Ann: Papyrus Newsletter September 2010 , page-5

Hi Lilac

I too am convinced that Ramy is fully committed to this his baby! I am also sure the others are trying their hardest. The main problem is I think that the scale up to production as envisaged in the prospectus story has failed. The original idea was 'hard rolls' of raw paper produced from banana trunks in a continuous sheet (1.8 metres wide) that could be more than competitive with conventional raw paper. One processing plant was envisaged to churn through 2 million banana trunks per year.

On all the evidence PPY has NEVER produced anything like a continuous sheet. The scaled up machinery appears to produce pieces of veneer that need to be individually handled (transferred to the dryer and graded one by one).

This is so far away from a viable industrial process as you can get- more like a cottage industry. Hardly the revolutionary solution to the world's fibre needs. They admit the Beta machine is not up to scratch and face a $1.5 million bill to build the next model.
From June Q Report: "The redesign and rebuild enabled the beta veneering unit to achieve a "continuous production" up to the stated production rate per hour later in 2009.
That has been achieved but because of design deficiencies in the beta veneering unit the veneering process cannot as yet operate "non stop" and requires regular and intermittent cleaning, debris removal and technical
mechanical improvements as the machine is being pushed to operate at higher production rates. In addition this "first commercial machine" has been worked intensely for over 12 months and the Company has identified much needed improvements in elements of the machine such as, for example, bearings, rollers, cutting blades and conveyors all of which will be incorporated into the next version."

In other words the Beta machine is a lemon....

BUT there is a cash burn of 800k per quarter (before R&D and capex) and only $2.44 million in the bank at June 30- probably now $2 million. A capital raising is inevitable- but at what price????? I can't see Walkamin fulfilling its 'showpiece role' until the next machine is up and running. Will PPY still be up and running then?????

I have invested a lot of emotional capital in PPY over the years and am really disappointed in where we are now....

Your comment: "The stock he refers to is I think just promotional stuff"- I agree but the problem is how damned little there is of it! After 12 months there must be piles of it around, not the piddling amounts mentioned in the newsletter.

the Friends of PPY has had a great effect in getting better disclosure- unfortunately that disclosure has just confirmed my creeping suspicions- pity it wasn't earlier!