I bailed this dog this morning - way, way too risky.Items of...

I bailed this dog this morning - way, way too risky.

Items of concern:
1) $13M loss on the CFR contract. That's a lot of pain. OK, they sold a shipload of Fe at spot prices, good on them, but this is a much greater sign of trouble than just a financial problem they can work their way out of by selling on spot. Number one, they clearly can't write contracts which benefit them, and/or can't meet them. Is this a dishonour fee on the unmet part of the WISCO deal from 2007? How are they going to go in enforcing and meeting contracts for the lithium?

2) The mining rate is 30Kt per month, a far cry short of the 100Kt er month bandied about repeatedly by PT in his reports last year. Remember, by now we were supposed to be at 100Kt per month. Sure, shortages of machinery, etc etc, but again a sign of incompetent management at some level within ADY and inability to meet goals - very negative.

3) Anthony Blumberg quits to "concentrate on Opes Prime". This is the first rat to leave the holed, torpedoes and flaming wreck of SS ADY. Which greedy self-serving director (they all are) would ever give up a nice stipend to concentrate on another listed entity? I kknow of some (eg Sadlier, Gillard) who have been on up to 6 boards at once, from time to time. Blumberg quitting is similar to the guys at Bendigo quitting just before the prat fall.

4) Debts upon debts. I think the RLL spin-off is aimed at quarantining the lithium business from the imminent implosion of Ciera Minera Santa Barbara. You spin off the best assets into a new vehicle, slough as much of the debt into the crappy dead horse as you can, and then duck into the trenches while it detonates. You still have your lithium! Whoopee....IF YOU CAN GET IT OFF IN TIME. CMSB is a ticking time bomb, and ADY's inability to complete the spin-off is a MAJOR risk for those who are "in it for the lithium". For me, too much of a risk. Sure, it'll be like a helium balloon once the dead horse of CMSB is cut loose...but not if the "going concerns" stop going...

5) Delays upon delays. We got the pilot plant a few months behind schedule. Fine. Happy. Now its ISO certification - a major risk. If they don't get it, their lithium sells for sub $5000/t, not $18,000/t. And they are forward selling the profits from their mining even before they've proved they can get the profits! Dodgy. Especially as now the delays are mounting. note that they've stopped the non-core bits of the operation, such as that other salt mine they bought to streamline the lithium mine. The iron mine is not going to get going till late 2009 at the nameplate capacity the company advertised mid last year as being ready by now.

6) Poor disclosure. The magnitude of the contract losses weren't particularly well disclosed. The contract risks are very poorly communicated - and especially so regarding the lithium transactions. As W Buffett says - only invest in something you understand.

Me, I'm out. Caveat emptor.