long term hold

ADY has disappointed again and the price will surely go down further Monday to about 18. However as many have stated the long term fundamentals are phenomenal long term.

First off Rincon, I noticed revenue projections where taken from the May 2008 presentation (found on website). I think PT beleives prices will go up over next year or two. Hence delaying offtake agreement. If Rincon produces 17,000t p.a as projected and prices of lithium go up about $10,000 t then net profit before tax will be around $180k per annum. This is without free potash 80,000t at $750 and we get some $60k of additional revenue. This free potash is worth alone $750 million based on a PE of 15. On top of this is revenue from other chemicals, and the potential to increase lithium to $68,000 t p.a. Taking this into account profit before tax of some $250 million sounds reasonable. Take a PE of say 15 (used for chemical companies and allowing possible increase in production potential) then that will give Rincon a market cap of around $3.5 billion with only around $80 million debt. That is close to a 20 bagger if all goes to plan based on current market cap. This however is not something alot of you dont already know.
The question is when. No dobt PT has rushed into the Iron ore, however he has taken his time with the lithium and to he credit has managed to revalutionise the washing process. I'm not sure what this will do to costs or the purity of the lithium, but i am sure it can only be good. I do think this breakthrough was worthy of a seperate announcement not just announced in the quarterly. Fine tuning this process will take time and hence more delays.
I beleive it will take 3 years mid 2011 for full production to be achieved. The split of Rincon is delaying both projects going forward significantly. However i'm not so sure that this is Pt's fault. Say it goes through in around October this year then finance wont be achieved to march next year. Construction then can start mid next year on the full size plant for completion early 2011.

Now to the Iron Ore. Where do i start one disaster after another. However they will get there and learn from there mistakes. When well lets say 2010 for 4mt and 2012 for 10mt if the company is not taken over before then. If they can generate $350 million before tax as he stated on last announcement at a PE of 10 then this will give a market cap at around $3 billion after taking into account the debt. When in 2012.

Total value some $7 billion in 2012 if all goes well. That is 30 something bagger on todays price. As for this year however the price may go no where for a while. Iron contract wont be signed (if) until at least they visit in June, so it will july at the earliest. No announcement by August and most likely it will be off. More heavy selling possibly. No announcement will will made in regards to lithium contract to the companies have seperated. Expect Novemeber/December.

Other issues on this company include PT himself. Inconsistent with his reports on progress and changes timelines without informing the market, not to mention placing capital raising announcements on the buzzer. He is not thorough in his reports and from results not thorough enough in his duties. No wonder he has time to write on the internet all the time. He is as dodgy as they come i'm afraid. He no doubt knew OPES was going down so he requested his shares back 5 days before administration. Coincidence. Not likely. However he will most likely get his shares back.

Now how low can the price go. Given no disaster on the share markets i would think 0.17 would be the low. They company will not likely go bankrupt. They raise capital when they need too and if worse comes to worse could a percentage of their assets. Lithium and Iron Ore are in hot demand so they should have no problem selling if it comes to that, which i dont think it will.

In conclusion if you have a 3-4 year investment horizon and dont expect to score a ten bagger in a year (maybe a 2 bagger at best if all goes well) like many daytraders on HC then you should do well. Waiting 3-4 years for at least a 10 bagger is a pretty decent return.