email from md

Personally the decision not to go ahead with White Dam was an indication that this company is willing to make the tough decisions, even in a tough market.

Some dodgy companies out there would have just gone ahead with it just so not to lose face with the market. Some even dodgier companies would probly not have even bothered about due diligence.

Here is an email I received from MD re white dam decision, as well as other aspects of the company, sent to another shareholder but CCed to me for my interest.

Cdchi1

1. Syrah Resources will continue to explore current tenements but new projects will have a much stronger focus on a more advanced resource status. Something that has the existing hallmarks of a future mine, rather than raw greenfields exploration.


2. The reason that White Dam deal was canned was that the due diligence showed that the capital cost had increased. The affect of the increased capital cost is that the value of the project is lower and the required new share issue by Syrah to fund construction increased. The follow-on affect of this is that the value of the project per share to Syrah dropped. In the current bad market conditions, the ability to raise the extra money by a large share issue or convertible note was also questionable and extremely dilutive to existing shareholders. Syrah has only 30 million shares on issue – we should keep this tight share structure as long as we can. That is why the deal fell over. We do not regret at all our decision to take out the option on the project late last year. If not for the capital cost issue and the torrid market for new equity raisings, we may have been finalising the deal today, instead of walking away.

3. We continue to seek new projects with a focus on more advanced resources, rather than pure greenfields exploration. After the demise of White Dam, we are moving onto creating new leads, with a new focus on overseas locations as the Australian industry is extremely competitive. I do own this strategy and will ultimately be held accountable for its success or failure.

4. The situation with regard to activity on our tenements was updated in our Jan qtrly report. There are no changes – we should drill at Lyndhurst in early March (looking pretty firm now) and at Levuka in hopefully April after the wet season. Munna and Archie/Mackenzie are still in target generation phase and will be for some time.

5. With respect to admin costs we are spending about $50k per month. The only reason more hasn’t been spent on exploration is that we have had so much trouble getting drill rigs. To be honest in this stockmarket phase it is also a very tricky time. One must conserve funds at the same time as delivering on the promise to shareholders that exploration will be conducted. The best approach I feel is to only spend the cash on drilling if the target justifies it. So at the moment we are being careful with the budget and strong on target generation. It should be noted that doing due diligence on new projects such as White Dam is recorded as an administrative cost where in fact it is much more valuable than drilling a dozen exploration holes, particularly if the prospect is ‘lean’ on potential. Unfortunately the due diligence on White Dam will be written off just as you would write off a failed drill campaign. The reality is that failed due diligence studies are very common in any industry, it’s just that many of them remain confidential and go unreported.