Hi Chippydude, refer below -this is from one of my previous post titled- Onerous Contract Provision - this should help. ADY is not out of the woods yet.
There has also been no follow up news re the sale of equipment & ore - the up and comming quarterly should clarify this.
cheers
Have current /future shareholders researched the possible impact of the onerous contract provision on the future of ADYcirca $6m?
The provision relates to significant losses on the supply of iron ore under a CFR contract signed with WISCO back in 2006. ADYs first contract, which has never been fulfilled.
Points of note:
1. The provision is classified as a current liability. This means it is due to be settled within 12 months. Whilst the losses have been provided for how is the contract going to be settled if ADY is no longer producing?
2. Whilst the recent rights issue has brought in some cash by no means can ADY pay out the contract other than by diverting any proceeds of the recently announced sale of surplus ore to the settlement of the contract over the same period (unless of course more capital is raised).
3. Do management have appropriate strategies in place to limit /settle this liability or is it a case of just hope that a JV will sort out everything? Or maybe even that WISCO will cancel the contract and forgo all rights?
With iron ore prices and shipping costs recovering this liability potentially will also increase unless appropraite action has been taken
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