Ann: New Large Project in Wuhan, China, page-80

hi kingkev
will try and answer your question on capabilities and capacity. On capabilities product good, workforce not a problem I believe contractors are brought in where need , one of the directors has built a china company from 4 people to over 1000 so has been though this type of growth before so capabilities is good.
on capacity at this stage I believe we are fine but could run into problems short term next year until a new factory is built. We had 2500 tons built up at the end of last quarter. This quarter we would have used some on xingyuan but I don't think to much as they spent a good bit of the quarter working out plans for the catchment. The 2 new trails was also time spent planning before applying so maybe not to much on these. I would say over the last quarter we would have built the inventory higher maybe to 3500 tons. The factory is running between 15 to 20 k pa but I believe this can still be doubled. starting this quarter if we produce 4000 tons and add that to the 3500 built up you are talking about 20 to $25m of product we would not be doing that amount of sales this quarter, if we were then the company would had to do a forecast update now. I would expect going into January with at lest 3500 tons still in inventory. If by January we won the two new trails and start work on xingyuan lake itself and the east lake going then by the end of the march quarter I would think the 4000 produced that quarter plus the 3500 built up would still be enough for the Jan quarter but inventory might be getting close to be fully used, so the march to June quarter might be the capacity constraints but by then the company might of increased the current factory high and I expect they will have new factory up and running by the end of the June. The last factory took 9 months to build but that was also when funds was tight total cost was about $1.5m now we have money they could get a new one up within 6 months if required. I would also think they want the new factory going by then as I would think the new pillow product for running water will come out of the new factory. So maybe some capacity problems coming but sure the company has got plans in place to make sure we are covered.
i think you also ask about pricing, the xingyuan lake price per ton was higher than most of us thought and I can't see them dropping pricing or margins much

thanks
mickem