ady shougang agreement, page-6

Buying mining equipment from China and India is like buying a sports car in France. It looks good for a while, but then the wheels fall off and you go bald and your secretary leaves you.

But you are right Kacy. They do have to work out a strategy to get the ore out of the ground and onto Shougang's ships, and whats more, Shougang needs to believe it. Based on past performance, its clear they don't have the correct strategy, and its a disgrace that after 2 years of trying they haven't got this sorted yet.

I'll grant that they have set themselves some interesting goals but they haven't met any of them (c.f. turning a profit by 2009, and with six months to go, no sign of it cheers con notes) and so far no good on a roadmap, if you will, toward what sort of operation they see.

I mean, where is the "SBM Candelaria Upgrade Project Scoping Study", where is the Bankable Feasibility Study if they are courting more than diners club style corporate finance from NAB? Surely the banks insist on some financial modeling, due diligence and cash flow analysis on behalf of the company they are loaning their money to? In every other case, (including I might add, though we've heard SFA recently, Rincon Salar) there's a need to do some engineering study, and given the deplorable track record of the engineering 'expertise' shown by ADY in Chile, one would hope that they engage an external engineering firm in order to do some real work on finding a robust and profitable solution to the problem of rocks not being animatronic and walking to China across the seabed.

Without some real progress on professionalism, I can't see Shougang bothering with ADY more than saying "If you have a spare ship or two we might pay spot". Seems to me like ADY needs Shougang to be the solution to all their problems - engineering, processing, cost controllers, customer and financier. Hardly a vote of confidence.