Observations from my friend PotofgoldI received the Annual...

Observations from my friend Potofgold



I received the Annual Report today and found the following points of interest:

Looking BAD

1. F2008 highlights were not that flash. For example the CEO did not want share dilution and preferred debt …but…. 252.6m new shares were issued.
2. During F2007 one million tonnes of iron ore were processed and 210,000 tonnes shipped. During F2008 two million tonnes were processed and only 224,000 tonnes shipped.
3. Iron ore production targets for F2008 were not achieved.
4. ADY still has $20m debt and poor cash flow to service operations.
5. Pressure on company viability ( as a going concern) due to liabilities.
6. Contrary to what has been stated the price of iron ore has gone down.
7. Interest penalty of $1m about to be incurred for the Hawkswood loan.
8. Cash at bank only $1.5m but ADY has $8.7m in Receivables and Inventories.


Looking GOOD

1. Iron ore resources up from 84m tonnes to 194m tonnes.
2. Now producing sodium sulphate ( mirabilite) at rate of 140,000 tonnes pa.
3. ADY now has operating control ( 60%) over Minera Santa Barbara.
4. Rincon is producing lithium (even though in small quantities at present).
5. Tenement area for Santa Barbara has increased.
6. Michael Clarke has not resigned. Must still have confidence in Santa Barbara operation.
7. New loans may be secured prior to Oct 31st deadline for debt repayment.


Other Observations

1. Tender for lithium issued but not executed. Now most likely out of date.
2. Approval granted to build new port at Punta Alcalde.
3. The list of Business Strategies ( contracts, production targets, ports, loans, etc) continues to impress but will they be delivered?
4. Noted that the shareprice has been under pressure. But not noted was the massive drop in capitalisation of the company.
5. Purchase of Boric Acid tenements at Rape, Argentina.
6. Provision made for the non payment of the $40m unsecured loan to Santa Barbara.
7. No mention in the annual report of current court cases nor Phil’s loss of ADY shares and ANZ court cases.


SUMMARY

The company has so much potential with iron ore, lithium and potash resources that are all wanted commodities. However it has disappointed when it comes to financial management and attaining strategic targets.

Repayment of the outstanding loan from Wyndham Explorations and a favorable result from the Besalco and Santa Fe court cases may guarantee success for F2009.