Ann: Quarterly Activities & Cashflow Report , page-6

I have re read the qtrly and believe that the company is making the right noises in regards to getting production on line. The concerns are as follows:

1.I read it that Vijay has an out and simply forefeits the JV by not coughing up the cash (no detail on penalty clauses but any such action would not bode well for NSL)

2.The dry plant sounds as though it is still not functioning and while the qtr has been spent adding additional capacity through new separators we have no historical throughput to base final capacity on. Q4 is therefore already significantly affected and we would want some confirmation at Y/E that at least the plant is operational to get a estimated run rate.

3.Wet plant is still just a blueprint

These concerns are somewhat offset by

1. Vijay has paid some money so unless they have discovered a white elephant somewhere you would expect the rest to be paid according to the tranches

2.For obvious reasons Vijay group is taking control of the dry plant and given their track record should be able to effect significant improvement and at least get the plant functioning.

3.Again Vijay will be managing the wet plant construction which hopefully suggests that it will be a more timely and reliable delivery than the dry plant.

I would not expect Qtr 4 to read beautifully as the qtr is already well underway with no reference to any production commencing let alone picking up. The best we can hope for is Vijay money in the tin, Dry plant issues resolved with Vijay at the helm and wet plant construction being under way. Delhi approval of mining license for AP14 would also be nice but wont be a sp mover.

In regards to off takes I suspect these will be light on until prod volumes are proven and gate sales will hopefully pick up as predicted in the Qtrly. Any offtakes going forward will be seen as a major positive in my view as it will signal confidence in the new structure and indicate that production is coming on line.

All up, its not one for the feint hearted but at 3.5 cents and potentially lower as we approach tax year end it should offer significant medium term upside. The only other thing to keep an eye on is the admin costs which at 500k a qtr will be a significant chunk of op costs.