hard rock options, page-28

binbin,

since I am heavily loaded with work I don't have the time to comment on all the points you have made. Instead I will pick out the IMO most important one, the one the market is focussing on right now.

"3. The plant continues to severely underperform.
- 'Severely' underperform?? That is your pessimistic assumption."

No, it's not. It's what the numbers and company tell us.

On 08/05 the company said: "the next step in the MCU offtake process is delivery of a 20 tonne bulk shipment of concentrate that is expected to be ready for despatch by the end of May 2012."

In plain English, what it means is this: What was planned to take 23 days (producing the 20 tonne bulk shipment) took them 51 days. That's a shortfall of 55%. What's more, they produced 16.2 tonnes instead of 20.0 (that's a best case scenario), a shortfall of another 19%. In sum, they produced 306kg/day while the plan was for 870kg/day. That's a combined shortfall of 65%. If that doesn't qualify for "severe underperformance", what does?

Also the company said in one of their latest press releases that external experts had made recommendations how to fix the plant, management was assessing the situation and in the process of making a decision with regard to which was the best solution. In other words: The plant has not been fixed yet. And they said that plant throughput was not going to improve significantly before any solution was applied.

It's a rather simple conclusion (and not my pessimistic assessment) that the plant currently continues to severely underperform.

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The essence of my postings was this: The company might not have the cash to rectify the production issues and could have to tap the capital markets yet again for this purpose. In my opinion this thesis stands 100% valid and here is why:

The 16/04 press release states: "Initial cash deposit requirements to ensure the Hard Rock project acceleration remains on track by booking the manufacturing production slots for the long-lead time equipment items, are estimated to be in the order of A$2 million. This initial funding [...] is envisaged to be raised by means of a share placement with a strategic investment partner [...] within the next few weeks."

Well, it took them a few months instead of weeks but anyway, this is exactly what they did with Mota-Engil. So they will spend the A$2M on long lead items and can not spend it on rectifying the severe production issues. So regardless of whether the A$2M had been received or not, they still could have to tap the capital markets again.

At the end of June they had less than a million cash in the bank and I am afraid this is not enough to cover all capital requirements (production costs AND the costs of fixing the plant).

That's why I am sure the ghost of another cash raising has not been fought off and it remains a threat to the share price in the short term.

Just for a moment let's take off the rose-coloured glasses and see what we've got so far: A year ago we would have expected the company to be a producer before year end and cash flow positive by now. Instead we missed all deadlines, costs were going through the roof which brought us another cash raising earlier this year (which heavily weighed on the share price). Now we're experiencing severe production issues that could make yet another cash raising necessary.

I am of the opinion this is a pretty sobering result.