1

CUDECO SHAREHOLDER RESEARCH

CHAPTER 6: REGISTRY ANOMALIES


6.1 A Review of Monthly Registry Anomalies
Spanning 2 Years of Trading





2

OVERVIEW OF THE SITUATION CONCERNING CUDECO
<Recommended background reading for first time visitors to the Shareholder Blog>

Trading behaviours associated with an Aug 18, 2010 price collapse in the share price of CuDeco Limited
have been generally dismissed by regulatory authorities as being acceptable given the company had not
delivered a resource that matched previous expectations. They said as much in response to a concerned
shareholder who in turn shared ASICs response on a public forum in May 2011, as per the following:

ASIC May 23: After careful consideration we have formed the view that it is likely that the CuDeco share
price fall on that date was related to a 2006 announcement which indicated that the resource had deposits
of 59 million tonnes with at least 2% copper
The judgement suggests that all aspects of trading have been ignored on the basis that the share price
slump was essentially the companys fault because it allegedly misled the market 4 years earlier.
Subsequent events have demonstrated that the company has been able to deliver, has continued to
deliver and has been more or less right all along with the advice it has provided to the market.
Furthermore, research is demonstrating that even ignoring the events of August 2010, the trading taking
place both before and after the resource upgrade has been seriously compromised. The current paper
and subsequent papers in the Chapter 6 series draw attention to serious anomalies between trading data
and shareholder registry data over 24 months of trading to further highlight the spread of trading activity
that might be regarded as dubious or suspicious. Certainly issues concerning CuDeco are not just related to
what occurred on Aug 18, 2010 where the regulatory response was based on conjecture, not trading data.

BACKGROUND
In 2006, the company tabled an initial inferred resource for its Rocklands Discovery of 59 mt @ 2%
Cu equivalent representing 1.2 million tons of in-ground copper equivalent metal;
The ASX deemed the 2006 statement to be non JORC compliant and forced a down grade to an
Inferred 25 mt @ 2% Cu equiv representing only 0.5 million tonnes of in-ground Cu equiv metal.
On Aug 18, 2010, the company announced a measured and indicated resource of 30 mt @ 1.24%
Cu equiv (for 0.37 million tonnes of in ground copper equivalent metal) and total resources of 245
mt @ .42% Cu equiv for 1.02 mill tonne of equiv metal following which the share price collapsed;
High levels of confusion surrounded the Aug 18 resource statement in regard to whether high grade
copper, a distinguishing feature of Rocklands style mineralization had been satisfactorily accounted
for by standard resource modelling techniques and JORC reporting requirements;

(Curiously, the regulator ignored the adjusted statement, enforced and certified by the ASX back in
2006 and referred to the original estimate in attempting to explain the Aug 18 share price slump.
Any disappointment should have manifested back in 2006, (which it did as shown by a collapse in
price when trading resumed in July 2006), and not a delayed response 4 years later. The 2010
resource should perhaps have been compared to the 2006 JORC compliant 25mt @ 2% Inferred
statement)

Rocklands was subsequently upgraded in May 2011 to a JORC compliant measured and indicated
resource of 30 mt @ 1.7% Cu equiv with total resources standing at 1.7 million tonnes of Cu
equivalent metal and with a substantial amount of high grade native copper still likely to be
discounted out of resource estimates;
Bulk mining trials over the main section of the ore body, the focus of the first 3 to 5 years of mining,
have consistently returned grades in excess of 4% Cu equivalent;
3

The 30 mt resource was tabled to support an EIS submission for a mining licence for an initial 10
years of mining, yet the licence has been granted for 30 years in recognition of the size of the
project;
Mineralization at depth and several high grade discoveries through 2011 and 2012, have not been
considered in resource estimates;
The company has consistently achieved funding at a strong premium to the share price and is
currently undergoing the transition from explorer to miner, debt free;
The share price has failed to recognize the likely mine economics of an initial 10 year mine at
Rocklands where even the Aug 18 resource statement is capable of supporting valuations in excess
of $4 per share;
Establishment media are generally dismissive of developments at Rocklands with a tendency to
highlight negatives or perceived negatives while virtually ignoring all major developments;
CuDeco is not being covered in research by mainstream brokers.


Compelling attributes of a future mine at Rocklands include:
o The granting of a 30 year mining licence;
o An open cut operation for the first 10 years with mineralization commencing at surface;
o Low stripping ratios (3.16) over the life of the project but beginning with ratios even lower
with initial mining focussing on high grade native copper and enriched supergene copper in
the central part of the Las Minerale ore body;
o An initial mining operation of 3 mt pa for the first 3 to 5 years of mining ramping up to
higher throughput as grades deplete, thereby maintaining copper production levels.
o Approximately 20+ years of open cut mining before underground mining commences;
o Excellent metallurgical recoveries after extensive testing of all ore types;
o Ready access to power, water;
o Easy accessibility by road, rail and air;
o Important infrastructure advantages being adjacent to a major town;
o Rail and port facilities secured for the transport of product;
o Company ownership of its own mining fleet where mining operations will be by contract
labour;
o 20 year Off Take agreements in place;
o Mining at Rocklands is likely to be fully funded, with zero debt and only around 200 million
shares on issue;
o A conservative Pre Tax NPV (Using 10% discount rate) of $1.25 Billion based on the current
JORC compliant resource for the first 10 year of mining;
o NPV valuations dont take into account underestimations in the theoretical JORC resource
because of the difficulties in quantifying native copper. Mining is expected to return cash
flows well in excess of estimates as suggested by the bulk mining trials returning in excess of
4% Cu equivalent;
o Additional resources have already been discovered in adjacent satellite deposits at
Rocklands, and future exploration potential both regionally and at depth still remains highly
prospective;
o Discoveries at Wilgar could lead to a separate open cut mine extracting rare earths, precious
metals and possibly uranium.

RESOURCE ISSUES:
The Aug 18 resource statement clearly misled the market with the company forced into providing a
theoretical resource assessment that undervalued Rocklands. Also, the company was not permitted to
qualify why its own in-house projections were vastly different from the JORC based estimates. Presumably
that would have been taken as criticizing the ASXs JORC code which is deemed to be sacrosanct and
4

beyond reproach. Significantly, the company has ignored JORC estimates for mine planning purposes as
detailed in the companys EIS application released prior to Aug 18.
The underestimation of Rocklands on Aug 18 is likely to have resulted from:
Limitations in the ASXs compulsory JORC code formulated without a unique resource such as
Rocklands in mind, with very significant amounts of nugget effect mineralization infiltrating a lower
grade ore body;
The harsh discounting of high grade resources by programming algorithms written into resource
modelling mining software, also designed without a unique resource like Rocklands in mind;
Resource modelling assumptions made by independent consultants in assessing Rocklands style
mineralization. Their conservatism led to substantial quantities of high grade native copper and
supergene copper being smoothed out of their resource estimate and other zones carrying
mineralization was considered as mining voids. Yet it is the high grade component of the ore body
that makes Rocklands such a unique and valuable resource and the so called voids may yet
represent a significant part of mining operations as per the companys Feb 9, 2012 announcement
reporting on surprising levels of mineralization in areas not previously considered as evidenced by a
deep costean across the ore body.

TRADING ISSUES:
Persistently anomalous trading data suggests that the market has been severely compromised over a
period of at least 2 years with the likely price capping and control over the share price by institutions the
overwhelmingly dominant feature of trading. Control over the share price has been facilitated by the
following aspects of trading as detailed in previous research:
Massive levels of trading churn that looks to have effectively swamped the market and prevented
it from performing its principal role of fair price discovery;
The use of short selling as a manipulative tool for control over the share price rather than for
legitimate price discovery purposes. Quite tellingly, short selling on market leading to lower prices
is often managed OFF market with the substitution of securities to cover shorting exposures and to
avoid price discovery on the upside;
Continuous control by a small group of brokers over the pricing outcomes associated with auctions
to commence and end trading each day;
Almost total control over pricing levels with trading algorithms ensuring that the majority of
changes in price (both Down Ticks and Up Ticks) occur between brokers who are likely to be
colluding with their trading, and representing institutional interests while doing so.
The constant selling down of significant announcements, primarily by institutional interests, which
has served to cap the share price at critical times but has also made sure that the market has
provided counter intuitive responses to what would normally be expected from good news. In this
way the compromised market has misled retail investors leading to further destabilization of the
market as they have then sold in disgust and frustration;
The constant flow of non-genuine wash trades back and forth between institutional interests has
delivered control over the share price while maintaining ownership over the shares used in such
exchanges. Trading profits appear to be only a secondary consideration as many of the trades
appear to be loss making;
The trading and settlement system also facilitates loss making trades by some brokers being
compensated by profitable trades by others where brokers are effectively acting for the same
interests. Pooling the trades and forwarding them to settlement agents for collation and clearance
can then result in marginal changes to holdings as there is the potential for trades to effectively
cancel each other out;

5

The possible use of dark pools to:
o provide a mechanism for redistributing shares back into the hands of the original owners
after being sold in the ASX market to friendlies perhaps to deliberately dampen market
expectations; and/or
o to relieve settlement pressure on sales by continuously transferring the shares before T plus
3 occurs and/or
o to relieve obligations associated with short sales with shares sold short to friendlies to cap
prices in the ASX market conveniently reversed between the same entities via dark pools.
E.g. Entity A sells to Entity B 100 shares that it doesnt own, then off market through dark
pool trading Entity B sells its recently purchased shares back to Entity A with the details
sorted out under the cover of opaque settlement arrangements.


SUMMATION:
All of the above trading behaviours appear to be facilitated by a trading and a settlement system that has
the inbuilt flexibility to process high volumes of seemingly unorthodox and manipulative trading strategies
without a hiccup and with most transactions concealed from view despite claims to the contrary about
supposedly transparent markets.
Surveillance of trading screens by ASX Officers is seen to be completely ineffectual to combat the control
over trading which manifests off screen through the dubious settlements of trades. Only audits are capable
of establishing trading links behind likely manipulative trading actions. Certainly regulators dont concede
that there is a problem and no-one seems any the wiser including brokers, journalists, investors and
shareholders. However the unusual data trends suggest that the market in CuDeco securities is far
removed from any expectation that its role should be to provide fair price discovery between genuine
buyers and genuine sellers.
What the data does demonstrate is that any regulatory assessment of trading without addressing the data
anomalies and without following through with audits cannot possibly be regarded as accurate, adequate or
even credible.
For regulators to ignore and/or dismiss disturbing data trends associated with the trading in CuDeco over a
period of 24 months by apportioning all blame to extraneous factors such as the company allegedly not
delivering on expectations back in Aug of 2010, and not moving on from there, is disappointing.
It is especially disappointing when developments achieved by the company show that despite JORC
imposed constraints and despite confusion surrounding Aug 18 events, it has clearly delivered and is
continuing to deliver on all expectations. At the same time disclosure of data anomalies indicate a
widespread targeting of the company through suspicious trading activities corresponding with a share
price that has remained undervalued and unresponsive to significant news. The disappointing market
action happens to be accompanied by corporate brokers being involved extensively in the stock to the
extent that their institutional clients have dominated trading over a period of at least 2 years. Yet there is
no interest in the company as far as the establishment financial press is concerned, nor is there support
from establishment brokers with virtually zero coverage of a major new Australian mine that has recently
been given the go ahead to proceed with a 30 year mining operation.
The situation casts doubt not only about the effectiveness of regulation but also grave doubts about the
integrity of the ASX and Australian financial system itself. It also makes it an imperative for shareholders to
do thorough due diligence and to make up their own minds about the issues.
The transparency provided by the shareholder blog at least brings the trading issues into the open where
data trends provide empirical evidence that something is seriously amiss with the trading taking place in
relation to CuDeco shares.
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7

EXECUTIVE SUMMARY Research Paper 6.1

BACKGROUND
Research Paper 6.1 is the first of a series of investigations that looks at anomalous registry data. Chapter
6.1 contrasts broker buying and selling in the market with the impact that the trading has had on the
register in terms of changes to share holdings.
Analysis looks at monthly data comparisons over a period of 2 years (i.e. Years 2010 and 2011)

To assist with comparisons, the following ratio is used.

The ratio effectively represents [Registry Share Flows] [Broker Activity]
With normal trading the ratio returns values of 100% (i.e. A sell or a buy in the market corresponds directly
to a movement OFF or ON the register associated with shareholders holdings).
For example a sale of 100 shares is necessarily accompanied by a purchase of 100 shares, with the sellers
holding at registry level showing movement OFF of 100 shares, and the buyers holding showing 100 shares
moved ON. The above ratio would simply be [100+100] [100 + 100] x 100 equating to 100%.
Trading isnt always a normal or straightforward situation such as outlined above, and may involve short
selling which leads to elevated registry movements with ratios greater than 100%. With short selling, the
register needs to deal with share flows related to the stock lender and the stock borrower as well as share
flows associated with sellers and buyers, all leading to an increase in registry movements.
Alternatively, intraday transactions that are closed out by the close of trade dont necessarily flow through
to the register and would therefore result in ratio values less than 100%. Also, the netting of trades by
trading partners or members of clearance firms generally lead to fewer registry transactions than buying &
selling in the market again leading to ratio values below 100%.
All registry data assessed in the research relates to shareholder changes as reported by Market Movement
reports issued by the share registry, which are therefore comparable to broker buying and selling volumes.
The data doesnt include transfers of shares associated with the settlement of trades by brokers which
represent an entirely different issue. Settlement trends over 2 years of trading are examined in Research
Paper 6.4.

SUMMARY POINTS
1. The outstanding feature of broker and registry comparisons across 24 months of trading is not that
ratios vary from the expected 100% on a regular basis (that is only to be expected given the nature
of trading) but the size of the variations are of such magnitude that they raise serious concerns
about the nature of trading, its effect on the integrity of the market and the appropriateness of the
price discovery taking place; an essential and integral function of market dynamics;
2. The 2 months immediately preceding the Aug 18, 2010 resource announcement saw a rapid
escalation in registry activity compared to trading volumes with ratios of 165% and 218% which are
substantially different than what would be expected from normal trading activity where ratios
would be around 100%;
3. The 2 months in which significant market upheavals occurred (i.e. Aug 2010 where there was a
share price slump following a resource announcement, and Nov 2010 where there was a share
price surge accompanying buying by M&G) were both accompanied by a dramatic escalation in
wash trades and a reduction in registry activity, as shown by ratios of only 38% and 69%
respectively;
(BROKER SELLS + BROKER BUYS)
)
(REGISTRY OFF + REGISTRY ON)
X 100 %
8

4. Months where price capping occurred following significant developments by the company or when
the company was approaching critical financing discussions, were associated with a strong
escalation in registry activity with ratios such as 185%, 132%, 244%, 379%,169%, 232%, 270% and
172% observed, well in excess of expected ratios for normal trading;
5. While audits are necessary to establish the exact nature of trading and what is responsible for
widespread registry anomalism, possible explanations for elevated registry volumes might include:
a. Extensive shorting activity, perhaps not accurately captured by existing daily reports issued
by the ASX and ASIC;
b. Possible illegal shorting activity including either naked short selling or shorting where
brokers with access to pooled accounts are using client shares on a temporary basis to settle
short sales but without their knowledge and without proper lending agreements in place;
c. Shorting exposures established in the ASX market being cancelled out before T plus 3
expires by using dark pool trading to reverse the transactions without impacting the market
and with prices chosen to suit the parties involved.
d. Short positions being established in the ASX market but continuously rotated using dark
pools to avoid settlement until a more opportune time presents to enable exposed positions
to be covered;
e. Non genuine, manipulative selling back and forth through the ASX market perhaps to limit
prices, occurring between entities who are colluding with their trading with the trades
reversed via dark pools to restore portfolio balances;
6. The other feature of trading where occasionally registry volumes are significantly fewer than broker
trading volumes is most likely due to non-genuine intraday wash trades that are closed out by the
end of the day not making it to the register.

a. The sort of activity that raises concerns is the trading back and forth between related
parties, or even the same entities, where the buying and selling is split up amongst a
number of brokers with completed transactions being pooled and sorted out by settlement
specialists. Such activity makes it easy for downward pressure to be applied to the share
price while retaining ownership of the shares sold back and forth;

b. The dynamics of such trades which are closed out by the end of the day wouldnt be causing
concerns for ASX surveillance teams because of the spread of trades across a number of
brokers and the co-mingling of orders with normal transactions making it difficult to observe
any wrong doing. Of great concern also is that the volumes associated with wash trades
(legal or otherwise) can actually dwarf the volumes related to normal or genuine trading;

c. Unless there is a preparedness to conduct audits, there appears to be no way of
differentiating such transactions from the rest of the trading taking place.
7. A trading and settlement system that allows entities acting through a large number of brokers to
effectively sabotage the markets function but without changes to the holdings of the interests they
are representing as per the trading behaviours suggested in dot points 5 and 6 raises acute concern
8. Also of concern is the control over the market by trading algorithms. Entities engaging the services
of brokers running similar programs tuned to each other can dictate terms to the market with a
daily flood of non-genuine, small order exchanges, distributed back and forth between trading
partners, and in so doing can prevent genuine price discovery from taking place. Such trading
sabotages the markets natural function with volumes capable of being ramped up to whatever
parameters are chosen and with settlements conveniently distributed at the end of the day across
nominee entities to the satisfaction of all concerned. Also, Dark Pools possibly provide the
mechanism to restore any unintended imbalances in holdings that may have occurred through
brokers outside the group getting in the way. As such, the algorithms are more likely to be the
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vehicles for trading rorts, and supporting manipulative trading agendas than servicing genuine
buying and selling activity.
9. CHART SHOWING FLUCTUATIONS BETWEEN REGISTRY CHANGES AND BROKER VOLUMES
It needs to be borne in mind that with standard settlement procedures and with genuine exchanges
between buyers and sellers, a ratio that compares registry volumes to broker volumes would show
minimal variations from one month to the next. i.e. The chart below would tend to flat line rather
than show the volatility that it does.

The vertical axis shows the variation of broker and registry data from the norm. A month where only
straight forward, genuine sales and genuine buys occurred would have an Index Change of zero indicating
that broker volumes and registry volumes would be one and the same. The persistent variances in monthly
data are an indication of how much trading is taking place that doesnt conform to normal, straight
forward, genuine buying & selling activity. The concerns therefore include:
High volumes of wash trades that dont make it to the register could easily be masking share price
manipulation, and in the current regulatory regime, without detection;
Months where excessive volumes of shares change hands on the register compared to broker
buying and selling may also be masking manipulative activity e.g. excessive levels of short selling?
Extreme variances above and below zero may therefore be providing a measure of how much stock
manipulation is taking place in which cause manipulation looks to be a dominant feature of trading.





The overriding issues associated with registry anomalism are therefore:

The troublesome extent to which it occurs and the extended period of time that it has been
tolerated for;
A trading, settlement, and regulatory system that can accommodates and camouflage enormous
volumes of suspicious trading activity without raising concerns;
Uncertainty about the type of trading activities causing it and the trading ethics involved;
The effect it is having on the function and the integrity of the market, and;
Whether trading protocols are being breached and/or whether steps need to be taken to
strengthen regulations to make existing trading and settlement systems above reproach and free
from any abuses.

Excessive
Registry
Movements
Month
10


CONTENTS



Introduction........Pg 11
THE EXTENT OF CDU REGISTRY IMBALANCES OVER A 24 MONTH PERIOD

Section 1 ........ Pg 14
SHAREHOLDER CHANGES COMPARED TO BROKER BUYING & SELLING ACTIVITY

Section 2 .... Pg 16
ANALYSIS OF TRADING TRENDS 2010
2.1 January to May 2010
2.2 June & July 2010
2.3.1 August 2010
2.3.2 Summary of Aug 18, 2010 Trading
2.4.1 September 2010
2.4.2 Broker Nominees
2.4.3 Dark Pools
2.5 October 2010
2.6 November 2010
2.7 December 2010


Section 3 .......... Pg 34
ANALYSIS OF TRADING TRENDS 2011
3.1 Intro - January & February 2011
3.2 March & April 2011
3.3 May, June & July 2011
3.4 August 2011
3.5 September & October 2011
3.6 November & December 2011


Section 4 .......Pg 38
SUMMARY POINTS

Appendix 1 ...Pg 40
Trade parasites feeding at the heart of the ASX Alan Kohler

11

INTRODUCTION

THE EXTENT OF CDU REGISTRY IMBALANCES OVER A 24 MONTH PERIOD
The buying and selling of shares is essentially a simple process resulting in corresponding changes in the
holdings of shareholders. A comparison of shareholder movements at registry level would therefore be
expected to correspond to the buying and selling volumes in the market.
However there are reasons why variations may occur such as with the netting
1
of trades to simplify and
streamline settlements and in regard to intra-day trades where transactions closed out by the end of the
day may not impact the register. Also, the practice of short selling introduces additional transactions from
a registry perspective as share flows between lenders and short selling agents also need to be considered.
Assuming most trading consists of normal transactions between genuine buyers and genuine sellers a
comparison between registry volumes and trading volumes might be considered reasonable if variations
resulted in comparisons falling within say 10% or even 20%.
An examination of monthly trading data and monthly registry data over 2 years should therefore provide
an overview of the type of trading taking place. The results for CuDeco are quite revealing as shown
below. The data trends show high volumes of wash trades at times (i.e. fewer registry changes) and an
escalation in the number of registry movements on other occasions with the causes not immediately
obvious nor readily explainable without audits of accounts.


MONTH
Registry Share Volumes Versus
Broker Trading Volumes

RATIO CHANGE

2
0
1
0

Jan 88% -12%
Feb 81% -19%
Mar 91% -9%
Apr 95% -5%
May 82% -18%
Jun 165% +65%
Jul 218% +118%
Aug 38% -62%
Sept 185% +85%
Oct 88% -12%
Nov 69% -31%
Dec 132% +32%
2
0
1
1

Jan 117% +17%
Feb 244% +144%
Mar 379% +279%
Apr 114% +14%
May 169% +69%
Jun 146% +46%
Jul 232% +132%
Aug 270% +170%
Sept na na
Oct na na
Nov 126% +26%
Dec 172% +72%

1
Netting
:
of trades refers to a consolidation and offsetting of individual trades into net amounts of securities and
money due between trading partners or among members of a clearing system. Netting results in fewer settlement
transactions (Refer http://www.sfe.com.au/content/bulletins/sfeclearing/2002/sfecl2002_079.pdf)
Months where wash
trades were a prominent
feature of trading
Months where register
volumes far exceed
broker activity
Months where wash
trades were a dominant
feature of trading
Months where register
volumes far exceed
broker activity
If netting occurs on a wide scale then it makes anomalies related to excessive settlements even more of a concern.
2 YEAR TRADING SUMMARY
Rather than variances of 20%,
registry volumes range from only a
1/3 up to 3 times broker volumes

12






























I
N
D
E
X

C
H
A
N
G
E
S

Registry Volumes Verses Broker Activity 2011
I
N
D
E
X

C
H
A
N
G
E
S
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Months with markedly elevated
registry volumes
INCREASING
MANIPULATION
13

The size of the anomalies and their spread across most months over the 2 year period raise questions
about the integrity of the market and its ability to perform its traditional function of price discovery.
In August 2010, registry volumes were only just over a third of trading volumes during a month when
record numbers of shares were traded. Yet in March 2011 the reverse occurred with registry volumes
almost 3 times the amount of trading activity. There were a number of months when fluctuations werent
as pronounced as those two months but were nevertheless still at levels which raise concerns.







The ambiguities associated with dark pools may also help to explain elevated registry numbers and also
raises questions about what exactly is being achieved by such transfers and why?

Mixed signals about the trading taking place are matched by the mixed signals in relation to the
performance of the share price. The two look to be related with the share price rarely responding to
favourable developments in a sustained manner, and generally failing to reflect appropriate value for the
company based on either fundamental considerations or comparisons to peers. The share price has
become all but redundant as an indicator of realistic value as demonstrated by several placements at a
strong premium to the share price and by the success of the company Buy Back (i.e. purchasing shares
from the market, cancelling them and then re-issuing shares at higher prices).
After two years of anomalous data trends and suspicious trading activity led by institutions, and with
certainty emerging about Rocklands with the construction of a major new mine at Cloncurry underway,
perhaps it is time that regulators took data irregularities seriously.
To date, as mentioned in the Introductory Overview on Pg. 2, the disinterest of regulators and their refusal
to conduct audits has been based on the company being viewed as being at fault, and with confusion
about the resource being responsible for the share price issues.
Unfortunately, the explanation completely ignores trading issues and also contains the contradiction that
while blame has been apportioned to the company for the Aug 18 JORC disaster the very same JORC
information enticed the M&G Group to become a major shareholder through a placement in September
2010 and through their strong buying on market in Nov & Dec 2010.
Logically the two events cannot be associated with the same circumstance unless the Aug 18
announcement seriously undervalued the resource and the M&G group had the expertise to identify and
understand why. It is now apparent that JORC methodology and standard industry modelling techniques
couldnt assess Rocklands accurately given the unusual but dominant nugget effect permeating the
resource. It is also becoming known that bulk trials provide the best indication of likely grades until such
time as mining commences in earnest. All thanks to the lone voice of the company in attempting to explain
the situation. There have been no official clarifications about JORC modelling issues from the ASX.
In any case, while uncertainty in relation to Rocklands has rapidly become a thing of the past since
confirmation of a 30 year mining licence in Nov 2011, data irregularities continue and are in no way
explained by any reference to the 2006 announcement by the company. As mine commissioning draws
closer it is imperative that action is taken to put an end to any manipulative activity occurring behind the
scenes that continues to manifest as anomalous data trends and an unresponsive share price.
The chronic data anomalies suggest that a thorough review of trading and settlement system procedures is
urgently required, together with an audit of the trading records of those entities chiefly responsible for the
dramatic fluctuations in the data.
The trends result from underlying trading activity which at face value appears to be highly questionable
for the following reasons.
Trades that dont make it to the register may be masking manipulative intent;
Trades that lead to a large blow out in registry volumes may be related to excessive short selling
activity and therefore price suppression.

14

Chapter 6.1. SECTION 1: SHAREHOLDER CHANGES COMPARED TO BROKER BUYING & SELLING ACTIVITY
As mentioned in the introduction, the buying and selling of shares is essentially a simple matter. A sale of
shares by an entity results in a reduction in ownership and a purchase leads to an increase in ownership.
All changes are recorded on the companys share register. As such it would be expected that broker
trading numbers and the volumes of registry changes would more or less coincide, yet that hasnt been the
case with the trading that has occurred with CuDeco as summarized below over a 24 month period.
The tables below enables Sells to be compared to Movements Off and Buys to be compared to
Movements On over a period of 2 years. Share placements have been excluded from registry flows.
2010
ASX BROKER BUYING &
SELLING
REGISTER
(SHAREHOLDER
MOVEMENTS)

2011
ASX BROKER BUYING &
SELLING
REGISTER
(SHAREHOLDER
MOVEMENTS)
Month SELLS BUYS OFF ON

Month SELLS BUYS OFF ON
Jan 9,565,555 9,565,555 8,375,943 8,374,948

Jan 7,494,594 7,494,594 8,754,218 8,771,819
Feb 12,115,534 12,115,534 9,851,251 9,731,157

Feb 6,961,872 6,961,872 16,860,995 17,120,090
Mar 15,611,534 15,611,534 14,556,105 13,887,077

Mar 4,281,778 4,281,778 16,562,824 15,860,722
Apr 10,409,873 10,409,873 9,687,287 10,065,262

Apr 3,933,436 3,933,436 4,416,263 4,576,597
May 14,557,103 14,557,103 11,914,444 11,937,729

May 10,413,415 10,413,415 17,501,763 17,679,456
Jun 13,350,211 13,350,211 22,002,998 22,143,737

Jun 9,002,175 9,002,175 13,254,025 13,023,909
Jul 11,541,679 11,541,679 25,159,419 25,087,370

Jul 8,618,502 8,618,502 19,798,850 20,264,037
Aug 93,327,086 93,327,086 36,285,447 34,349,734

Aug 8,554,067 8,554,067 23,002,052 23,186,120
Sept 24,023,623 24,023,623 43,644,290 45,340,980

Sept 0 0 3,375,211 3,312,203
Oct 32,051,119 32,051,119 28,123,407 28,319,927

Oct 0 0 2,262,073 2,484,832
Nov 42,508,669 42,508,669 29,407,542 29,631,683

Nov 12,294,931 12,294,931 15,852,072 15,112,710
Dec 15,578,750 15,578,750 20,528,663 20,620,404

Dec 9,543,253 9,543,253 16,187,454 16,597,278



For comparative purposes it is helpful to compare monthly Totals for Broker Activity (i.e. Buying plus
Selling) to Totals for Registry Volumes (i.e. ON Movements plus OFF Movements) using an index as shown:



2010

2011


Broker Activity
BUYS + SELLS
Registry Activity
ON + OFF
Register Versus
Broker Activity

Broker Activity
BUYS + SELLS
Registry Activity
ON + OFF
Register Versus
Broker Activity
Jan 19,131,110 16,750,891 87.6%

Jan 14,989,188 17,526,037 116.9%
Feb 24,231,068 19,582,408 80.8%

Feb 13,923,744 33,981,085 244.1%
Mar 31,223,068 28,443,182 91.1%

Mar 8,563,556 32,423,546 378.6%
Apr 20,819,746 19,752,549 94.9%

Apr 7,866,872 8,992,860 114.3%
May 29,114,206 23,852,173 81.9%

May 20,826,830 35,181,219 168.9%
Jun 26,700,422 44,146,735 165.3%

Jun 18,004,350 26,277,934 146.0%
Jul 23,083,358 50,246,789 217.7%

Jul 17,237,004 40,062,887 232.4%
Aug 186,654,172 70,635,181 37.8%

Aug 17,108,134 46,188,172 270.0%
Sept 48,047,246 88,985,270 185.2%

Sept 0 6,687,414 na
Oct 64,102,238 56,443,334 88.1%

Oct 0 4,746,905 na
Nov 85,017,338 59,039,225 69.4%

Nov 24,589,862 30,964,782 125.9%
Dec 31,157,500 41,149,067 132.1%

Dec 19,086,506 32,784,732 171.8%
Persistent imbalances between Selling and Movements
OFF the register over the 2 year period
2010 - Mainly
registry short
falls?
2011 - Mainly
registry
surpluses!
Persistent imbalances between Buying and Movements
ON to the register over the 2 year period
Erratic
15

The data focusses on shareholder changes on the register resulting from buying and selling. It doesnt
include the registry share flows associated with the settlement of trades. It would appear that although
buying and selling is essentially a straight forward matter, by the time that the buying and selling impacts
the register the result is anything but straight forward. The monthly trends in the data may be summarized
as periods where:
Broker Activity and Registry Activity are more or less in balance such as in Jan, Mar, Apr and Oct of
2010, and Jan & Apr of 2011
Broker Activity exceeds Registry Activity (i.e. Feb and May 2010); and
Broker Activity far exceeds Registry Activity (i.e. Aug and Nov 2010); and
Registry activity far exceeds the buying and selling in the market (i.e. Jun, Jul, Sept & Dec 2010, and
Feb, Mar, May, Jun, Jul, Aug and Dec 2011).




Reasons why broker buying and selling volumes might differ from the registry share flows include:
1. Netting by brokers where buying and selling orders of clients are combined to give a net result for
settlement purposes. Netted transactions and fewer registry entries might occur where broker
clients have traded intra-day or within the T plus 3 settlement timeframe. Netting of trades may
have been responsible for the registry shortfalls from Jan to May 2010 and in Aug and Nov of 2010.
Extensive netting of trades may also be associated with a flood of dubious wash trades
1
.
2. Private Off Market transactions that arent included in daily trading volumes where individual
holders may switch shares from one account to another or effectively buy and sell shares between
themselves using paper transfers. However the volumes involved in such Off Market transfers are
incidental and not a major contributor to anomalous share volumes.
3. Broker exchanges (or crossings?) that are not included in daily ASX trading volumes as for example
occurred when the stock wasnt trading during March & April of 2011. Such transactions have been
a major contributor to anomalous share flows and may have been accomplished via Dark Pool
trading about which comparatively little is known. Similar exchanges may also have occurred even
when the stock was trading but again separate to ASX trading thus helping to boost registry
volumes (Refer Sect 2.4.3 Pg 21 for information on Dark Pools);
4. Share placements where shares are issued by the company separate to daily trading. These are
both readily identified on the register and easily understood;

1
The issue of wash trades and possible market manipulation has been addressed

in Research Paper 3.3,
Section 3.3.1. An excerpt follows:
Market manipulation is acknowledged as a practice inherent in all global markets requiring close
regulatory attention at all times. It has been defined as Transactions which create an artificial price or
maintain an artificial price for a tradable security and involves a range of trading techniques including
stock churn, wash trades, excessive short selling, and actions to deliberately drive a share price down.
Wash trading has been described as:
an illegal form of stock manipulation in which an investor simultaneously sells and buys shares
in order to artificially increase trading volume, and,
"a securities transaction which involves no change in the beneficial ownership of the security."
The wide fluctuations between monthly broker data and monthly registry data are certainly difficult to
reconcile with normal trading, particularly with registry procedures assumed to be routine and
consistent. The extreme variations are in fact likely to be signalling serious market integrity issues.
16

Chapter 6.1 SECTION 2.1 ANALYSIS OF TRADING TRENDS - 2010
JANUARY 2010 TO MAY 2010:
The first 5 months of 2010 (Jan through to May) had registry activity falling short of broker activity. Intra-
day trading and the netting of trades by brokers has possibly led to fewer registry transactions than buying
and selling activity in the market.
2010
ASX BROKER BUYING &
SELLING
REGISTER SHAREHOLDER
MOVEMENTS
Register Activity
as a % of Broker
Activity
Month SELLS BUYS OFF ON
Jan 9,565,555 9,565,555 8,375,943 8,374,948
88%
Feb 12,115,534 12,115,534 9,851,251 9,731,157 81%
Mar 15,611,534 15,611,534 14,556,105 13,887,077 91%
Apr 10,409,873 10,409,873 9,687,287 10,065,262 95%
May 14,557,103 14,557,103 11,914,444 11,937,729 82%

As detailed in Research Paper 3.2, trading was characterized by falls through January 2010 amid general
market weakness. However CuDeco fell more sharply than its peers and other mining companies generally.
The period also coincided with the company making several solid announcements (particularly in relation
to new discoveries at Wilgar) which were all met by heavy selling (as referenced in Research Paper 3.5).
In general it was the institutions that were doing the net selling during the period January to May 2010,
with retail investors doing the buying.
Chapter 6.1 SECTION 2.2 JUNE & JULY TRADING
A change in trend occurred in June and was continued in July whereby registry transactions substantially
increased compared to the levels of buying and selling occurring in the market. While it is difficult to
account for the abrupt changes in trend responsible for the large numbers of excess registry movements,
the index at least quantifies the extent of variances.
2010
ASX BROKER BUYING &
SELLING
REGISTRY SHAREHOLDER
MOVEMENTS
Register Activity
as a % of Broker
Activity
Month SELLS BUYS OFF ON
Jun 13,350,211 13,350,211 22,002,998 22,143,737
165%
Jul 11,541,679 11,541,679 25,159,419 25,087,370 218%

The data for June and July is extremely anomalous and presents as a red flag that something extremely
unusual was taking place. Two possibilities come to mind in an attempt to try and explain the imbalances.
Client shares in pooled accounts were being used to temporarily cover a short position but without the
clients knowledge or permission (i.e. without formal lending agreements in place);
Trading via dark pools was rotating an exposed short position that was proving difficult to settle.
The extended settlements possibly had implications for the trading that took place during these two
months as well. i.e. If there was an exposed short position then trading may have been compromised by
attempts to protect the position and to prevent it from becoming further exposed.
The matter is more fully investigated in the soon to be published Research Paper 7 titled The Impact of
Institutions on the CuDeco Register. The implications regarding Dark Pools are outlined further in Sect
2.4.3 Pg. 30 of the current paper.
NORMAL
Trading?
Abnormally High?
17

Chapter 6.1 SECTION 2.3.1 AUGUST TRADING:
Trading during early August also featured some strong data anomalies (Refer Research Paper 7.1) similar to
what occurred through June and July. The anomalous registry activity set the scene for a share price
collapse following the release of the Aug 18 resource upgrade. The resource statement was perceived to
be disappointing because of grades less than expected given the high grade intersections reported by the
company over several years. The reality appears to be that the JORC compliant statement misstated
resources because of the harsh discounting applied to high grade native copper and high grade supergene
mineralization. The matter still hasnt been adequately qualified by either the ASX through its JORC
committee, by the financial media or by the broking community who have access to resource analysts
capable of understanding what has played out. Resource analysts taking the time to do thorough Due
Diligence would also appreciate why M&G analysts saw the stock as a strong buy yet no qualifying advice
has ever been made available publicly. The company has at least attempted to address the situation
through its EIS documentation, its subsequent resource upgrade in May 20, 2011, impressive results from
extensive metallurgical and bulk mining trials and more recently, by a deep costean across the main zone
of the ore body. The clarifying information released by the company has generally been met with price
capping activity in the market and ignored by the media and the broking fraternity as previously detailed in
Research Paper 3.6.
Private Investors who have also done extensive Due Diligence have opted to fund a mine at Rocklands at a
strong premium to the share price. Their actions support the companys stance in regard to what it will
actually be mining at Rocklands, and further suggest that there are problems with theoretical JORC
estimates.
August Data
2010
ASX BROKER BUYING &
SELLING
SHAREHOLDER REGISTRY
MOVEMENTS
Register Activity as a
% of Broker Activity

SELLS BUYS OFF ON
Aug 93,327,086 93,327,086 36,285,447 34,349,734 38%

The share price collapse associated with Aug 18 resulted in more shares traded for the month than had
traded over the previous 7 months. However, just over a third of the record number of shares that traded
during August actually impacted the register. Non genuine wash trades were the dominant feature of
trading with institutions appearing to push prices lower while trading large volumes of shares back and
forth amongst themselves. Importantly however, sophisticated investors retained their holdings thereby
indicating that they didnt have a problem with the resource. The trading data suggests that the company
was destabilized during the confusion about the resource.
High levels of churn associated with institutional brokers provide the paradox that entities destabilized the
company through their trading yet they remained fully invested. At the same time they were likely to have
incurred tax losses (Refer Profitability Considerations Pg. 19). The motivations behind such trading are
difficult to comprehend from a legitimate trading perspective.
On the other hand, many retail investors were either forced to sell their holdings because of margin
pressures or they were panicked out of their holdings by the extreme market volatility that was created.
Extensive wash trades created an impression of massive selling which also contributed to investors being
misled. The selling however was orchestrated and matched by just as much buying which resulted in
minimal changes to holdings by the time transactions were collated and prepared for settlements.
An abnormally
low ratio
indicating large
volumes of
wash trades
18

For the trading events of August 2010 to be properly assessed free from the noise and conjecture
surrounding what the JORC delivered or didnt deliver, or what the company did or didnt do, it is
necessary to understand the dubious trading behaviours that are embedded into anomalous trading data
spanning a period of two years, not just one month. There have been several trading behaviours identified
(Refer Paper 5.4 Pg. 3 Issues 1 to 12) that suggest the company has been unfairly targeted over a very long
time with some of the strategies used to create havoc through August of 2010 as well.












Chapter 6.1 SECTION 2.3.2 SUMMARY of AUG 18 TRADING
To recap from Research paper 4.1, the trading volumes and the patterns of trading on Aug 18 suggest that
collusive strategies were in play with a game plan that was implemented immediately the undervalued
resource estimate was released to the market. The following features of trading stand out.
5 million shares were traded in the 1
st
hour of trading for a fall of 14.7% from the previous close;
16.466 million Shares traded for the day for a fall of 49% from the previous close. (By comparison,
the average daily volumes for the previous 7.5 months of trading was around 500 thousand shares);
Strangely, brokers SOSL, HUB24 (formerly ANZIEX) and BBY were uncharacteristically active in
trading at levels well above market shares they had established over the preceding 7.5 months.
Their market shares were up 413%, 700% and 113% respectively on Aug 18;
Brokers dominant in all trading over the previous 7.5 months tended to stand back and allow
brokers with minimal previous involvement to set the trading agendas. The actions suggest that
trading was highly orchestrated;
DMG was both a major churner of stock (1.52 mill sales & 0.81 mill buys) and the second largest net
seller on the day (0.71 mill net sales), presumably for institutions;
Accompanying DMG with their heavy selling was broker BELL who heavily sold throughout the day
and mostly for one major client;
COMM was by far the most dominant broker in trading with a market share of 25% (an increase of
58% to its level of involvement over the previous 7.5 month) yet the majority of trading was
conducted anonymously by entities not identified on the register (i.e. around 68% of all their
trading was by anonymous entities, not retail clients). COMM bought 4.664 million shares, sold
The overwhelming theme highlighted by the research undertaken is that a wide range of trading
behaviours has led to long term distortions in trading and registry data that signal that something is
seriously amiss with the integrity of the market for CuDeco Ltd securities. The root causes of consistently
anomalous trading data need to be identified and understood before the situation can be properly
addressed. Certainly, the data trends accompanying trading suggest that a corporate targeting of the
company has been responsible for the stripping of large numbers of shares from retail investors and at
the same time destroying substantial wealth for the company and its shareholders.

While the issues have obvious implications for investors and undermine confidence in the ASX itself, it
also needs to be borne in mind that dubious trading strategies have made it extremely difficult to
establish a major new mine in Australia that will lead to the creation of jobs, regional development for
QLD, royalties for the QLD State Government, tax revenues for the Australian Government and the
strengthening of Australias balance of trade. The corporate targeting of companies such as CuDeco
comes at no small cost, particularly if a cheap takeover was successful in achieving overseas ownership of
another important and emerging Australian asset.
19

3.545 million shares and crossed 887,945 shares. COMM was in fact responsible for 68.5% of all
cross trades (i.e. XTs) on Aug 18. Yet despite all of their trading activity, the register reveals only
954,072 of retail sales and 1,636,287 of retail purchases following Aug 18 trading. An investigation
into the COMM clients associated with cross trades and the large volume of anonymous wash
trades transacted by COMM that didnt impact the register, would most likely provide very useful
insights into the nature of trading that occurred;
Despite the large volumes traded on Aug 18, only 14% of the selling and 23% of the buying of all
brokers showed up on the register as being related to retail interests. Also, the register reflects
little activity in relation to the remaining 14.2 mill sales and 12.7 mill buys that occurred on Aug 18.
The overall trend was that trading was dominated by non-genuine wash trades that didnt make it
to the register with much of it camouflaged amongst the retail client orders of brokers such as
COMM, ETRD, and AIEX. An investigation of the corporate activity taking place within retail brokers
would therefore also reveal a lot about what actually took place on Aug 18;
Foster Stockbroking was one of the most active brokers in the opening auction knowing that its
hastily written, poorly researched, unsigned broker report was about to be released to the market.
Foster had previously set a price target of $9.60 on the stock but was suddenly calling for $1.20. To
date no action appears to have been taken in regard to Foster Stockbroking so it is assumed that
their actions have fallen within trading guidelines and codes of ethics governing broker conduct.
However, the ready acceptance of such behaviours and a disregard and/or disinterest in
investigating dubious trading agendas serves to destroy confidence in the financial system;
Deutsche Securities who had been an overriding force in auctions in the 7.5 months leading up to
Aug 18 and who had attended 94% of all auctions, didnt participate in what was arguably the most
important pre-open auction for the entire year. The unusual absence of DMG also suggests that
trading on Aug 18 may have been orchestrated and followed a tight script;
Profitability Considerations: Assuming that most trading was back and forth churn conducted on
behalf of institutional entities, a tax perspective on trading would require the previous average
costs of shares held as at June 30, 2010 and the average cost of shares purchased up until Aug 18,
to be averaged against stock bought on Aug 18 to obtain an overall cost basis from which sales
could be measured against. Up until the trading halt of Aug 13, 2010, the holding costs of shares
owned would be expected to be well in excess of say $4.00. It means that holding costs (i.e. $4.00
or above) plus the average buying costs on Aug 18 (say $2.85) would result in a cost basis of shares
traded in excess of the selling prices achieved on Aug 18. As such, it is likely that all high volume
back and forth trading by institutions would have been loss making;
The profitability of trading can be estimated using actual trading data such as that by broker State One
Securities (SOSL) who were unusually active on Aug 18 compared to their previous involvement with
the stock.
SOSL Sales: 1.33 million shares sold at an average selling price of $2.863
SOSL Purchases: 1.38 million shares purchased at an average buying price of $2.855
SOSL Churn: 1.33 million shares were bought and sold for a profit margin of $0.008 per share
Accumulation: 51,349 shares were retained at the close of trade
Holding Costs: Assume $4.44 for shares held at June 30 and shares bought July & early Aug 2010
Cost of Shares churned: Say ($2.85+$4.44)/2 or $3.65
Selling Price Achieved: $2.86
Assuming that SOSL was acting for institutions, they can therefore be considered as selling shares for
an average of $2.86 which would have effectively cost around $3.65. But why?
20

Selling the accumulated shares at the close of trade would have crystalized further losses. i.e. 51,349
shares effectively costing on average around $3.65 and being sold at say the close of trade price of
$2.45 is a further loss making exercise. Even larger losses would have resulted if the accumulated
shares were sold a few days later when the share price declined to around $1.60. Based on the above,
the efforts put into trading appear somewhat pointless at least from a profit perspective.
Even if SOSL were representing clients with no previous history in the stock the profit motive
surrounding their trading is still questionable. Churning 1.33 mill shares for an average buy price of
$2.855 and an average sell price of $2.863 (i.e. a margin of $0.008), is still seen to be loss making
overall when the accumulated shares are valued at closing prices of $2.450 and compared to buying
prices of $2.855. And even more so if they were sold a few days later;

Unusual Down Tick Trends: In a market characterized by panic and confusion, the share price
collapsed rapidly, falling from $3.59 at the open to $3.06 after an hours trading, before sliding to
$2.45 at the close. In such a scenario Down Ticks in price would be expected to occur from
desperate sellers accepting what was being offered by buyers (i.e. the BID price). As it happened,
the complete opposite occurred with down ticks favouring ASKs 93% of the time. The extreme
statistical bias against what would be logically expected suggests that trading was controlled by
algorithms belonging to brokers who were colluding with their trading. The dominant sellers
associated with Down Ticks were brokers COMM, DMG, SOSL, and BBY, and the dominant buyers of
Down Ticks were much the same group in COMM, SOSL, CITI and BBY. Data such as the above cuts
through to the essence of what actually took place and unfortunately, what is revealed is difficult to
reconcile with what would be expected from normal and/or fair trading. It also demonstrates that
the auditing of accounts of brokers and their major trading clients is an imperative if a proper
assessment is to be made of the events surrounding Aug 18;
An absence of net selling by sophisticated investors despite the heavy churning of stock they
appear to be responsible for, underscores the realization that Rocklands remained a valuable
minerals discovery from their perspective despite the frenzied trading undertaken;
Shorting Considerations: Official open short positions on Aug 18 showed an increase of only
461,029 shares compared to trading volumes of 16.47 million shares. At first glance it might appear
that the downward pressure on the share price was to do with investors or traders genuinely
selling, rather than the shorting of the stock. The increase in open short positions is certainly small
by comparison to trading volumes.
However, it is not known what percentage of wash trades were related to intra-day shorting (i.e.
selling first and then re-purchasing later with transactions closed out by the end of trading). From a
logical perspective, to make money trading in a rapidly falling market, sales need to be made first
followed by the re-purchase of stock afterwards so the likelihood of high levels of shorting activity
associated with wash trades is more than a distinct possibility. Such trading could easily be
associated with manipulation and could even be illegal if proper lending agreements werent in
place. Given the extremely large volumes involved it is an issue that requires serious investigation.
There is the added complication that some entities may have used some brokers to short sell, with
their short covering done by purchase orders put through other brokers and with the transactions
sorted out when pooled and forwarded to ASTC settlement agents. The system of settlements may
therefore be viewed as a convenient cleansing facility where dubious or even illegal trading
activity can be effectively normalized and assimilated into the register as required;

21

Collusive Trading: Additional to shorting concerns, are bona fide shareholders who have the shares
to cover their sales also participating in the same practice of using the services of a number of
brokers to do their buying and selling then have all the transactions forwarded to a settlement
agent to be collated and prepared for settlement. A group of entities acting similarly and even
facilitating each others buying and selling, all while spreading their influence across a wide range of
brokers can be seen to effectively dominate trading and to override the markets function of fair
price discovery between genuine buyers and sellers. Again, such activity in the context of a trading
and settlement system that tolerates and facilitates such behaviours provides the perfect foil for
manipulative interests to achieve their trading objectives at the expense of all other investors;
Trading data suggests that the share slump was probably more attributable to high volumes of
churn by a number of brokers acting in unison to create mayhem and uncertainty, with their
trading algorithms tuned to accommodate each others continuous buying and selling. In that
scenario it would only take a couple of brokers who were dominant sellers to tilt momentum
downwards and that occurred with the heavy net selling of DMG and BELL. The 1
st
and 2
nd
hours of
trading is summarized below;


1
st
HOUR Total Volume 5.34 million shares
BROKER SELLS BUYS NET BUYS MARGIN

BROKER SELLS BUYS NET SELLS MARGIN
SBAR 14,000 291,360 277,360 $0.45

BELL 596,792 95,331 -501,461 $0.02
COMM 932,419 1,163,258 230,839 -$0.02

DMG 767,315 316,500 -450,815 $0.03
ETRD 249,349 459,163 209,814 $0.04

ORDS 126,226 11,000 -115,226 -$0.52
ANZIEX 157,000 290,000 133,000 $0.03

FOST 117,227 5,000 -112,227 $0.33
AIEX 101,118 231,446 130,328 -$0.09

MACQ 55,356 20,045 -35,311 -$0.22
PSL 4,040 110,000 105,960 -$0.17

GSP 118,184 45,783 -72,401 $0.22
MACP 86,179 168,240 82,061 $0.03

HART 74,804 7,804 -67,000 -$0.07
BBY 341,070 412,198 71,128 -$0.03

MERL 151995 141140 -10,855 $0.07
NORS 20,000 85,734 65,734 $0.04

Other 224223 30231 -193,992 na
MSDW 3,487 67,188 63,701 $0.06




CITI 227,121 266,307 39,186 -$0.01

BRLL 59,072 59,072
0
-$0.01
TPPM 157,960 184,652 26,692 -$0.07

INTS 23,000 23,000
0
$0.01
UBSW 37,189 63,499 26,310 -$0.02

STBG 50,000 50,000
0
$0.09
SOSL 517,774 537,274 19,500 $0.01
OTHER 127,807 205,482 77,675 na


Net Buying
1,559,288

Net Selling
-1,559,288


The trading activity is seen to be dominated by brokers acting predominantly for institutions and
sophisticated investors (shown shaded in mauve) with their buying and selling orders generated
automatically by pre-set trading algorithms. In the scenario where entities are colluding with their trading,
it matters not whose algorithms are set to generate profitable trading margins and which trading programs
are set to generate losses as all trades are eventually pooled and profits and losses effectively cancel each
other out for all orders generated by the same entities.
The dominance of institutions is accentuated when retail activity is taken into account. Retail settlement
volumes after T plus 3 following Aug 18 showed that only a small portion of the overall buying and selling
of retail brokers serviced retail interests on the register. The majority of buying and selling associated with
retail brokers was therefore likely to be associated with anonymous institutional interests and/or
sophisticated investors with those transactions passed on to ASTC & ACH agents for settlement.
A summary of the type of buying brokers were associated with on Aug 18 can be extracted from the table
on Pg. 51 of Research Paper 4.1 Sect 4.8.1 which contrasts retail settlements against the total buying &
selling of the brokers concerned.
22

The results are as follows with the predominantly corporate brokers separated from the more retail
focussed brokers and also showing retail activity separate to corporate & institutional activity for each
group:


BROKER OTHER RETAIL

BROKER OTHER RETAIL

BROKER RETAIL OTHER
CITI
100% 0%

TAYL 97% 3%

COMM
31% 69%
DMG
100% 0%

BRLL 97% 3%

ETRD
35% 66%
MERL
100% 0%

HART 95% 5%

BELL
37% 63%
CSUI
100% 0%

TPPM 94% 6%

AIEX
49% 51%
GS
100% 0%

ORDS 93% 7%

SBAR
52% 48%
MERL
100% 0%

PSL 92% 8%

MACQ
89% 11%
UBSW 99% 1%

JDV 89% 11%

CMCS
65% 35%
MACP 99% 1%

WILS 88% 12%


SOSL
99% 1%

SHAW 76% 24%
ANZIEX 98% 2%

RBSM 71% 29%






BELL Securities was a pivotal seller on Aug 18 and mainly on behalf of a single large client. The selling is
unusual as large client orders are generally crossed, not sacrificed into the market on highly volatile trading
days especially when there are willing institutional buyers as shown by the trading volumes. There is also
the precedent of large share transfers occurring OFF Market such as appeared to have occurred on Aug 16
and Aug 17 (Refer Table Pg 25) where large orders can certainly be absorbed if required, without impacting
the market.
The heavy selling by DMG may have been on behalf of an institution or a sophisticated investor or
alternatively it may have been associated with the short sales associated with the increase in open short
positions. In any case the heavy selling by BELL and DMG superimposed over high levels of trading churn by
a large number of brokers acting for sophisticated investors looks to be crucial in forcing prices
dramatically lower. There is also the possibility that the heavy selling by DMG was absorbed by the buying
through a range of brokers led by SBAR and COMM but acting for much the same interests as the DMG
sellers. i.e. the wash trade effect!
Despite all of the activity in response to the resource announcement, institutional holdings retained their
shares emphasizing that they still saw value in Rocklands despite their prolific trading activity.

Brokers who
predominantly
serviced institutional
and corporate
interests on Aug 18
Brokers who serviced
retail interests but
also the interests of
sophisticated clients
CORPORATE & INSTITUTIONAL BROKERS RETAIL BROKERS

The substantial trading activity of retail brokers is seen to be in support of interests other than their retail
clients. The retail brokers listed represent 40% (6.70 mill) of all sales on Aug 18 and 48% (7.81 mill) of all
purchases however their retail client activity averaged around only 36% of all their buying and selling
OTHER = CORPORATE & INSTITUTIONAL ACTIVITY
NOTE:
23

2nd HOUR Total Volume 2.36 million shares
BROKER SELLS BUYS NET BUYS MARGIN

BROKER SELLS BUYS NET SELLS MARGIN
COMM 755,894 1,067,687 311,793 $0.00

HART 191,213 0 -191,213 na
SBAR

120,000 120,000 na

BELL 171,713 25,000 -146,713 $0.02
BBY 41,459 134,225 92,766 $0.14

MERL 230,956 88,155 -142,801 -$0.06
MSDW 801 47,892 47,091 $0.02

ANZIEX 124,072 62,000 -62,072 -$0.04
ETRD 94,356 132,941 38,585 -$0.02

SHAW 38,000 5,000 -33,000 $0.11
NORS 30,000 67,500 37,500 -$0.02

MACP 75,100 42,615 -32,485 $0.00
UBSW 8,331 24,951 16,620 -$0.05

CSUI 32,427 0 -32,427 #DIV/0!
SOSL 146,891 160,027 13,136 $0.01

MACQ 32,452 1,469 -30,983 $0.10
RBSM 0 9,500 9,500 na

DMG 148,617 128,417 -20,200 $0.01
OTHER 30,376 57,546 27,170 na

AIEX 144,692 138,263 -6,429 -$0.03





OTHER 63,642 47,804 -15,838 na
Total Net Buys 714,161
Total Net Sells 714,161

Brokers mostly acting for institutions and sophisticated investors again set the trading agendas during the
2
nd
hour with volumes lower than the 1
st
hour but nevertheless still high compared to more normal levels
of trading. DMGs net selling was replaced by selling by broker HART (again for institutions?) with BELL still
prominent as well. If indeed Harleys were acting for the same institutional entities it would likely
demonstrate a tag team approach to trading,
The trading churn and targeted selling set up the conditions where stop losses were triggered leading to
acceleration in the downward trend. Sophisticated investors with their superior information systems and
contacts in the industry would have known what those levels were and may have targeted them
specifically. The first hour saw prices retreat from $3.59 down to $3.06 which was then followed by a drop
to $2.83 in the second hour. The heavily engineered falls in the share price by brokers acting
predominantly for institutions set the scene for a capitulation by retail investors in the trading that
followed and over the ensuing days. The dominant feature of initial trading was the levels of churn
generated by trading algorithms set to high levels of buying and selling. Confusion associated with the
JORC reporting of resources created the perfect opportunity for the market to be managed sharply lower
which then took on a momentum all of its own as investor panic set in.
While it was true that retail investors were extremely confused about what happened to the high grade
copper that didnt seem to make it into the resource statement, they actually net bought shares on Aug 18.
However the relentless push lower by the trading churn of sophisticated investors eventually forced
irrational panic and a share price route with prices falling to around $1.60 and helping to convey an
impression that the Rocklands resource was second rate and/or sub-standard. None of which was true.
Trading Algorithms: The trading by prominent brokers on Aug 18 featured high usage of algobot trading
programs as shown in the table which summarizes total trades by prominent brokers for both the first
hour of trading as well as for the complete days trading. The market share (%) of trades is quite telling

1
st
Hour All Day
BROKER Total Trades % Share of all Trades Total Trades % Share of all Trades
COMM 778 17.5% 2,975 21.2%
DMG 466 10.5% 1,525 10.9%
SOSL 463 10.4% 1,454 10.4%
BBY 363 8.2% 936 6.7%
ETRD 285 6.4% 874 6.2%
UBSW 214 4.8% 723 5.2%
CITI 206 4.6% 718 5.1%
AIEX 139 3.1% 562 4.0%
MERL 121 2.7% 458 3.3%
ANZIEX 118 2.7% 442 3.2%
BELL 183 4.1% 433 3.1%
MACQ 139 3.1% 291 2.1%
MACP 79 1.8% 266 1.9%
24

Automatic trading algorithms facilitated buying and selling at rates on Aug 18 that appear to be consistent
across the entire days trading, and as such look to be governed by trading agendas rather than genuine
buying and selling. If the buying and selling is mostly on behalf of institutions there would be plenty of
shares to back up selling orders and plenty of purchasing power to support buy orders. However, the
reality was that much of the buying and selling simply cancelled each other out at registry level leading to
minimal impact on the register compared to the volumes of shares traded.
Algorithms looked to be set at rates to generate high volumes of buying and selling by some brokers with
others having their trading algorithms tuned similarly. Trading volumes could therefore increase
exponentially in that scenario and on Aug 18 and the days that followed they did exactly that. If the
brokers algorithms were representing much the same interests then it would suggest that the market was
heavily manipulated with prices stepped down to pre-set agendas. Audits would clarify the situation.
The consistency in the trading data numbers across the entire day is quite remarkable giving the
impression that number of shares bought and sold was incidental and that trading agendas were the key.
Trading agendas tend to be more closely affiliated with share price manipulation than genuine buying and
selling. Certainly the trading behaviours appear to be the exact opposite to what would be expected with
genuine buying and selling where orders get filled and so transactions cease.
TRADING ALGORITHMS AND HIGH FREQUENCY TRADING (hft): Also refer Appendix 1
The reasons responsible for anomalous Down Tick behaviour (and anomalous Up Tick behaviour) (Pg. 20)
look to be intricately associated with the high frequency trading algorithms referred to in the Alan Kohler
article provided as Appendix 1.
The fact that Down Ticks in price occur at an astonishing 94% (approx.) of the time at the sellers ASK price
across all trading in panic stricken markets (such as on Aug 18), as well as with buyer driven markets (such
as when M&G were accumulating shares, Refer Research Paper 6.3) and with practically every other
trading day as well, is statistically incongruous. It is certainly far removed from what would be logically
expected. The extreme bias is very likely to be related to the ability of trading algorithms to sense orders as
belonging to a trading partner or not with action taken in millionths of a second to either step back from
making a transaction or to intervene with an order (e.g. to force a Down Tick). Alan Kohler has actually
drawn attention to this issue by noting:


Equally they could also dart behind them if it meant withdrawing a selling order for example that was
representing a parcel of shares that wasnt really for sale.
The situation provides clear insights into a murky situation that may sit at the heart of share price
manipulation that is sanctioned and even facilitated by the current regulatory regime as per the bank of
computers sitting at ASX headquarters as mentioned in the article.
In the Australian Securities Exchange's Sydney data room, which is about the size of a big lounge room, there are six
"cuckoos". These are the banks of servers installed by high-frequency traders. They sit against the wall opposite the
ASX servers and each is connected directly into the host by a fat fibre optic pipe. Each cable is precisely the same
length by agreement with the ASX so that none gets an advantage; if one server is closer to the input, its cable is
looped around to lengthen it. Think about that: one less metre of optic fibre carrying data at 299.8 million metres per
second - that is, the speed of light - would give one share trader an unfair advantage over the rest. It suggests that
something pretty quick is going on.


It would appear that the stringent efforts to ensure that hft traders dont have any advantage over each
other in their quest for execution speed superiority, is at the expense of retail investors whose trades are
offered up as a fertile feeding ground for what clearly amounts to share price manipulation.
By operating at the speed of light high frequency traders can "feel" a buy order coming and can dart in front of them
25

REGISTRY ISSUES SURROUNDING AUG 18 TRADING
The table summarises trading volumes immediately before Aug 18 (there was a trading halt on Aug 16
prior to the commencement of trading) together with the registry activity associated with changes to
shareholder accounts up to the settlement of trades following Aug 18 which occurred on Aug 23. The
column ASTC movements represent shareholder movements organized by ASTC settlement participants
which mainly represent institutional dealings.
Trading Day
2010
Daily Volume T Plus 3
Settlement Date
ASTC Registry Movements
SELLS BUYS OFF ON
Wednesday Aug 11
503,800 503,800
Monday Aug 16
1,116,344 874,002
Thursday Aug 12
623,800 623,800
Tuesday Aug 17
967,699 1,137,808
Friday Aug 13
560,400 560,400
Wednesday Aug 18
1,063,003 1,100,586
Monday Aug 16
0 0
Thursday Aug 19
903,269 1,111,269
Tuesday Aug 17
0 0
Friday Aug 20
1,005,856 916,829
Wednesday Aug 18
16,466,300 16,466,300
Monday Aug 23
5,323,459 2,273,350

The table contains several anomalies including:
The volumes of institutional share movements accompanying trading for Aug 11, 12 & 13 are
approximately double the trading volumes recorded on those days suggesting high levels of share
exchanges taking place separate to ASX buying and selling;
The volumes associated with institutional share flows remained more or less unchanged whether
shares were traded 3 days earlier or not. (e.g. settlements on Aug 19 & Aug 20 shown highlighted
correspond to zero trading due to a trading halt, yet the share flows are commensurate with what
occurred following Aug 11, 12 & 13 when trading did take place)
Trading volumes increased by 2,838% in going from 560,400 (Aug 13) to 16.466 million (Aug 18) but
only resulted in a 401% increase in movements OFF the register by Institutions. Similarly the almost
3000% increase in trading volumes only resulted in movements ON to the register by institutional
holdings increasing by 107%.
Movements ON to the register (2,273,350) shares when 16.47 million shares traded were only
marginally up on the 916,829 shares when zero shares traded on Tues 17)
There is no way of knowing without audits what proportion of the 5.3 million shares moved OFF the
register on Aug 23 related to sales made on Aug 18 and what proportion relates to Off market
share transfers. i.e. Critical information when attempting to establish how much genuine selling
took place.
The numbers demonstrate odd registry behaviour prior to the Aug 18 announcement and an extremely
unusual registry response to the large volumes of buying and selling that occurred following the
announcement. Again, the behaviours are far removed from what would be expected from genuine buying
and selling and further illustrate an apparent absence of integrity regarding dealings in the market and the
corresponding impact that trading has on the company register.

26

The Trading Halt and Other Issues:

CuDeco announced a trading halt before the commencement of trading on Monday Aug 16, in
preparation for the release of a resource upgrade for Rocklands. Trading didnt take place on Aug
16 or Aug 17 and resumed at 11.20 am on Wednesday Aug 18.

In the period late July, early August up until the trading halt, there were several indications to
suggest that leaked information was circulating throughout broker circles and around the market
generally and that insiders were active in preparing for the release of the resource upgrade.

Incidents included:
o Rumours of an exposed short position with the company being approached for a placement
for around 1 million shares to unwind the position;
o Legal action initiated by the company against members of a public share forum, thought to
be former employees of the company, for denigrating the companys resource and referring
to likely low JORC estimates;
o Other members of share forums being unerringly accurate with their forecasts of what the
JORC resource would contain;
o Unsolicited emails to a significant shareholder again referring to low JORC numbers;
o Market rumours of a large shareholder wanting to sell approx. 1 million shares which
turned out to be correct with the same holding forming the basis of selling by a prominent
broker on Aug 18;
o Rumours concerning widely disparate views between the external consultants and key
company geological and exploration reps regarding Rocklands, with the consultants not
visiting the site;
o Rumours suggesting that the resource consultants discussed Rocklands issues with a
member of the ASX JORC committee before releasing their findings.

The above incidents could be verified by regulatory officials with the authority to access
information now concealed from public view and the authority to question key personnel.

The period leading up to the resource announcement certainly suggests that insiders were active
and that industry professionals knew about the likelihood of low resource estimates being
delivered. They would also have had the expertise to understand how a strong nugget effect ore
body like Rocklands would be harshly discounted. The negativity generated in broker circles and on
public forums prior to the resource being released never addressed the issues surrounding
accurately quantifying nugget effect mineralization and the need for bulk mining trials or indeed
the start of mining operations to accurately assess grades.

The trading halt combined with informed views about low grades gave plenty of opportunity for a
market raid to be organized with a spurious broker report prepared and ready to go when trading
resumed.

27

Chapter 6.1 SECTION 2.4.1 SEPTEMBER 2010 TRADING:
September showed similar inconsistency between trading and settlements volumes as occurred in June,
July and early August where registry activity was far higher than the buying and selling that occurred in the
market.


2010
ASX BROKER BUYING &
SELLING
SHAREHOLDER REGISTRY
MOVEMENTS
Register Activity as a
% of Broker Activity

SELLS BUYS OFF ON
Sept 24,023,623 24,023,623 43,644,290 45,340,980 185%

The trading behaviours responsible for almost a doubling of registry activity during September compared
to buying and selling in the market also need to be identified before a proper assessment of trading can
occur. Certainly any analysis from the information that is available raises more questions than answers.
The tables below show a breakdown of shareholder activity over September with around 70% of all trading
associated with institutional activity.
















Traded volumes
in Sept were only
a quarter of that
for August
Abnormally high?
A Breakdown of Registry Activity for
September 2010

SHAREHOLDERS OFF ON
Retail Entities
7,997,130 8,133,962
Broker Nominees 5,265,251 5,523,306
Sub Total
13,262,381 13,657,268
Institutions
30,381,909 31,683,712
Total Registry
43,644,290 45,340,980

Institutions accounted for around 70% of the
total share movements occurring in September.
A Reconciliation of Broker Trades and Shareholder
Registry Activity, September 2010



SALES BUYS
All Broker Activity
24,023,623 24,023,623
Less
OFF ON
Retail & Broker Trades
13,262,381 13,657,268
Leaves a SALES BUYS
Balance of Broker Trades
10,761,242 10,366,355
To account for OFF ON
Institutional Trades
30,381,909 31,683,712

A large volume of shares again appears to have changed hands away from the ASX market during September. A
reconciliation of trading data shows around 10+ million buys and sells as being available to support institutional
trading, yet institutions have exchanged around 30+ million shares.
Presumably the additional transactions by institutions were associated with off market share exchanges using
for example Dark Pool trading as explained in Sect 2.4.3.
The situation appears extremely ad hoc and suggests that the market may have been compromised by the
trading activities requiring additional large volumes of shares transferred off market.
Approx.
20 mill
Shortfall
Since share flows are far in excess of the broker trades available, the
bulk of the transfers are likely to have occurred off market
The increases in registry activity may also have something to do with the unorthodox covering of short
positions on the registry as mentioned for June and July. If so, such pressure on the register would
almost certainly have had implications for the integrity of the market with likely attempts to ensure
that exposed short positions didnt become more vulnerable through share price increases.

28

Chapter 6.1 Section 2.4.2 BROKER NOMINEE ACCOUNTS
The trading associated with Broker Nominee entities is decidedly unclear. The accounts can be used for a
multitude of purposes with one explanation referring to them as the vehicle for the processing of short
sales. In that scenario movements into a Broker Nominee Entity might be from stock lenders providing
stock to support settlements, and movements OFF could be acting for the short seller in delivering stock to
purchases. Alternatively, when covering is done, movements ON would be the receipt of stock from
covering purchases, and movements OFF would be to return the stock to lenders. As such the movements
are settlement transaction and not market movements and shouldnt be offset against broker buying and
selling.
In an attempt to view the situation from all perspectives even treating the Broker Nominee volumes as not
being market trades (but facilitating settlements) still leaves a substantial shortfall.







The reality surrounding Broker Nominee entity share movements is possibly somewhere between
representing some short selling transfers, as well as acting for clients with their trading as well as
representing brokers themselves with their in-house trading. The mix of transactions for Broker Nominee
accounts may also vary from broker to broker.
There is also the issue with Nominee Accounts that they may be providing legal cover for stepping around
trading guidelines. For example wash trades have been described in the footnote on Pg. 15 as:
"a securities transaction which involves no change in the beneficial ownership of the security."
Broker Nominee trading or even Institutional trading may be masking a multitude of transgressions. The
omnibus accounts represent a multitude of anonymous interests, where massive numbers of buying and
selling orders are conducted on their behalf through a large range of brokers and then forwarded to
settlement specialists to be collated and settled. Often there is generally no change to the beneficial
ownership of the security even though in the wash up to each days trading individual nominee holdings
might be adjusted up or down substantially and as required to balance the numbers. Trading certainly
appears to be absorbed and sanitized by the settlement process. The broker nominee or institutional
trading vehicle as a whole often remains relatively unchanged despite prolific trading volumes, but may be
avoiding wash trade scrutiny because of legal loopholes constituting what a nominee entity can and
cannot do.


A Reconciliation of Broker Trades and Shareholder
Registry Activity, September 2010



SALES BUYS
All Broker Activity
24,023,623 24,023,623
Less
OFF ON
Retail Trades
7,997,130 8,133,962
Leaves a SALES BUYS
Balance of Broker Trades
16,026,493 15,889,661
To account for OFF ON
Institutional Trades
30,381,909 31,683,712

Assuming Broker Nominee
movements are settlement
transactions rather than
market trades still leaves a
large shortfall when
accounting for institutional
share flows
Take 2:
The situation is decidedly unclear, but one thing for certain is that if individual traders were to trade
collusively in swapping shares back and forth amongst themselves day after day, month after month in both
on market and off market trading activity, and with their holdings more or less remaining unchanged by all of
the activity, they would be most certainly brought to account for illegal stock manipulation.
29

The following link spells out issues associated with Broker Nominee accounts and although based on the
American market, there would be similarities with the ASX.
http://the-international-investor.com/investment-faq/stock-broker-account-safety
<EXCERPTS> Re: Pooled Nominee Accounts
Shares may be held within pooled nominee accounts, also known as omnibus accounts. The shares are
usually held in electronic form, but the name that appears in the records as the legal owner is a nominee
company, which is usually owned by your stock broker.

Re: Designated Nominee or Sole Nominee Accounts
It is unusual for individual investors to use this kind of account they are more commonly employed by
institutions. The stocks are registered in the name of a nominee company, but they are not bundled
together with other clients holdings. Your nominee account is used for holding your assets only. Your
name does not appear on the register of shareholders.
How Nominee Accounts work
Your shares are legally owned by a non-trading subsidiary of your stock broker, known as a nominee
company. However, while the nominee company is the legal owner of the shares, you are the beneficial
owner, meaning that you have rights over them. Your stock broker will keep records of which client is the
beneficial owner of all the shares held by the nominee company, trade your holdings according to your
instructions and pass cash from the sale of your shares or from dividends on to you.
Having the shares owned by a non-trading company rather than the main brokerage business means that
your assets are legally separate from the assets and liabilities of your stock broker. The segregation
between client assets and company assets is crucial to how this arrangement operates.
If the broker goes bankrupt, your stocks are still your property. The creditors cant touch them. If your
investments were just assets of your stock broker and could be claimed by its creditors, you wouldnt have
any security at all.

In theory, segregation ensures your investments are safe. However, cases such as MF Global, where clients
in segregated accounts lost money, demonstrate that it doesnt always work.
Why account segregation doesnt mean safety
Segregation is effectively an honour system, where the broker is expected to do the right thing and keep
client and firm assets separate. In some cases, regulators and exchanges will be checking up on their
holdings regularly, but obviously they cant keep an eye on whats in which account all the time.

So the system is open to fraud and abuse. If your stock broker decides to sell or move shares from nominee
accounts, they will be able to do so.

Under most systems, regardless of what name the stocks are in, your stock broker still has access to them
to sell them otherwise they wouldnt be able to carry out your trades. So that means they could choose
to sell them fraudulently without your instructions, just as they could in a nominee account.
Its possible that in a fraud, pooled nominee accounts would be raided before directly registered ones. And
its likely that in the event that a stock broker collapses, investors with shares in their name would get
access to their investments much more quickly than those using pooled nominee accounts, because the
ownership of these shares would be much clearer. <END EXCERPTS>





The relevance of the above to the anomalous registry trends identified with CuDeco relates to the possible
use of pooled accounts by brokers but without client authorization. Not so much for the selling of client
shares but perhaps brokers are dipping into pooled client holdings for temporary lending purposes to
cover for short sales. i.e. Such activity of course would be illegal as short sales are meant to be backed up
by certified lending agreements to ensure delivery.

Subsequent sales by the clients whose stock has been substituted may then require alternate transfers of
securities to replace the missing stock thus increasing the number of switches occurring on the register
and helping to explain why settlement volumes are much larger than would be reasonably expected.

30

Chapter 6.1 SECTION 2.4.3 DARK POOLS
Another possibility to explain variations in broker trading and share flows on the register relates to the use
of Dark Pools by institutions which refers to large share exchanges taking place between brokers but
away from the ASX market. The trading via Dark Pools apparently enables large volumes of shares to be
efficiently exchanged off market without impacting the market.
The following link provides some information about dark pools with some excerpts also provided below.
http://modernir.com/what-are-dark-pools.aspx
<Excerpt>What are dark pools?
The term dark pool refers to a place where trading liquidity -- a supply of shares --exists that is not
displayed for all to see. Think of dark pools as members-only platforms for trading participants wishing to
execute larger trades without advertising interest through an open-book, or displayed, position.
There are independent dark pools like Pipeline, Liquidnet and ITG Posit, and broker-operated dark pools
such as Credit Suisses CrossFinder and Goldman Sachss Sigma X. The anonymity afforded to investors and
traders through dark pools protects not only the parties identities, but also the sensitivity of share prices to
movement when any sizeable demand surfaces.
Dark pools serve a highly useful purpose. They enable large institutional participants to move sizeable
amounts of liquidity without fighting all the trading intermediation that distorts stock prices. Some are
concerned that dark pools themselves garble pricing mechanisms and present the risk of a two-tiered
market between displayed and dark liquidity. But all markets are two-tiered. For any product, there are
wholesale and retail channels. It is the same with stocks. There are wholesale and retail brokers, upstairs
and floor trading. If anything, dark pools are a response to regulatory efforts to create a single market for
all participants, which is contrary to human nature and at odds with the diverse purposes and time horizons
that typify trading transactions.
The Bottom line: dark pools are a natural response to pricing inefficiency and over- intermediation. <End>


In CuDecos case if registry imbalances are in fact related to trading by institutions via Dark pools, the
arguments extolling the virtue of Dark Pools are not at all convincing because of the style of trading taking
place on the ASX. Trading in CuDeco is characterized by non-genuine trades where large volumes of shares
are merely swapped back and forth ad infinitum both in trading on the ASX and in share exchanges
occurring separate to the ASX, and often without an apparent profit motive. At face value, institutions
could in all likelihood achieve similar monetary returns by sending each other a cheque week about,
thereby avoiding all of the registry activity such as that summarized in the table below for the years 2010
and 2011.

INSTITUTIONAL ENTITY OFF ON NET
CITICORP NOMINEES 95,279,683 94,824,912 -454,771
NATIONAL NOMINEES 79,930,822 80,508,622 577,800
HSBC CUSTODY NOMINEES 36,469,443 65,991,585 29,522,142
J P MORGAN NOMINEES 11,163,200 26,227,492 15,064,292
JP MORGAN NOMINEES 5,710,554 8,377,092 2,666,538
ANZ NOMINEES 13,544,264 8,800,260 -4,744,004
TOTALS
242,097,966 284,729,963 42,631,997
The accumulation up
until Dec 31, 2011
included 31.2 mill
placement shares
ANZ ceased trading in
Oct 2010, with JP
Morgan taking over
their role (and shares)
31

Institutions are seen to have engaged in trading extremely large volumes of shares back and forth amongst
themselves although how much activity has been associated with dark pools and how much is related to
ASX trading is an unknown. The lack of transparency is a real concern as it means that the system is wide
open to abuse. The following observations apply to the trading by institutions over the two year period:
Ignoring placements, institutions have continuously traded a mammoth 240 mill shares back and
forth amongst themselves;
The high volumes necessarily require a high degree of co-operation and willingness to take the
opposing side of each others buying and selling orders;
Institutions, mainly on behalf of M&G accumulated over 11 million shares from retail investors;
The shares picked up by substantial holders (i.e. the M&G Group and Oceanwide International) are
held on their behalf through JP Morgan and HSBC Nominees, with 31.2 million of those shares
secured by placements;
Institutions can be regarded as effectively controlling pricing outcomes with their trading as their
combined weight of buying and selling has dominated the market;
The practice of selling for a loss through one group of brokers but effectively repurchasing the
shares through another group of brokers would suggest that trading profits and losses cancel out to
a large extent when collated for settlement, and would explain why holdings remain more or less
unchanged despite heavy trading activity;
The system appears to be able to accommodate institutions effectively buying and selling to either
themselves or to other institutions with the shares being re-purchased at a later stage, either
through the market or perhaps through dark pools. Such collusive activity would certainly assist any
attempts designed to manage the share price;
The dominant trading profiles of institutions despite ongoing confusion about the profitability of
their trades, suggests that there are other agendas behind their trading activity. As sophisticated
and informed investors, clearly they wouldnt be involved to the extent they are unless the stock
had excellent prospects and there were reasons extending beyond short term profit considerations
responsible for their peculiar trading profiles;
It needs to be understood that Nominee Entities sitting in pooled accounts are passive investors
and not requesting for their holdings to be sold or added to. They have signed over trading rights to
the managed fund they have opted for and their shares become part of a pool of shares used to
support institutional trading strategies. The trading agendas and the discretion for buying and
selling reside with the fund manager. Any losses or profits are distributed amongst the Nominee
Entities under management who might include global super funds, indexed funds, alpha funds,
sophisticated investors, investment bank funds, private & public companies and so on.
High volume institutional share exchanges of CDU securities through Dark Pools would be more
likely to be involved with redressing imbalances that might occur through trading in the ASX
market, rather than being genuine exchanges between genuine buyers and sellers as per the
previous link on dark pools. Certainly, adjusting portfolio balances would be ideally suited to dark
pool activity if managing the share price was an ongoing theme and shares sold to friendlies
needed to be retrieved with no-one any the wiser. Such an arrangement would also offer the
convenience of being able to re-balance holdings at prices chosen to suit all parties.
A cynic may also observe that the prolific trading by fund managers without an obvious profit
motive might also be an opportunity to earn commissions on top of management fees.




The Alan Kohler article included as Appendix 1 also points also out to a ludicrous situation where he mentions,

The joke is that in many cases, the same investment banks are doing both the high-frequency trading and running the
dark pools; they are causing the problem and solving it, each for a handsome profit

Perhaps the joke has more to do with the fact that the ASX has become a casino with house rules favouring a particular
type of client at the expense of all other investors, yet still masquerades under the guise of fair trading and
transparency? The situation requires an investigation and a proper resolution to both trading anomalies and operational
issues that strike at the very foundation of the market. i.e. market integrity.

32

Chapter 6.1 SECTION 2.5 OCTOBER 2010 TRADING:
2010
ASX BROKER BUYING &
SELLING
SHAREHOLDER REGISTRY
MOVEMENTS
Register Activity as a
% of Broker Activity

SELLS BUYS OFF ON
Oct 32,051,119 32,051,119 28,123,407 28,319,927
88%
#




#
NOTE: The 88% ratio applies to register volumes associated with trading only and so excludes a 10 million
share placement in October negotiated by the company with M&G Limited of the Vanguard Group.
The number of shares traded in October and the number of registry movements that resulted was
approximately in balance suggesting that trading was back to more normal levels such as at the beginning
of the year. It draws further attention however to why trading wasnt normal in June, July and September,
and what actually took place during August. In the absence of plausible explanations of irregularities in
registry data it would appear that trading was likely to be severely compromised both before the resource
announcement was released to the market on Aug 18 and immediately afterwards.

Chapter 6.1 Section 2.6: NOVEMBER 2010 TRADING:

2010
ASX BROKER BUYING &
SELLING
SHAREHOLDER REGISTRY
MOVEMENTS
Register Activity as a
% of Broker Activity
Month SELLS BUYS OFF ON
Nov 42,508,669 42,508,669 29,407,542 29,631,683 69%

Following the October share placement to M&G of the Vanguard Group, further shares were acquired by
the group from on-market buying. The buying commenced on Oct 29 with the purchase of 884,380 shares
at an average price of $2.32 and continued through November and December. Interestingly, genuine
buying by M&G more than doubled the share price which stood at $2.18 at the commencement of trading
on Oct 29 and closed at $4.59 on Dec 31, 2010.
The data trends in November were remarkably similar to what occurred in August in that high volumes of
buying and selling did not impact the register. It is of interest that when significant market events are
playing out such as massive destabilization in August and strong accumulation in September, the significant
events are accompanied by a blow out in trading volumes where the incidence of large volumes of wash
trades not impacting the register reaches record levels. Unlike August trading however where no
significant net changes to holdings occurred despite the enormous volumes of shares churned through the
market, November showed strong accumulation. M&G were the accumulators with shares held on their
behalf in JP Morgan Nominees and HSBC Nominees.
The data suggests a strong link between trading churn and control over the share price in pursuit of
corporate objectives with control perhaps more aptly described by the term market manipulation. As
such, audits by the regulator would be necessary to identify the anonymous entities who have exploited
the trading and settlement systems to significantly distort the market while pursuing their trading agendas.
The movements ON to the register do
not include a 10 million share placement
Abnormally low!
33







On Market Buying by M&G of the Vanguard Group during November:
In the period Oct 29 to November 30, 2010, M&G of the Vanguard Group purchased 8.54 million shares
taking the share price from $2.18 to $3.72 (a 71% increase). The purchase of shares by the Vanguard Group
reveals a good deal about the market dynamics associated with day to day trading. It adds further insights
about the relationships between institutional interests and how multiple brokers appear to progress
institutional aims through what might be regarded as collusive trading activity.
The success by the group in accumulating shares cheaply, firstly from the company through a placement
and secondly from the market needs to be closely scrutinized. Their success in amassing a major stake
strongly relates to the questionable dynamics of trading accompanying the JORC code confusion; confusion
that was responsible for many retail investors losing their conviction about Rocklands thus paving the way
for cheap acquisitions by the M&G group.
A full account of the M&G buying and the implications for a market system heavily weighted against the
interests of retail investors is summarized in Research Paper 6.3 titled: Registry Anomalies Associated with
M&G Buying On-Market

Chapter 6.1 SECTION 2.7 DECEMBER 2010 TRADING:
M&G purchased 10.25 million shares from the market in the period Oct 29 to Dec 14 with most purchases
occurring by the end of November. Only 16.7% of their buying took place in December 2010. Their monthly
buying is summarized below.
Oct 29 884,380 8.6%
Nov 7,656,295 74.7%
Dec 1,710,783 16.7%
Total
10,251,458 100%

With most of the M&G buying out of the way, December trading was again characterized by excess registry
activity compared to the buying and selling taking place in the market although to a lesser extent than
what occurred in September.
2010
ASX BROKER BUYING &
SELLING
SHAREHOLDER REGISTRY
MOVEMENTS
Register Activity as a
% of Broker Activity

SELLS BUYS OFF ON
Dec 15,578,750 15,578,750 20,528,663 20,620,404 +132%
Shares changing hands in volumes considerably higher than the trading in the market is seen to be a
recurring theme throughout 2010, and represents a trend that requires proper explanations that only
audits can deliver.
83.3% of the M&G buying
was completed by the end
of November
Importantly, the acquisition of CDU shares by the M&G Group was prompted by the same information
released to the market on Aug 18 that was used to precipitate a share price collapse and yet their genuine
buying pushed prices back to $4.59. Vanguard is a leading investing group with funds under management in
the resources sector amongst the largest in the world. Their decision to acquire a significant position in the
company further suggests that the JORC compliant resource released on Aug 18 completely undervalued the
companys Rocklands project. Also, there is the possibility that the market activity during August seriously
destabilized the company preparing the way for a major group to be able to obtain a substantial holding. In
retrospect whether deliberate or fortuitous that is exactly what has occurred.
34

Chapter 6.1 SECTION 3 ANALYSIS OF TRADING TRENDS - 2011
3.1 INTRO
Trading throughout 2011 was again associated with distortions between the volumes of shares changing
hands on the register compared to buying and selling occurring in the market.
The situation is complicated by the fact that the stock didnt trade for extended periods of time because of
voluntary suspension. Extended trading suspensions were requested by the company while it was
negotiating funding arrangements for a major new mine to be constructed at Rocklands.
A monthly summary of broker data and registry data for 2011 is provided below. Again, the registry data
focusses only on market activity resulting in shareholder changes. It does not include share movements
associated with broker settlements.

2011
ASX BROKER BUYING &
SELLING
SHAREHOLDER REGISTRY
MOVEMENTS
Register Activity
as a % of Broker
Activity
Month SELLS BUYS OFF ON
Jan 7,494,594 7,494,594 8,754,218 8,771,819 117%
Feb 6,961,872 6,961,872 16,860,995 17,120,090 244%
Mar 4,281,778 4,281,778 16,562,824 15,860,722 379%
Apr 3,933,436 3,933,436 4,416,263 4,576,597 114%
May 10,413,415 10,413,415 17,501,763 17,679,456 169%
Jun 9,002,175 9,002,175 13,254,025 13,023,909 146%
Jul 8,618,502 8,618,502 19,798,850 20,264,037 232%
Aug 8,554,067 8,554,067 23,002,052 23,186,120 270%
Sept 0 0 24,575,211 24,512,203 na
Oct 0 0 2,262,073 2,484,832 na
Nov 12,294,931 12,294,931 15,852,072 15,112,710 126%
Dec 9,543,253 9,543,253 16,187,454 16,597,278 172%

January showed an increase in registry activity over trading in the market however the trend became quite
pronounced in February. There was more than twice the number of shareholder changes during February
compared to buying and selling in the market. It represents another month where the trading trends are
removed from what would be expected from normal trading.








ABNORMAL?
Funding and
Resource
Upgrade
Further funding
obtained and a
mining licence
granted
Funding talks
A Breakdown of Registry Activity for
February 2011

SHAREHOLDERS OFF ON
Retail Entities
2,865,657 3,258,440
Broker Nominees
4,172,364 4,228,561
Sub Total
7,038,021 7,487,001
Institutions
9,822,974 9,633,089
Registry Totals
16,860,995 17,120,090

Institutions accounted for around 58% of the total
share movements occurring in Feb 2011.
A Reconciliation of Broker Trades and Shareholder
Registry Activity, February 2011



SALES BUYS
All Broker Activity
6,961,872 6,961,872
Less
OFF ON
Retail & Broker Trades
7,038,021 7,487,001
Leaves a SALES BUYS
Balance of Broker Trades
-76,149 -525,129
To account for OFF ON
Institutional Trades
9,822,974 9,633,089

Data anomalies were again associated with February trading. After allowing for retail and broker transactions there
are zero trades available from which to reconcile share movements recorded by institutions. Institutional share flows
amounted to approx. 10 million shares moved OFF and ON the register.
Even if the volumes associated with Broker Nominee entities arent counted (as some transactions may be assisting
short selling settlements) there is still a substantial shortfall when attempting to reconcile the trading & registry data.
Usual
Shortfall
35

Chapter 6.1 SECTION 3.2 TRADING DURING MARCH and APRIL 2011
2011 ASX BROKER BUYING & SELLING SHAREHOLDER REGISTRY MOVEMENTS Index
SELLS BUYS OFF ON %
Mar 4,281,778 4,281,778 16,562,824 15,860,722 379%
Apr 3,933,436 3,933,436 4,416,263 4,576,597 114%

The obvious anomaly in March is associated with the stock entering voluntary suspension on March 10 but
with large volumes of shares continuing to change hands on the register up until April 27 when the stock
resumed trading. The registry activity is quite revealing and may have implications for all settlements
taking place. It is summarized in Research Paper 6.2 titled Registry Anomalies Coinciding with CuDeco in
Voluntary Suspension
Chapter 6.1 SECTION 3.3: TRADING DURING MAY, JUNE and JULY 2011
2011 ASX BROKER BUYING & SELLING SHAREHOLDER REGISTRY MOVEMENTS Index
SELLS BUYS OFF ON
May
10,413,415 10,413,415 17,501,763 17,679,456 169%
Jun
9,002,175 9,002,175 13,254,025 13,023,909 146%
Jul
8,618,502 8,618,502 19,798,850 20,264,037 232%

Trading in May, June and July followed several strong announcements by the company relating to:
Securement of a 20 year Off-Take Agreement
Securement of a cornerstone investor and substantial amounts of funding at a premium to the
share price
A strong resource upgrade to what was tabled on Aug 18, 2010 lifting measured and indicated
resources from 30 mt @ 1.24% Cu equiv to 30 mt at 1.7% Cu equiv representing an additional $1.1
Billion of in-ground copper resources. The resource upgrade resulted from a re-interpretation of
the drilling and geological data base with a relatively small amount of additional drilling done as
well. The substantial upgrade in such a small amount of time further demonstrates serious issues
with the resource statement prepared by Hellman and Schofield in Aug 2010.
Additional bulk trials returning in excess of 4% Cu equiv further demonstrating inadequacies
associated with the JORC modelling done for a resource characterized by an unusually strong
nugget effect.
Securement of rail and port facilities for the eventual shipping of a range of concentrate products
from Rocklands
Yet all announcements had minimal effect on the share price with trading churn by institutions again the
dominant feature of trading. The trading churn was also associated with anomalous volumes of shares
being transferred back and forth on the register for all 3 months and particularly in July.






A Breakdown of Registry Activity for
July 2011

SHAREHOLDERS OFF ON
Retail Entities
3,351,557 1,972,396
Broker Nominees 5,118,143 7,700,351
Sub Total
8,469,700 9,672,747
Institutions
11,329,150 10,591,290
Registry Totals
19,798,850 20,264,037

.
A Reconciliation of Broker Trades and Shareholder
Registry Activity, July 2011


SALES BUYS
All Broker Activity
8,618,502 8,618,502
Less
OFF ON
Retail & Broker Trades
8,469,700 9,672,747
Leaves a SALES BUYS
Balance of Broker Trades
148,802 -1,054,245
To account for OFF ON
Institutional Trades
11,329,150 10,591,290

Again even allowing for some uncertainty about whether Broker Nominee trades represent settlement share
flows or genuine trades by clients there is still a lack of buying & selling correlating to institutional share flows.
Large
Shortfall
36

Chapter 6.1 SECTION 3.4 TRADING DURING AUGUST 2011
2011 ASX BROKER BUYING & SELLING SHAREHOLDER REGISTRY MOVEMENTS Index
SELLS BUYS OFF ON
Aug 8,554,067 8,554,067 23,002,052 23,186,120 270%

Trading data during August 2011 is complicated slightly by the company going into voluntary suspension on
Aug 18. Allowing for T plus 3 registry data and ignoring the rest of the month when there were an
additional 1.396 million OFF movements and 1.543 million ON movements provides the following
registry/broker comparison numbers.
2011 ASX BROKER BUYING & SELLING SHAREHOLDER REGISTRY MOVEMENTS Index
SELLS BUYS OFF ON
Aug 8,554,067 8,554,067 21,605,915 21,642,936 253%

Even after adjusting for share flows while the company was in suspension the data remains anomalous
with broker trading far exceeded by registry activity; the recurring theme during 2011. A reconciliation of
broker trading and shareholder registry movements reveals the familiar shortfall in buying and selling to
justify the registry changes of shareholders with the trading of institutions again providing the most
confusion in terms of reconciling trading data.














The company went into voluntary suspension on Aug 18 while negotiating further funding agreements. It
remained suspended until October 31
st
, 2011 when it resumed trading after announcing a further capital
raising of $83.6 million. Again the share placement was achieved at a strong premium to the share price
demonstrating the failure of the market as a fair pricing mechanism.
A Breakdown of Registry Activity for
August 2011

SHAREHOLDERS OFF ON
Retail Entities
3,919,461 4,741,397
Broker Nominees
5,873,351 5,982,190
Sub Total
9,792,812 10,723,587
Institutions 11,813,103 10,919,349
Total
21,605,915 21,642,936

.
A Reconciliation of Broker Trades and Shareholder
Registry Activity, August 2011



SALES BUYS
All Broker Activity
8,554,067 8,554,067
Less
OFF ON
Retail & Broker Trades
9,792,812 10,723,587
Leaves a SALES BUYS
Balance of Broker Trades
-1,238,745 -2,169,520
To account for OFF ON
Institutional Trades 11,813,103 10,919,349

Shortfall
If the elevated registry movements occurring across a number of months are related to short selling activity
then the persistently anomalous data trends may be suggesting that:
Levels of shorting activity are being grossly under reported by the ASX and ASIC;
Shorting is taking place without appropriate stock lending arrangements in place and is being covered
using unorthodox methods (e.g. accessing the shares in pooled funds under management but without
consent);
Regulations that make the short selling of shares permissible as a means for efficient price discovery
are being abused and instead are facilitating large scale share price manipulation in much the same
way as naked short selling was before it was banned.
37

Chapter 6.1 SECTION 3.5 REGISTRY MOVEMENTS DURING SEPTEMBER and OCTOBER 2011

2011 ASX BROKER BUYING & SELLING SHAREHOLDER REGISTRY MOVEMENTS Index
SELLS BUYS OFF ON
Sept 0 0 24,575,211 24,512,203 na
Sept 0 0 3,375,211 3,312,203 na
Oct 0 0 2,262,073 2,484,832 na

The share flows in September were boosted by the issuance of placement shares to Oceanwide
International (21.2 million shares) thus completing the funding agreement announced on April 27.
Additional share movements in September and October while the stock wasnt trading were similar to
what happened when the stock was suspended during March and April although not as pronounced. The
reduction draws further attention to the background conditions associated with March and April that
required large volumes of shares transferred back and forth between institutional interests while the stock
wasnt trading. The background conditions apparently werent present in October & September, (at least
not to the same extent), when the stock was again voluntarily suspended.

Chapter 6.1 SECTION 3.6: NOVEMBER & DECEMBER TRADING
2011 ASX BROKER BUYING & SELLING SHAREHOLDER REGISTRY MOVEMENTS Index
SELLS BUYS OFF ON
Nov 12,294,931 12,294,931 15,852,072 15,112,710 126%
Dec 9,543,253 9,543,253 16,187,454 16,597,278 172%

Trading during November and December was associated with break throughs by the company on a number
of fronts which effectively guaranteed that it was going to be able to make the transition from explorer to
miner. Major announcements during this period included:
Securing $86.3 million of funding from New Apex Asia Investment at a premium to the share price
Securing $32 million of additional funding from M&G at a premium to the share price
The granting of a mining licence by the QLD government for a 30 year mine at Rocklands
Several developments with exploration including high grade mineralization at Fairfield separate to
the Rocklands initial mining resource, and spectacular gold and rare earth mineralization at Wilgar
All announcements again received muted responses in the market with an eventual rise immediately
capped and pushed back down. All of the positive announcements saw the open short position increase
from 1.64 million shares on Oct 31, 2011 to 2.3 million shares on Dec 29, 2011. The de-risking
announcements were therefore countered by 649,871 of new short positions despite an undervalued
share price (based on the resource and comparisons to peers) even before the announcements.
Registry movements and broker volumes in November were more closely in balance with what might be
expected from normal trading with the substantial net selling by retail investors after a lengthy period of
suspension keeping the share price under pressure. The net retail selling was led by:
COMM 694,271 BELL 495,931 ETRD 210,438
MACQ 144,082 SBAR 140,045 AIEX 136,356

Includes
placement
stock
Without
placement
stock
Registry activity again showed increases in December compared to the levels of buying and selling taking place
in the market indicating that short selling was possibly taking over from retail selling to maintain a cap on prices.

38









Chapter 6.1 SECTION 4: SUMMARY POINTS
In the absence of acceptable and/or legitimate explanations to explain why persistent anomalies are
associated with broker and registry data over 2 years of trading, the data trends may be suggesting that:
The share price is being manipulated and that the company has been subjected to an extensive
campaign of corporate targeting;
Day to day trading is tainted by the trading agendas of possibly a select few who are colluding with
their buying and selling and thereby distorting the function of the market and making it unfair for other
participants.
As previously mentioned, excessive registry activity may be suggesting high levels of short positions being
covered on a temporary basis with rotations back and forth between entities to satisfy settlement
deadlines. If so then then such containment of exposed positions is likely to be complemented in the
market with price capping to prevent exposed positions becoming more exposed. Certainly such activity
would explain why promising announcements are almost always sold down and why share price gains are
rarely able to be sustained.
The possibility of trading via dark pools to restore portfolio balances after shares are sold to friendlies to
limit price gains, also fits well with the observed data trends. Audits would establish how extensive this
activity is and whether trading guidelines have been breached or whether guidelines even address the
opportunity for dark pools being used to aid share price manipulation. Indeed the shareholder research
may have uncovered a prima facie case for a complete review of existing trading guidelines.

Further observations in regard to CDU data anomalies include:
1. Whatever the reasons, 24 months of anomalous data trends signifies that trading is far removed
from what could be reasonably expected from the normal exchange of shares between genuine
buyers and sellers;
2. It is likely that entities are using the settlement system in ways for which it was never intended in
pursuit of corporate agendas and in so doing have compromised both the markets integrity and its
ability to provide fair price discovery;
A Breakdown of Registry Activity for
December 2011

SHAREHOLDERS OFF ON
Retail Entities
3,481,286 1,991,329
Broker Nominees
3,279,674 3,634,972
Sub Total
6,760,960 5,626,301
Institutions
9,426,494 10,970,977
Registry Totals
16,187,454 16,597,278

.
A Reconciliation of Broker Trades and Shareholder
Registry December, August 2011


SALES BUYS
All Broker Activity
8,554,067 8,554,067
Less
OFF ON
Retail & Broker Trades
6,760,960 5,626,301
Leaves a SALES BUYS
Balance of Broker Trades
1,793,107 2,927,766
To account for OFF ON
Institutional Trades 9,426,494 10,970,977

The usual
shortfall
situation
39

3. The effectiveness of decision making by retail investors has been seriously impaired by the under
valuing of the resource that occurred on Aug 18, 2010 and by the trading that has resulted in both
distortions to registry data and counter intuitive trading signals delivered to the market.
4. Issues concerning CuDeco are not just an August 2010 phenomena based on confusing resource
information, but represent trading issues that have impacted all trading taking place over a period
of at least 2 years.

For example, the M&G group accumulated 10.25 million cheap shares from retail investors late in
2010 principally because of the ongoing confusion about the resource and frustration with a share
price dominated by trading churn and a market that appeared to be continuously weighed down by
selling. Yet the selling wasnt genuine with entities washing shares back and forth through the
market with minimal changes to holdings while strong accumulation was also taking place. The fact
that M&G were buying strongly also says a lot about the so called JORC confusion that was allowed
to persist by the ASX without qualification.

5. A persistently undervalued share price (as measured by company fundamentals and by comparison
to peers), represents diminished shareholder wealth. This has made it difficult for the company to
advance the Rocklands discovery into a mining project. However, the low share price has not
deterred genuine investors who after due diligence have invested in the company at premium
prices. The situation seriously questions whether the market is being allowed to fulfil the role for
which it is intended, i.e. fair price discovery;
6. It is highly unlikely that anomalous trends can be adequately explained or even addressed without
the independent auditing of accounts simply because:
Anomalous data trends have been allowed to occur over a period of at least two years;
The current trading and settlement system obscures trading details associated with the
majority of trading taking place;
Not only have regulators failed to detect anomalies in trading, they have also failed to
even acknowledge them after issues have been referred to them;
7. Broader Issues: The trading patterns identified with CuDeco are also likely to be occurring with
other companies throughout the ASX with potentially far reaching implications for the integrity of
the Australian financial system. Suspicious trading practices put at risk not only the investments of
retail shareholders, but also the contributions of workers whose superannuation funds are invested
with institutions who look to engage in dubious trading practices even if sanctioned by the current
system. Substantial amounts of investment funds may very well be facilitating the obscure trading
agendas of fund managers, some of whom may not even be focussed on returning profits over the
short term, if at all.


Relationship between hft and price movements and Kohlers article Re M&G Buying Period


The issues raised concern integrity, probity, transparency, fairness, orderly markets and effective regulation, or
possibly, a concerning lack of the aforementioned. Certainly persistent data anomalies ought to be identified
and corrected with the advanced information systems currently available. The fact there is not even an
awareness or acceptance that there is a problem despite concerns being flagged to the responsible authorities
says a lot about the serious state of affairs existing in our financial markets. If investors were fully informed
and aware of the trading issues through proper levels of transparency being maintained, then perhaps it would
be a case of Buyer Beware despite obvious deficiencies in the system, rather than the present case which
more closely resembles Lambs to the Slaughter.

It is likely that CDU issues focus attention on the mechanisms that enable systemic market manipulation to occur
throughout the Australian Stock Exchange and which put at risk the investment funds of genuine investors.
40

APPENDIX 1:
ARTICLE: Trade Parasites Feeding At The Heart Of The Asx
LINK: http://www.abc.net.au/news/2012-04-11/kohler-high-frequency-trade-parasites-at-heart-of-asx/3943052
By ABC's Alan Kohler
Updated April 11, 2012 13:45:52
Photo: By operating at the speed of light high frequency traders can "feel" a buy order coming and
can dart in front of them.








In the Australian Securities Exchange's Sydney data room, which is about the size of a big lounge room,
there are six "cuckoos". These are the banks of servers installed by high-frequency traders.
They sit against the wall opposite the ASX servers and each is connected directly into the host by a fat fibre
optic pipe. Each cable is precisely the same length by agreement with the ASX so that none gets an
advantage; if one server is closer to the input, its cable is looped around to lengthen it.
Think about that: one less metre of optic fibre carrying data at 299.8 million metres per second - that is,
the speed of light - would give one share trader an unfair advantage over the rest. It suggests that
something pretty quick is going on.
The question is whether it's fair to the rest of us; whether those six parasites with their suckers fastened
directly into the heart of the ASX should be allowed to get away with it.
The ASX is no longer a regulator, just a business, so it says that if the practice is legal and it pays a fee not
to mention a handy rent in the data room then it can't and won't stop them.
For global regulators, it's actually too late: high-frequency trading accounts for as much as 70 per cent of
the volume on American stock exchanges, including the NYSE; the time to control it was 10 years ago.
What do the computers and their algorithms do? Well, as my relatively low-frequency brain can
understand it, these machines constantly monitor order flow into the ASX servers, and the sophisticated
programs can pick up patterns that indicate when a reasonably large order has been placed. What they
then do, in effect, is "front-run" that is, they buy ahead of the order and make a small spread selling into
it.
In other words, by operating at the speed of light they can "feel" a buy order coming and can dart in front
of them and ensure that the buyers pay a little bit more than they were going to, without noticing a thing.

41

These operators begin each day owning no shares and end each day in the same position, but they make a
lot of money by doing thousands of trades every day: it's a high-volume, low-margin business.
It's not known how much money the HFT traders make, but whatever it is, they weren't making it 10-15
years ago, and stock market returns have not gone up in that time, so whatever they make has come out of
someone else's pocket.
That someone, of course, is you. The buy orders that the HFT operators are front running come from the
superannuation funds in which ordinary people have their money. Now when they place an order, they
usually end up paying a cent more than they would have because they are buying from someone who
didn't own any of the shares 10 microseconds ago and only bought them to make that quick cent.
HFT represents less than 10 per cent of the volume of the ASX, but in the United States it is much more,
and there is no reason to think we won't follow the US.
Should something be done to stop it? I think so, but it's too late.
HFT firms like the privately owned and aptly named Getco (Global Electronic Trading Company), the
world's largest HFT operator, produce a large amount of self-justifying research material based around the
proposition that they help investors by providing extra liquidity in the market.
This, plus presumably the hiring of expensive lobbyists, has snowed legislators and regulators and let the
practice flourish, to the point where the parasites are taking over the host and it's too late to stop them.
Stock exchanges the world over are now making a fortune from renting space in their data rooms to high-
frequency computerised traders and would probably collapse without it (the ASX would not yet.)
As a result, investors are abandoning the "lit" markets and using "dark pools" instead. This simply refers to
off-market share trading away from the official stock exchanges provided by investment banks where big
investors know they are not being picked off by high-frequency front runners. The problem with that is
that these "dark pools" are not properly regulated or transparent.
The joke is that in many cases, the same investment banks are doing both the high-frequency trading and
running the dark pools; they are causing the problem and solving it, each for a handsome profit.