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Gold/Mining/Energy : Eaglecrest Explorations

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To: Dave Robinson who wrote (27)	10/12/1996 1:39:00 PM
From: Joe Bilich	of 639

Dave-- You raise some good points about the private placement--it is quite possible to arbitrage the stock vs. the warrants (i.e. short the stock, pay to exercise the warrants at the lower price, and deliver the shares obtained via the warrant exercise to cover the short). Voila! Pure profit to the tune of the stock price less the warrant exercise price less commissions--with 0 risk. Or just sell stock you have, and exercise the warrants to in effect buy back the same position cheaper. It is done all the time. However--to take the analysis further--there is no need to wait for the private placement to be free trading to do this--you can put on the short well in advance if you know you will exercise your warrants when the time comes. So Oct 16 is not a magic date--this is probably already at work in the market. Finally--there is one other reason why Oct 16 may not mean much. When private placements are ISSUED they usually have a one year hold. However, that does not mean that the one-year hold actually stays in effect for the whole year. Many Canadian companies issue such PPs with the year hold--then quietly "register" those shares for free trading a couple months later. I do NOT know if this is the case with the EEL private placement which is to nominally free up 10/16/96 -- but it is done all the time by junior mining companies. So--if there is no dip after the 16th, you probably can assume that either the shares are wrapped up in very friendly long-term hands or that they have long since been registered and sold. Still could see a dip as folks fund warrant exercise via selling their common. Private Placements put needed cash into a company's coffers. However, unless those taking down the placement are really behind the company for the long haul, the PPs can offer insiders and pros some really easy trading profits at the expense of those who did not participate in the PP. I have no clue as to the status of EEL's PPs. Just wanted to put in my two cents that there is more to PPs than meets the eye. For what it is worth--I am long a little EEL but more than a little frustrated with the lack of a clear and consistent business direction. I have found that among junior mining companies those that can plan their work and then work their plan do well. So far EEL has not provided consistent evidence that they have a plan that they are sticking to.

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