what the anns don't tell us

The Sept qtrly tells us that:

Silver production exceeding expectations. New Merrill Crowe silver extraction circuit operating at over 110% of capacity. Since commissioning, the upgraded crushing circuit and heap leach processing facility have performed exceptionally well, achieving close to overall design capacity by the end of the quarter. Mining rates are now being accelerated to establish a sizeable stockpile of primary ore to under-pin the ramp-up in silver production to the initial targeted annualised rate of 1.5 - 2.0 million ounces per annum by the end of calendar 2011.

Testwork on the crusher product, which has subsequently been confirmed by production results, has shown that the silver extraction rate is achieving the design expectations at this early stage of the leach cycle. Ultimate extraction rates will be reported after the project has been running at steady state for three months.

21st Nov 2011 ann tells us that there has been "excellent progress in the first four weeks of wet commissioning", "Alcyone will commence building a strong cash flow as commercial ramp-up is completed this quarter", and, commenting on the pre-pay and hedging from CS "That puts us in a strong position both operationally and financially".

The first warning sign comes in the 24th January 2012 ann, mainly about drill results, but includes the comment "production continues to ramp up to the targeted level of 1.5-2.0Moz per annum". No further comment. No indication as to why they have missed the date for full production, what the production rate currently is, or when they expect to be in full production.

22nd February 2012. Finally, they talk about a slower ramp-up in recovery rates. But wait - there are delays with the crushing circuit? The circuit that five months ago was "achieving close to overall design capacity by the end of the quarter"? And this has caused the steady state operations to be put back 9 months? It gets worse. The company is now "moving towards its goal of achieving consistent daily production of around 4,000oz of silver.". That's an annual rate of 1.46Moz per annum. But they still claim the target of 1.5 - 2.0Moz per year, as well as 4,000oz per day. The goal is changing, but they are not making that at all clear.

March 29th ann still has 1.5 - 2.0Moz per year.

The March qrtly still has the 4,000oz per day, and they have finally changed the target to 1.2 - 1.5Moz per year, but now steady state has been put back a further three months.

And finally to the 7th of May. "Texas project now cash flow positive": really? So why do you need funds to bring forward construction of leach pad 4 (part of the Texas project), connect to the grid (also part of the Texas project, and started in the Oct to Dec 2011 qtr)? Does the company mean that it is cash flow positive so long as they don't actually spend any cash? April production was approximately 2,500 oz per day - still a long way from 4,000 oz/day.

Bearing in mind that much of the silver already produced has come from the old Macmin ore, already sitting on the leach pad just waiting to be irrigated, I can't believe for a moment that the steady state cash cost will be any where near $15/oz for an operation running at 75% of the initially targeted production.

Too may unanswered questions, which shouldn't have to be asked, for me to come back in yet.