Ann: Quarterly Activities Report , page-7

Anyway guys hope I havent been too arguamentative,
Just very doubtful that the company is heading towards any financial difficulties,
Morningstar have decreased price target to 50c but that's becuase they are also worried about debt,
Earnings will be picking up next year and any other of a range of wonderful events could happen from now until then so I'm not fussed,
Anyway here is the morningstart reccomendation.

Event Analysis
Perilya reported a solid second quarter considering pressures from weak commodity prices. Broken Hill finally had something to shout about with contained lead and zinc production up 18% on the prior quarter to 34,975 tonnes, tracking well ahead of annual guidance of 110,000 - 120,000 tonnes. Unit production costs (cash costs) fell 17% to USD 0.55 a pound, better than annual guidance of USD 0.60 - 0.70 per pound despite metal credits falling 16%. Underlying performance was a little less positive with ore mined falling 6% and mill throughput down 7% on the prior quarter. The cash cost boost came from an increase in zinc grades from 4.2% to 5.4% and lead grades from 3.5% to 4.0%. Zinc and lead ore reserve grades are 5.3% and 4.0% respectively meaning improvement could well be maintained. Mine site costs were flat on the prior quarter at USD 45 million. Broken Hill generated just AUD 4 million EBIT in the second half of 2011 and we expect a similar contribution in the first half of 2012 despite improvements. Significant improvement is most likely to come from higher nickel prices and/or higher production. Additional production from the Potosi/ Silver Peak mine is expected from the first quarter of fiscal 2013.

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Cerro de Maimon had a weak quarter with lower head grades and recovery rates the principal cause. Contained copper production of 3,244 ounces tracked below annual guidance of 14,000 - 15,000 ounces but not alarmingly so. Copper recovery fell from 82% to 75% due to higher zinc in ore processed and delays to floatation reagent deliveries. We expect EBIT from Cerro de Maimon to fall around 30% between the second half of 2011 and first half 2012. Cerro de Maimon remains a successful acquisition and recent issues are likely to prove fleeting. Metallurgical test work is underway to improve zinc and copper separation from primary ores in the flotation circuit. Year to date cash costs of USD 0.63 a pound remain in the bottom half of the cost curve. An updated resource is due in September following recent drilling.

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Of minor concern is a 67% increase in net debt to AUD 72 million. Development costs for the Potosi deposit at Broken Hill are the likely cause. The half year result, due on 30 August 2012, will clarify. Merger and acquisition activity is clearly on the agenda and we expect Chinese debt to fund potential deals. The success of the Cerro de Maimon acquisition and weak equity markets instils confidence that future deals will create shareholder value. Following a review of our financial model, we increase Perilya’s risk rating from high to very high resulting in a 10% reduction in our fair value estimate to AUD 0.50 a share. At AUD 0.26 a share our recommendation remains Accumulate for very high risk tolerant investors only.