cheap krapper, page-9

No debt relative to its capacity?

Are you talking "potential" capacity or "actual" capacity?

As far as I know, actual capacity for iron exports and hence profits is $24M p.a.. Actual performance is much less than that. 100kt per quarter is 0.4Mtpa, and may I say, we haven't heard what the actualised price for their iron sales has been (spot? contract?) nor have we heard what the cost of production has been.

We can have a guess, that the $7.14M revenue relates to the 58,950 tonnes in August, giving a price of $120/t, including that this is a mix of spot and contract sales.

Even if they can manage to get to 0.4Mt off the docks during fruit season, this still only $48M in revenue for the year.

I also hearily encourage everyone to hunt up the current FOB spot prices ex-china, which have collapsed dramatically in the past 2 months. So one has to wonder if they'll keep getting their $120/t averaged price for what little they manage to get to the docks.

It is still, even at this stage, unclear whether the company can make its 14 shipment contract and avoid an impairment.

ADY wants a $200M bridging finance. It has $48M revenue and last quoted a margin of 40% on its sales, so we'll assume $19M per annum profit. This could possibly cover the interest on the $200M facility, which obviously is aimed at de-bottlenecking the operation and in 2 years or so, getting them to where they said they'd be six months ago.

However, before then they have to cover their existing debts and repay Hawkswood's loan. This is happening during fruit picking season when the dock is being used by the farmers, hence, the operation is running into yet another bottle neck at a time when they have to repay a debt which has already landed them in court.

So, to my mind, you have to separate their potential from their reality. They are spending $12M a quarter and making $19M per annum, roughly speaking. This leaves them $38M in the hole.

They have covered this with con notes, and borrowing.

They borrowed $9.5M in the 1st Quarter and $11M of shares were issued.
They backed up in the 2nd quarter 2008 with $7.4M of new shares and $6.8M of borrowings.
Then in the 3rd quarter they borrowed $20M and paid $1.1M in borrowing costs.
Then to wrap it all up they issued $6M in notes in the 4th quarter 08.

Total equity financing: $24M
Total borrowing: $32.3M
Plus the existing $11M from FY07, they should come out with around $60M in debt. Already.

Can they support this on $19M profit before tax? Yes, just, because the cost of it already is $6M and they seem to spend $50M a year, leaving them with a paltry $4M to conduct business - very close to their admin costs for all these trips to Shougang.

They need this bridging finance. And hey won't get it this side of a feasibility study.