message from phil..., page-14

from ann 11/7/07

"Admiralty seeks to closely monitor price developments as it starts to negotiate long term supply agreements later this year. Admiralty is still targeting Sept 2008 to commence production and reach full production of 17,000 tonnes of lithium product by middle of 2009".

A comparison.

ADY (the lithium revenue stream) has very similar market fundamentals to that of LYC (rare earths-) ...LYC timetable for commencement of commissioning & production is similar but they are a couple of milestones in front (ie. they have negotiated financing and off take agreements but will not produce via ramp up until 1st qtr - mid 2009 at best- ADY will be producing by ramp up phase from Sep 2008 ) ...from a share price perspective LYC is trading at around $1.00(high $1.50+ for a Mkt cap $580m) and is trading on a full year operational p/e of nearly 7 (based on an estimate that EPS will be 15cps in first full year of operation)... from this comparison we can potentially see the sp upside in ADY once the following three risks are reduced... that is financing and off take agreements are in place and production is confirmed...my target for lithium is around 70cps - valuation $700m + (based on a minimum prices of $US6000 per tonne of lithium and $US175 potash with a conservative 60% operating margin )...

At a share price of 34c .The market is applying very little value to the lithium assets (maybe about 10cps/ $100m).... the balance is I/O supported by production of 2.4mtpa an estimated profits of about $15-$20m annualised plus a bit of premium which is apparanent in the I/O sector – ((based on iron ore @ $US45 tonne FOB ... & if we work backwards from the following ( $US67.5/60%- ownership/ $US 450m revenue indicates approx 25% cash operating margin-refer p 5 Sept presentation)) - this is possibly conservative plus we have the possible 20- 30% increase in I/O prices on the table...

In early calander year 2009 it is planned that I/O will be ramped up from 2.4mtpa to 10mtpa producing an EBITDA of around $US60m for ADY (refer p 5 Sept presentation)...when achieved this could potentially substantiate a sp of around 40c (based on say NPAT $US30m and p/e approx 10 )

For the lithium production timetable to be met I think that PT will need to act shortly in order to lock in financing ($100m is the capital cost) which may require that he at least in part locks in some form of off take arrangement (possibly will be a condition of financiers) or maybe even a partner similar to what is happening in the I/O sector. Eg GBG,ARH etc

Announcements due.

Look out for the following price sensitive announcements which are due soon :

* JORC's for Mariposa and Primavera- more ticks toward a target of 600mtpa
*Financing for Caldera port facility and maybe even Lithium or at least an update
* Possible new I/O contracts ( original contract was for around 6 months)
* also it would not surprise if PT makes a formal announcement to the market to confirm that the significant production milestone of 2.4mtpa has been reached.

For the long term investor ADY is great growth story and is well supported by market fundamentals.

Cheers