a sound risk management approach

There has been very little commentary on this forum following the release of the last Quarterly report to 31 March 2013.

Since last October, when APG traded at 4.1c the APG share price has dropped by over 50%. I believe this significant drop has been primarily due to previously released Company Commissioning and Production timeframe concerns, ongoing cash flow concerns and the more recently pending Kronos legal action.

Many current holders and many potential and future investors would be more than concerned with the unknown ramifications of a future depletion of significant funds to undertake such a defence, and of course the possible unknown cost of not being successful in its defence.

Any legal action should not be taken lightly, is a definite concern and is a distraction to the main game – in APG’s case the main game being the final commissioning of the plant leading into the much anticipated production phase that will finally generate needed income for APG to finally become a reality.

The Company has clearly stated in the last Quarterly report “Commissioning of the plant will commence during the third quarter and production will follow in the fourth quarter of 2013”.

The quarterly report also detailed actual and future estimated costs to complete the Commissioning and take us through to the Production phase in the last quarter of 2013.

The report also detailed an actual 2nd quarter Administration costs of $672k and a future 3rd quarter estimated Administration cost of $500k. Why a reduction? Is APG going to put off a senior staff member or perhaps two support staff members? I would of thought that the closer we get to the Commissioning and Production phases more staff would be required? Anyway perhaps not a real important point in the big picture but still an interesting observation to ponder on at the least

Current cash on hand at the end of the 2nd quarter amounts to $7,063k. Many would say more than enough funds to get the Commissioning and Production phases across the line. Many would also still be concerned, based on previous APG spending history, timeframes and now the ongoing future legal costs in the defence of the Kronos allegations.

The total estimated cash out flows for next quarter amounts to $3,750k, $3mill for the development of the plant, $250k for exploration costs and as mentioned above $500k for the anticipated administration costs.

Clearly the market would be viewing the current APG position with some significant investment still to be undertaken to enable the Commissioning and Production phases to be completed. The market would also be concerned of the Company advised completion timeframes, bearing in mind the Company’s previous reporting history in this regard. Any further completion delays would of course push costs out further. And again the market would clearly be concerned with the ramifications of the Kronos legal action.

How does APG provide confidence to the market that that they do have sufficient funds to ensure they complete the plant on time, they do have sufficient funds for the completion to actually occur whilst at the same time they do have sufficient funds to manage the defence of the Kronos legal matter?

A sound Risk Management approach to perhaps appease the concerning market could be to have in place an arrangement for a significant loan facility or credit standby arrangement, in the form of a bank overdraft or simular credit facility, to be drawn upon if and only if and when required to ensure the plant production will be funded no matter what and will indeed commence during the last qtr of 2013. This would not incur a major cost to the Company at all.

Could a much stronger cash flow position be the required guarantee and positive sign to the market that APG has a sound Risk Management approach to its business and its cash flow requirements? Is this the positive sign that APG will now ensure production becomes a reality and is not just a dream? Is this the positive sign that APG is now closely approaching its goal and wants to be recognised in the main game?

A sound Risk Management process and approach is now required.

JAWSY:)