan to provide control to Cliffs in exchange for the BOD being taken care in the form of cash for options. They could have blocked Noront by enabling the shareholders rights plan and doubling the size of the FWR share base by giving all FWR shareholders a chance to buy cheap shares. But in this case they would have likely lost Cliffs as a suitor and likely had no effect as the pro-Noront friendly FWR institutional shareholders (that also own Noront) would retain the same percentage of voting shares overall. This is not as much about Freewest against Noront as it is Freewest against the pro-Noront friendly shareholders with sizable holdings in FWR. I for one cannot believe Noront would make an attempt at FWR without having some understanding that they had these "dual citizens" support for the bid they announced. I believe Mac may have ticked off these shareholders when he placed millions of shares directly into Cliffs control during the PP earlier this year. In my estimation this is more of a coup from within than an idea Wes throughout for the heck of it in October.

The current share price of FWR is stable and is based on the latest Cliffs offer. If should be noted that Noront's offer is not a cash towards shares offer like Cliffs. It is a 7:2 share exchange + the $4 five year warrant. While some wonder what the value of this exchange is for a shareholder given Noront's current share price of $2.40, the math is a little more complicated than 2 times 2.40 divided by 7 (which equals .6857) plus the warrant. One must also consider that Noront is offering these share outside of the current market. With close to 31 million shares of Noront being offered to FreeWest shareholders in exchange for their shares, one must ask what it would take to buy up 31 million shares (albeit collectively) on the open market by Friday, December 11. The demand would send Noront's shares through the roof, leading many an FWR shareholder to pay a premium if they wanted to buy directly into Noront.

While many retail folks with less than 30K shares can easily sell their FWR shares at .88 cents and buy Noront today at $2.40, the institutional investors do not have that same option. They hold millions of shares and to sell millions of FWR shares to raise money to buy Noront shares will lead to increased supply for FWR and thus a drop in share price. The same holds true when they go to buy up millions of NOT shares.

This is the reason I believe we are not seeing a huge, albeit what would be a manipulated run up of Noront's share price. Noront will rise and fall based on what Noront does as a company. FreeWest's current price is based on the bidders intentions at the moment. For an institution who wants to convert their FWR into Noront shares without causing a drop in FWR share prices and driving up the asks for Noront shares, then this is a good opportunity. For institutions that just want to cash out, they can tender to Cliffs and receive their 90 cents towards a CLF share but they are still faced with the challenge of having to pay a premium for millions of shares of another ROf company should they wish to stay in the ROF game. This is the reason for Wes's theme of late. Tender to Noront and stay in the ROF.

So this current bidding war is more of a concern for institutions than it is for retailiers as it allows them to position themselves in terms of millions of dollars in the ROF rather than the thousands we trade with.

One may wonder why an institution would not just sit back and quietly accumulate given that Noront's volume averages between 500K and 1M shares traded a day. The challenge with this type of thinking is one assumes that what is traded represents direct transfers between a buyer who wants to own the stock long term and the seller who wants to cash out and walk away. In reality, most of the volume could be day traders flipping stock back and forth for a penny, or cross trades executed between brokers trying to provide the impression of a falling stock price in order to shake out weak hands or trip stop loss sell orders. But the resultant volume of these types of trades does not mean there is an endless supply of Noront shares available at any current share price. Try buying up a million shares at one time and see where the price goes. Maybe Cliffs was right. The Noront stock may be less liquid, but not for the reasons they state. Could it be that the Noront stock is held very tightly which is not always a bad thing as it shows long term confidence is a rising company.

Misfit's prediction: Institutions will tender to Noront as most of the institutions who bought into the Ring of Fire story bought into Noront and FWR as well as many of the other companies. They know that there is a much bigger offer up the road should the area become consolidated under one controlling company. If they wanted an easy double they would flip Noront for $5 given the recent PPs at .80 cents and $2.80. They are here for the long term based on the continued results coming out of the ROF area from many companies. I believe they see Cliffs as the new kid on the block trying to get in through the side door by essentially taking care of the FWR board through the cash for options clauses in their bid. I believe at the end of the day Noront will have control over these assets and the FWR retail brotherhood will become part of the NOT retail brotherhood (and sisters) and we will prosper going forward.

Unless of course Mac completely loses it, completely sells out his shareholders, and goes on a dilution tear for which Cliffs is the only beneficiary. Then you will see fire works.

Rest easy Notters. Our time will come.

M1.