ADY - Admiralty Resources

[lyang]

Hi

Just browsing through www.ady.com.au and came across the following on
http://www.ady.com.au/uploads/news/6974ce5ac660610b44d9b9fed0ff9548.pdf which was posted on 5/2/08 :-

TOPSTOCKS - Question to Executive Director
Share price is low.
Top 20 list indicates that perhaps some holders have sold out. The various Option holders/sellers have long been and gone, so it seems improbable that they are the cause. Despite three quality announcements, we have seen continued selling. Now, it would be fair to suggest that the recent issues over credit, plus general market conditions would affect the share price. However, a 50% reduction, in spite of good news, is a little hard to swallow. And, it is generally not the case with stocks that may be considered 'peers' of ADY. Question: Is someone lending shares to enable short selling?
This facility is not generally available via CFD, but some have noted that ANZ are allowing shorts on ADY via a specific type of instrument which requires the purchase/sale of other shares - ie., some sort of 'balanced' scenario.
If you have any thoughts that you are allowed to offer, I'm sure they would be much appreciated.
Shareholder
ADMIRALTY RESOURCES - Answer from Phillip Thomas to Shareholders

I have checked the trades every day for the past two weeks to see if there is any short selling, that is people who have a sold position and no matching bought position. There are none that I can find. I think there is a bit of imagination going on here regarding the ANZ short facility as I doubt whether ANZ would be bothered lending ADY stock from other large holders (and I know them all) - try it yourself with
BHP for 100,000 shares from a stock lender and see how much it costs you and the interest charges - better off to use CFDs, which do not cover Admiralty. Macquarie will not margin lend against ADY. It is only UBS, ANZ, Merrill Lynch, Opes-Prime and some of their wholesale stockbroker clients.
Even if they do short the stock, it only takes one institution to buy $20 worth of stock as has happened before and they are dead in the market, with no liquidity via futures, CFDs options, etc. Admiralty is an announcement driven stock and the market is wai ting for me to announce the two 10 year sales contracts worth at 46 million tonnes total at $60 per tonne - $2.7 billion and $40m finance.
However, we are not rushing as we have another strategy which might give us a better outcome soon and so we are working on this - if the market thinks we are worth AUD $270m today then so be it.
The market cap does not make sense as our partner Wyndham just sold a 70% interest in two deposits with 11 drill holes, no JORC, one existing mine for $74 millionto JSW Steel (Jindal subsidiary). So 10% was worth $7.4million (US). They stumped up $52m yet we only paid $26m for 60% they paid $52m for 70% and they are just down the road.
In contrast, we have an existing mine, 90 million tonne JORC, shipped 210,000 tonnes, two keen bidders (and about 100 more for the ore), three port strategies (he has one which we have tied up for 2/3rds of the month for the next 10 years) so the asset alone has to be worth US$200m+ (we paid $13mUS for the previous 10%) which is 20 cents a share. Even if you assume the life of the mine is 46m tonnes and it is s worth $750m net profit at a discount rate of 12% over ten years, it makes the
share price 75 cents x p/e 8 = $6.00. You might work it out another way but this is a rule of thumb.

The reason why the share price is not six dollars is because we have a few tasks to
complete which we are working on:
- Sales contracts
- JORC
- Ports
- Expanded production to 4 million tonnes which is our environmental permit
amount at Japonesa Mine but over time the price will gravitate upwards because the market won't allow the arbitrage.
Then add the lithium business, the lead-zinc at Bulman upside and so on.
Share volumes have been low - so there is little momentum. Now that I am back from
leave more information will be disseminated.
Kind regards
Phil Thomas
Phillip Thomas
Managing Director - Rincon Lithium Limited
Executive Director - Admiralty Resources NL
Director - Cia Minera Santa Barbara

As an absolute amateur in these matters, would appreciate it if somebody could enlighten me on PT's valuation of $6 SP for what I think are the CMSB assets?
Thanks

 

[semochen]

I think his valuation should be $0.60

The 750m profit to me should be divided over the 10 years..
Divided by roughly 1000m shares = 7.5cps
x PE of 8 = 60c

and that is if everything he states goes on plan

Don't think there's any way this thing is worth $6.00 atm...
if it is PT should be buying big time himself

Don't know if it's an error he's made, or he did it on purpose (if i'm right of course) either way it worries me though

But anyway.. still is good value to me atm

 

[lyang]

Thanks Semochen. Makes that much more sense. But with the SP atm at 24c???
Would be interesting to see what the market makes of the impending demerger.

 

[STRAT]

Hi



As an absolute amateur in these matters, would appreciate it if somebody could enlighten me on PT's valuation of $6 SP for what I think are the CMSB assets?
Thanks

Hi there lyang. I suspect ADY will have red cheeks over this one as the math does not add up. Based on the info in the email alone it should have read 60c

geez you gotta be quick around here lol

 

[rub92me]

The calculation makes no sense whatsoever imho.
First he talks about a total sales revenue for 46 million tonnes over 10 years which equals 2.7 billion, i.e. 270 million per year. They won't actually be able to produce and ship that much annually for at least the next 2-3 years so actual sales value won't be close to that for a while.
P/E should be taken over revenue not profit, so the net profit is irrelevant.
Valuing a company on just the P/E is a bit ludicrous and I'm sure that as an actuary PT is well aware of that. So I think he's just stirring the pot a bit with the Top Stocks interview; I'm surprised ADY put in on their site though.

 

[rub92me]

Finally looking like some action on the ADY front. Promising volume in the first 2 hours and steadily chewing through the sellers. If the volume keeps up we may finally get a leg up.

 

[roland]

Nice little run today on ADY. Should make all of us brine/swamp lovers happy

I just love it when I read the side of all my batteries Li-ion!

 

[rub92me]

Nice run indeed, with good volume to boot. Long may it continue; it still has an awful lot of catching up to do to get back to where it was only a couple of months ago.

 

[nikki]

Support was incredibly strong around 0.3 today. Sellers were very disciplined IMO. I am amazed that our index has lost so much ground in the past few days and yet ADY has managed to do so well.

The volume of shares traded going down from 0.4 - 0.205 was very small with a lot probably exchanging hands amongst the same group of people. As a result, i assume the move from 0.3-0.4 will be strong and fast.

I suspect that Phil will use a couple of trading halts for 2/3 days to bring more attention to the stock once he has the paper work ready for the demerger.

I also think that many traders will dump before demerger because of the uncertainty of keeping it through that next phase. . . I am just glad we are not testing the lows at the moment anyway?

Cheers to you all.

 

[roland]

Another positive announcement:



14 February 2008
Company Announcements Office
ASX Limited
20 Bridge Street
SYDNEY NSW 2000
RINCON SALAR UPDATE
Headlines
One tonne of lithium Carbonate produced at high grade from pilot plant
Monthly pilot plant production expected to be 10 tonnes per annum before expansion
Project finance proceeding according to timetable
Tender process for agency and sale of 10% lithium products completed first phase
The Board of Directors is delighted to announce that:
• The pilot plant at the Rincon was successfully commissioned on 20 December 2007
and is now operating above expectations for production volumes, with the first
production of lithium carbonate produced on 25 January 2008.
• This one tonne of lithium carbonate has been produced with a purity of 99.0+%
exceeding the expectations from previous research indicating that future processing
will enable production of high purity lithium products.
• The production boreholes from where the brines are extracted are performing above
their expected production capacity and have the properties to yield four times the
required volume for a plant in full production at 17,000 tonnes per annum.
• The Rio Grande Salar that was recently acquired is now entering into production and
we expect the first commercial output of sodium sulphate, a major input into the
production process, in May 2008 in advance of our scheduled production date.
• The pilot plant will reach a steady state continuous production in early April of 10
tonnes per month as planned giving the successful commissioning, we are
immediately implementing our expansion to a full size plant by trebling the size of the
ponds in the next three months.
• The initial operating costs which have not yet reached optimisation have been
contained to well below the market price for the products.
• Basic engineering for the full-scale plant is now complete and detailed engineering
and quotations for major items is underway.
• We continue to plan for full plant production in 2009.
• Project financing continues with legal diligence and engineering due diligence
underway.
• The company is implementing a strategic program for the identification and acquisition
of further mineral resources in the region. This project is being managed by Dr
Alonso.
We are now investigating by-products from lithium and magnesium hydroxide production with
the view to increase earnings from the existing production.
Cia Minera Santa Barbara
The first ship for 2008, is scheduled to arrive on 20th February to deliver a cargo of
approximately 43,600 tonnes to WISCO, our client in China. This is the first of four shipments
in the first half of calendar 2008 under the 2006 Sales and purchase agreement. We are
expecting to finalise the 2008 agreement shortly. The value of this shipment is US$3.248
million.
Demerger
The demerger continues but due to timing of expert reporting and applications for waivers to
ASX and ASIC, the timetable has been deferred for one month, with the EGM due to be held
in April 2008.
Yours sincerely,
Phillip Thomas
Executive Director
[e] pthomas@ady.com.au

 

[rub92me]

The price action today is very similar to what happened in late june last year. Gap up followed by collapse due to lack of volume. See posts #69 onwards in this thread. For history to repeat (with rapid sp rise over the next 2 weeks) we'll need a lot of volume. Overall market sentiment is a bit different now though, so we could see more of a tendency by daytraders locking in gains early. Happy with the rise so far this week though. :

 

[nikki]

Rub92me, That is hillarious. I went back to those discussions and had to remind myself that what i was reading was last year? Let's hope PT can engineer the same series of announcements this time around?

Although I am not looking to sell, today's agressive selling at the close makes me think we are going sideways until PT can do something with announcements. Volumes were amazing in the morning but terrible in the afternoon trade.

Amazing announcement today by Phil. A lot of the speculation in the fundamentals is starting to disappear from this stock.

 

[roland]

Hardly a world breaking announcement - and "Market Sensitive"? Good news though, our pile of dirt is worth more. Whenever I see "Notice Received" the anticipation is nerve racking - let's see some better ones

 

[rub92me]

The ASX decides whether it's market sensitive or not. However based on the 46 million tonnes over 10 years it does mean that anticipated net profit over 10 years has now moved from $750 million to $2 billion. I'm happy with that

 

[nikki]

oh! My! What happened today!! I was expecting a small drop on the XAO and ADY to hold steady in its consolidation channel!

10million trades and we are back to ground zero!

Rub92me - that is a huge increase in income assuming that management can get a contract locking in that price. . .I would be surprised if iron ore prices can continue rallying at this rate. Surely, consumers of the ore will not be able to pass such a huge rise in price to customers?

Anyone know what the reference in ADY's statement is re spot price for iron? How come that is so much higher than the normal price for ore?

 

[roland]

When did this happen:

Admiralty Resources have acquired a 10% interest in Nilnav Orthopaedics - an organisation offering a revolutionary, surgical technique and patented toolset for minimally invasive, "one cut" incision hip replacements.

Nilnav has entered into an agreement with the Ellysian Group to globally commercialise the technology.

The Nilnav technology and procedures make it a major development in orthopaedic surgery in the last 40 years.

Guess I should concentrate more ....

Volume seems pretty low at the moment - I'm sort of hoping the SP will drop a little and I'll grab some more.

 

[Sainter]

Years ago, apparently. A legacy investment if you will. I'm not including it in my hopes/expectations for the company.

 

[Sean K]

On the surface of what has been posted above, this is a dot com, turned explorer, turned biotech. LMFAO!!

 

[nikki]

Volume seems pretty low at the moment - I'm sort of hoping the SP will drop a little and I'll grab some more.

Hey Roland, support at 0.3 seemed very strong. It only closed @ 0.3 because of 1000 shares that were sold at the closing auction. In fact, i have to admit I have rarely seen ADY respect certain support levels and if it was going to break 0.3 during this consolidation period it should have been Friday. It did not trade @ 0.295 even though it could have easily done that.

The weekly chart for ADY looks really good at the moment. I suspect we might get a next leg up soon if the DJIA/S&P do not screw things up

Hope is a good thing

 

[roland]

Hey Roland, support at 0.3 seemed very strong. It only closed @ 0.3 because of 1000 shares that were sold at the closing auction. In fact, i have to admit I have rarely seen ADY respect certain support levels and if it was going to break 0.3 during this consolidation period it should have been Friday. It did not trade @ 0.295 even though it could have easily done that.

The weekly chart for ADY looks really good at the moment. I suspect we might get a next leg up soon if the DJIA/S&P do not screw things up

Hope is a good thing

Yes nikki, in fact it rode out the dip better than I expected. The rise in the ore prices surely would have helped that.

Personally I am a little aprehensive about the business split, I kinda like seeing things stay stable. I would imagine that this leaves a little uncertainty in the minds of would be investors as well.