ADY - Admiralty Resources

[roland]

The ann is good news but some things to consider...

1) 4 shipments of iron ore early this year = not much income
2) Lots of debt to be taken on - not a problem if infrastructure is completed in a timely way and contracts are finalised. More delays here = larger interest cost
3) Demerger yet to happen and we still don't know how what cost base will be allocated to each share
4) Li infrastructure way behind schedule - I note in their latest presentation they're now saying Jun-Sep 09 before all ponds are ready. That is a big delay.
Previously it was meant to be 06, then late 08, now mid-late 09.

I have every confidence that it will pan out successfully but these delays mean share price doesn't grow smoothly = opportunity cost. I'm sitting on the sidelines all cashed up but I don't know how much to throw into ADY because of these factors. So back to my original plan, either sub-30c entry or wait till cost base for demerged companies to be announced.

sounds like a plan Tradesim - good luck. In the meantime, I am happy to trade the 10% swings, up or down I am happy

 

[MS+Tradesim]

Roland, exactly.

That's how it's done - trade our own plan. Doesn't matter how successfully someone else can trade a particular strategy, if it doesn't "fit" us, we will lose money.

 

[nikki]

The ann is good news but some things to consider...

1) 4 shipments of iron ore early this year = not much income
2) Lots of debt to be taken on - not a problem if infrastructure is completed in a timely way and contracts are finalised. More delays here = larger interest cost
3) Demerger yet to happen and we still don't know how what cost base will be allocated to each share
4) Li infrastructure way behind schedule - I note in their latest presentation they're now saying Jun-Sep 09 before all ponds are ready. That is a big delay.
Previously it was meant to be 06, then late 08, now mid-late 09.

I have every confidence that it will pan out successfully but these delays mean share price doesn't grow smoothly = opportunity cost. I'm sitting on the sidelines all cashed up but I don't know how much to throw into ADY because of these factors. So back to my original plan, either sub-30c entry or wait till cost base for demerged companies to be announced.

- if income & debt is an issue for ADY how are they affording to give 22 million to give to cia, to buy an extra 10% of cia, etc.,.
- do you think they could have gone faster given that the government has only just given them the EIA permit they need for production.
- they are planning to ramp up the iron ore production (by applying for an additional permit to the existing one) according to an email phil sent to someon on TS. extra $40 million will allow that to happen. getting buyers is obviously not an issue.
- this current iron ore contracts is imo only a taste of what the lithium tenders are likely to produce!!!!

i think the question for me is whether i can get a better entry into the stock than the current .35 of today - but then phil has the great ability to release a few announcements one after the other????

 

[MS+Tradesim]

Nikki,

Check the ann. again. ADY is borrowing money. It will then lend that to CMSB, no doubt at a higher interest rate than ADY is paying.

CMSB is ultimately servicing the loan and if it is making only 4 shipments early this year and then the balance of the original contract once the panamax port is complete then it will need to be very careful with its cash flow. I have no doubt it will, but these guys have a history of infrastructure delays, so any delays now mean more interest payments over time.

ADY itself will be fine if it can nail down a forward sales agreement on Li. That should service its debts. However, another thing I don't know is how the debt will be structered in the demerger. Will Rincon Lithium Ltd be responsible for anything? Unlikely, but who knows just yet.

Phil is an extremely canny businessman and I have no doubt he is putting together great things. But history also shows plenty of delays. My main point is I'm not getting too excited just yet.

BTW, I've been following ADY for quite a few years and I know it nearly inside out. It's the closest thing I know of to a sure bet in a junior company. I'm just not prepared to commit funds yet if I think I can get a lower price. This is where Warren Buffet's margin of safety comes in. Why pay .35 if I think I can get it for .25-.30? The greater the margin between purchase price and intrinsic value, the less likely it is to fall further (assuming the fundamentals remain in place). On the other hand if it takes off in spite of the overall market negativity then I have no problem paying a higher price to pick up a quality growth company.

I would absolutely not want anyone to be influenced by my opinion. This is just sharing how I'm thinking.

 

[nikki]

Hey MS, wasnt questioning how well you know ady - just your spin on their story.

Either way, it does not seem that the SP cares about news or fundamentals. It seems to be weighted down by the iron ore it is trying to ship out of Chile.

I noticed companies selling potash were really knocked about yesterday in the US. Maybe the negative sentiment re potash has had an impact on sellers today??????

 

[nikki]

Hi MS,

the annoucement says they are providing 20million to cia as an interest bearing loan. i havnt looked at ADY's balance sheet for a while but can you not read that statement as ADY receiving interest for the money they are giving to cia.

as you know, cia is not wholly owned by ADY so it has to give them an interest bearing loan??????

either way, i do not care that much as my losses at the moment in ADY have been adequately covered by ZYL zooooooooooooming today?

cheers to you.
N

 

[MS+Tradesim]

Hi Nikki,

I'm not being defensive. What I haven't said clearly is that I am a true believer in this company, but I'm trying to be realistic and objective about the share price.

Yes, ADY will be loaning the money to CMSB and will be paid interest on it. But where do you think ADY is getting the money from? The ann. says they will be approaching a bank, and possibly also raising money through a placement. They have already provided $22m to CMSB as interest bearing loan, and this will be increased to $60m over 2008.

So ADY borrows money from a bank (plus maybe a placement) and has to pay interest on it. ADY then lends money to CMSB who have to pay interest to ADY. CMSB need income to service that loan. Where's that coming from? Only 4 iron ore shipments due early this year. That will provide some cash-flow. Will it be sufficient? Depends on the size and term of the loan. CMSB also have a lot of wages and operating costs to pay. Where is all the money coming from? One possibility could be a forward sales agreement on part of the iron ore. But who knows for sure? Not me.

There are a lot of unanswered questions which are probably weighing on the share price. I'm confident Phil Thomas can pull it all together. Don't know about the new guy.

 

[nikki]

Am I missing something?

Can anyone tell me whether that annoucement was good, bad, ugly, fantastic, etc. I am at a loss figuring out ADY?? I understand downtrend and how not much can save the SP but this is getting ridiculous. . . .

 

[rub92me]

They got money on good terms and the price of iron ore is rising. Doesn't sound bad to me. :
I think people's moods are such that unless they announce a new cure for cancer nothing much will change at the moment. On a positive note, the shareprice is starting to make higher lows after sustained selling over the past 3 trading days.

 

[nikki]

They got money on good terms and the price of iron ore is rising. Doesn't sound bad to me. :
I think people's moods are such that unless they announce a new cure for cancer nothing much will change at the moment. On a positive note, the shareprice is starting to make higher lows after sustained selling over the past 3 trading days.

Hi Rub92me, i thought there were lot of good things in the announcement & totally agree with your sentiments:

- JORC for new tenements comming up soon with potential to create new mines in three areas.
- 0.7 for ADY as option in case of default given by the institution who also does research on them.
- the funding arrangements for the IO businness is clearly there which is what PT needs to make the demerger work.

blah blah blah blah blah blah blah

technically re SP, you are right. had not seen the higher low and might be the reason why all the buyers suddenly turned up at the sub .3 price???? i am curious however: who is selling all these shares and would they be selling at a loss???

i really do not care for the SP because i think ADY is heading in a very positive direction and only watch it to see what the broader market thinks of the fundamentals of the company (perhaps a stupid thing to do when the market is down 2%)!!!

 

[MS+Tradesim]

What struck me as odd was Merrill Lynch buying @78m shares for average price around @0.52 and then unloading the majority of them. Methinks orders came from top down to lighten their holdings across the board because of their own cashflow problems. "We need capital. Sell! Sell! Sell!" BTW, I bought a few today, but still think we still might see lower.

 

[nikki]

What struck me as odd was Merrill Lynch buying @78m shares for average price around @0.52 and then unloading the majority of them. Methinks orders came from top down to lighten their holdings across the board because of their own cashflow problems. "We need capital. Sell! Sell! Sell!" BTW, I bought a few today, but still think we still might see lower.

MS, do you think Merrill sold down. They never appeared on the top 20 list which tells me that someone from the top 20 must have used ADY as collateral for something else they were doing. . . . . .

Welcome back to ADY - let's hope you buying gives it a good kick in the but back up to .69

 

[MS+Tradesim]

Nikki,

There are still motivated sellers by the look of it so I've only picked up about a 1/4 of what I want.

Merrill became a substantial holder 2/11/07 and ceased to be one 24/12/07.
The disclosures don't make sense to me...make of it what you will.

 

[rub92me]

After the stock market meltdown in Australia/Asia yesterday and Europe overnight, I'm expecting panic selling today across the board, at least in the morning. Last time this happened, ADY shareprice momentarily dipped to 20 cents. I'm targeting to buy ADY today, and wouldn't be surprised if the price dips below 25 cents.

 

[MS+Tradesim]

I hear you Rub. That's what I'm looking for. Europe got caned overnight. There will be red everywhere today.

 

[rub92me]

It's gone down hard as expected, but not the full out high volume panic selling yet that I was anticipating. Maybe when Commsec gets back up we'll get another wave. Buy orders at 21 cents and 20 cents. I'll stop watching this now

 

[skating101]

wheres my freaking shotgun, nothing like losing thousands of dollars in 3 months especially when there is the company you've invested in has little exposure to the actual CAUSE of the market downturn. Damn I hate traders.

 

[roland]

oh well, couldn't resist ....picked up a bunch of ADY at .23 - sold something else at a loss to afford it.

 

[MS+Tradesim]

Good on ya Roland. I'm looking to get in at 22.5. Looked likely earlier. Dunno now, might have to go 23 and be done with it.

On the other hand, I'm also thinking if US tanks tonite then sub-20 is on the cards.

EDIT: Hmmm....big buyers stepping in now.

 

[skating101]

Im starting to rethink my position on this, anyone think there is any impetus to sell now? Everyone is expecting the dow to plummet overnight and hence tomorrow morning take the all ords with it along with this puppy