G’day Folks,I would like to make some observations on some...

G’day Folks,

I would like to make some observations on some recent comments. I agree with Miningnut that the EAF build has been bad. But as I said in a previous post, Anvil tried to build them on the cheap and save money. They didn’t pick the right contractor and have paid for that mistake with the EAF not operating to design specs.

The “inept investment” of Anvil’s investment funds is not in my opinion inept but was inline with many other government, non-government, not-for-profit sectors, debt investments placed at the time. Anvil went to Oakvale Capital Limited to advise and invest their monies in various debt securities. Now I went to a debt conference 3-4 years ago, which had many people from the government sectors there. The first speakers were Standard & Poor’s. They talked about how CDO’s were “safe” and “secure”. They talked at length how they rated securities. If you have a look at the debt portifolio that Oakvale set up, we had less than 5-7% of funds issued in less than A- securities.

Yes after the credit crash we wrote down those investments. But there were also A rated securities that were no longer liquid and in a market, which historically always was. Universities, Local Councils, Charities, etc have all invested in these securities because (under the investment legislations or policies that governs their investment decisions); these securities were “safe”. They yielded a good return and were backed by banks or mortgages. We all know has happened since. Now we are trying to liquidate what were A rated investments in a market where there is now little demand.

But the number one consequence of the difficulties we are in is not that Bill has taken his eye off the ball. We were no longer a little one-man operation. We haven’t been for a very long time.

The biggest issue was the DRC Government Contracts Mining Review. It started in 2007 and still is not completely resolved. It hit our share price particularly hard. The slide didn’t stop and when October 2008 came along we were already in such a weakened state. Miners were not able to raise capital throughout this period. I don’t think people truly understand how difficult it was/is to operate in this environment of uncertainty. It strangled and severely limited our ability to raise funds at a healthier share price. Initially we were “supposed” to lose the Dikulushi & Kinsevere licences.

If this review had been sorted quickly and completely in the first place. We would have had either a rights-issue or “white knight” investor buy in at a double digit share price and we would have sailed through the last 8 months reasonably well and have the cash to have completed Kinsevere and Dikulushi. People wouldn’t be complaining.

But the reality is we haven’t. We have lost many valuable staff, shut down mines and still pay had to pay the Congo government the monies they demanded from the review. We have had a very poor share price since mid 2007 and all of us have lost a fortune. We are fatigued by bad news and an ugly share price.

I completely agree, this quarter will still be ugly as we have only had the HMS plant running again for part of that time. So why the massive volumes on the TSX? The copper price is over US$2 per pound. Fund managers know that in a couple of years, picking up these new shares will turn out to be a bargain. Kinsevere will be built. Mutoshi will be developed and they know it. Contracts are secure, but we do have the grade, history and resources. So they are buying.

Liquidity is low on the ASX hence the larger price differential. I'm not expecting any positive news as such. I think the current volume is due to marketing by the brokers, market anticipation of the funding being approved and general improved investor sentiment.

We have all been very patient for such a long time, and were doing very well for a while. But remember Bill built Dikulushi from nothing and under the most difficult of circumstances. We then went on and drilled, modelled and built up our resources and mines. We will do that again.

All the best.

KKR