Your in luck i happen to have this dont know when it was written...

Your in luck i happen to have this dont know when it was written
cheers


From State One
Admiralty Resources Ltd (ADY) - Strong Buy
Project Overview
_ Admiralty is primarily a lithium producer as of next year with forecast 20,000t of lithium brine production from the Rincon Salar alkaline salt lake in Argentina coming on stream in late 2007, with mine infrastructure under construction this quarter. Evaporation pond construction will allow pumping from the bore field, the brine then to evaporate to a salt concentrate, processed into specialty compounds including, lithium salts, soda ash and potassium chloride.
_ Lithium production from alkaline brines is, according to guidance from the company, likely to continue for a decade or more, with production rate most affected by environmental factors acting upon evaporation. Further production from Rincon Salar is certain geologically, though the rate is controlled by climate, for which predictions beyond a decade are sketchy.
_ A forward sales agreement on lithium salts, at US$24,000/t has been placed for specialty specifications over a 2,000tpa portion of production. The remainder will be sold into the open market. The 10% of production forward sold at the higher price is a US$48M revenue stream, with the remaining 90% of production of~18,000tpa providing a US$100M revenue stream at US$5,500/t.
- Admiralty Resources has 49% of the Santa Barbara iron ore project in Chile. Admiralty and its partner have begun shipping the first shipments of a 940,000t contract to Wuhan Iron and Steel Company, China, worth around US$65 million to the joint venture, or A$40 million to Admiralty. Rates for FY08 are projected to be 1.8Mtpa.
_ A recent off take agreement for 1.2 million tons per annum of a 50 million ton stockpile underpins growth from the current 1.8Mtpa to a potential 5Mtpa of iron ore sales. Lack of forward contracts is not seen as a significant risk in light of high demand from China.
Further non-stockpile ore resources of 33.6Mt @ 23.5% magnetite iron exist within the JV, which can be extracted to produce high-iron low-phosphorus magnetite concentrate.
Opinion
This financial year Admiralty is set to generate around A$24M in iron ore revenue via shipment of ~240,000 tonnes of ore, with profit margins of A$45 per tonne of iron ore. This represents around A$10M in profits for FY07 on 4 months production, valuing Admiralty at a PER of 9.1x on the current share price. Our prediction for FY08 iron ore sales should see production at the 1.85Mtpa rate generate A$83M in profits to give a forecast EPS of 9c per share. Early 2008, assuming lithium production ramps up as planned, FY08 should see 6 months of lithium production come through, an A$80M-plus revenue stream. With a predicted 75% profit margin this represents $65M profit or 6c per share earnings. Taking this into account, on current share prices, FY08 earnings is 15c per share and a forecast PER of 1.6x on a 25c share price.
With current earnings growth in this and next quarter, and growing revenue streams in the next 6 to 12 months we see Admiralty as a strong growth stock. Our recommendation is a strong speculative buy with a target of $1.20.
Investment Data:
Share Price $0.23
Ord Shares 630m
Options 105.8m
Market Capitalisation $173m
Net Cash (May 2007) $13.7m
52 week Low/High 25.5c / 7.4c
Directors:
Prof J. Ross Harper Chairman
Phillip Thomas Managing Director
Anthony Blumberg Non-Exec Director
John Anderson Non-Exec Director
Stephen Prior Company Secretary