edit a quote from pt

FROM TS
Asked By
deezee


14-06-2008

Dear sir

There is some uncertainty amongst ADY holders in the TS community (and certainly elsewhere) as to the source of the notes whose convertion and share issue was reported on Friday. The only known outstanding notes were with Cornell Capital understood to be convertable at $.70 and yet due.

Could you clarify what and whose the notes reported in the conversion were?
If they were Cornell Capital's, could you clarify as to how they were converted at $.175 and not the reported $0.70?

As always, thanks in advance.


Phillip's Answer
Hi

Cornell capital retired US$9m of the debt we wowed them, and the forced conversion price was 70 cents (175% of the sp on note issue) unless we did a share placement at which they could then convert at the lowest price at which we did a placement.

We had two choices = raise A$5m for working capital which we needed, possibly retire US$9m of debt, dilute the share base by 5% (which cost me personally $300,000+ - not happy Jan) or take a bet that the Shougang L/C would be completed and or the other facilities we are putting in place would be completed. We made the right decision because we are not able to speed up the other funding debt only lines, but everyday we get a step closer.

We also considered other strategies to reduce the absolute number of shares they were entitled to using other provisions of the note but in the end it was a zero sum.

Strategically our position is not to dilute by issuing shares and after the share consolidation it will be less of an issue. But sometimes when you are growing a cash hungry business you have no choice. We could of sat on our hands for four years and built it then started production, or built in one year and gradually expand.

To make $14m of net profit we would have had to sell and ship 350,000 tonne of iron ore so it would have been tight doing it on cashflow at the moment.

Hope this helps.

regards

PT