As a shareholder of CANACO, I just received the Notice of Special Meeting in regard to the proposed creation of the above. I have reviewed the document in some detail and have some major reservations regarding the proposal. In principle, I support the concept of spinning out the Ethiopian exploration concessions of Harvest Mining into a separate company for the reasons given in the Notice. However, the first issue that I would like to raise, is that CAN only has a 70% interest in Harvest Mining which has a 100% interest in 468 sq km of the exploration concessions.[ CAN acquired that interest in August 2010 from Beijing Donia Resources for 3.5m shares of CAN (est value $7M @ approx $2/sh) plus $4M cash for a valuation of $11M, in spite of the fact that less than $2M had been previously spent on exploration on the property. At this point, Donia and its sister company SinoTech, held 51.6M CAN shares, or 31.6% of CAN. In March 2011, SinoTech divested themselves of 8M shares of CAN @$5.40/sh.] The proforma financial statements of Tigray show a $17.7M valuation of "Mineral Property Interests" (p. 83). In addition, I am not aware of "spinning-off" an asset which consists of less than 100% ownership of an asset into a separate company. Has anyone any comments on these issues?

Secondly, it would appear that the proposal involves a cash outlay of $16.4M by CAN........$12.4M to purchase a CAD non-interest bearing promissary note from CRBI for CEBI shares(?) and $4M for 4M Tigray shares for working capital. The proforma financial statements of Tigray only show the $4M as part of the "Current Assets". I can find no other reference to the recovery of the $12.4M cash nor on what basis the CEBI shares were originally valued. The $12.4M appears to have disappeared into thin air. Any comments or clarifications/explanations would be appreciated.

geoprof