Its all too quiet here so i thought id add my thoughts. Viney,...

Its all too quiet here so i thought id add my thoughts. Viney, you still here?

Been watching AVD on and off for the last couple of years, never held until recently. Came onto my radar after their attempt on TEX a couple of years back. TEX have gone on to bigger and better things but i think it might be time for AVD to finally come good.

Viney, certainly like your thoughts re the PXR connection. As we know, many of these small caps are interconnected with board members/directors. But this one is very close indeed. GBU assisted with the placement for PXR after coal acquisition, so you are right, there is a direct line.

Doing some detailed research on this one, and i think that AVD look to have managed to turn this one around. Still early days but after the $11m+ sale of the assets in Texas in December, assuming that is confirmed, there is a clear path to having adequate cash at hand to meet the convertible notes interest, as well as paying down the 3-4m bank loan. That leaves them with well and truly enough cash to acquire some decent assets and still a 50% interest in a prospective field in Texas.

The hope here would be an acquisition of a coal project in Indonesia, similar to PXR. It is noted that they are looking at other "energy projects" for the first time outside of the U.S. That means that something like coal in an emerging market would very likely be on their radar.

Still just 217m shares on issue here, tiny in comparison to some others. And at current SP a market cap of just over $2m!

A decent acquisition would give them an opportunity to go for a placement without too much dilution to help with cash flow, pay for drilling etc. In fact, given the sale and the interest in the Texas field - a decent placement would actually leave AVD clearly in the black on assets, even allowing for the convertible notes.

The recent options issue (AVDOA, Aug 2012, 3 cents) looks clearly designed to come into play to pay for the convertible notes which fall due Sept 2012. Conversion of options would realise around $6m, notes due of about $5.25m. That means you can see a path for the directors to try to get the share price well in the money (3+ cents) before that time, without having to go to the market for a placement.

Still a risky play as are all these specs, but there is a way forward here and has the potential to be very positive. Encouraged by directors taking a 50% pay cut last year to preserve cash. Tightly held by top 20, who have around 65%. So with only 217m shares on issue, a decent coal play or something similar could see the SP move quite quickly. I note the sell side is very thin.

I'll be holding and looking closely at announcements in coming weeks. Interested in any other thoughts.