The market uses a PE of 2.Read the announcement carefully.The...

The market uses a PE of 2.

Read the announcement carefully.

The grade is Fe. It mentions that SRk wants them to run it for proportion of magnetite Fe. So it seems that the resource is done on total Fe, and we have no idea what part of the total Fe is recoverable via magnetic separation.

They also mention that the assays are generated via the on-mine lab. Which is fine for concentrates and day to day running of a mine. But for a JORC resource, its fairly marginal "best practise" to use results generated by an on-site company owned laboratory. For a start, there's impartiality, which comes down to trust. In this case, given they aren't claiming to have 1Gt @ 75% Fe or something ridiculously Bre-X like that, its fairly clear its reliable - but it won't skate for Measured Resources without some serious spadework.

This then brings us to the spadework - the accuracy and repeatability. SBM/ADY will have to prove their lab results are accurate via QA/QC - which the report notes they don't have a program to do. This is big alarm bells, and not just because they could be overstating their Fe grades. They could be overstating their impurities, harming their sale price. They could be mismeasuring moisture content, etc, etc, or underreporting the grades.

I looked at these factoids and thought "no wonder there's so much inferred". And i wonder again how you'd go about calculating an EPS.

Aside from the obvious PE valuation problems, did no one note that all of a sudden the capital costs for the operation have gone up to $240M?

How the hell can ADY hope to get anyone to tip more money into their pot when they can't even consistently produce anywhere near what they've claimed they should be producing at by this time. Figures like 10Mtpa leap to mind - and the real figures are more like 0.75Mtpa.

This, to me, is why ADY hasn't gone to 50c, and never will. They are about to sell a heap of shares to cover equity, and take on an additional $200M debt - or probably sell a sizeable chunk of the project to Shougang, thereby reducing equity and also therefore, knackering your wild and wacky EPS forecasts.

That's if they can raise their debt.

Also, I wonder what all the pages which were excised from the announcement said? There wasn't 57 pages in the ann, but there were at least 57 pages in the JORC report. What sins were hidden within the report and not aired?