ADY - Admiralty Resources

[jimmyz1]

ive been with ady for over a year now,and with the split coming up where do you think ady will priced by the end of the year as the last couple of months im getting nervous.

 

[nikki]

Hi Roland, I think the management of ADY are cautiously moving forward with the demerger because they keep delaying it. I know there are lots of uncertainties with the demerger but @ 0.3 I think all the risk is included in the SP.

jimmyZ1, it's anyone's guess where the SP will at the end of the year. I read a merrill lynch report predicting that our index will end the year @ around 6300. That suggests to me that for the rest of the year we are going to consolidate within a broad spectrum in the index. During long consolidation periods it seems that fundamentals of a company become even more crucial and will be tested severely. IMO, the commodity markets that ADY is working with are still very bullish (potash, lithium, ore, zinc). So as long as the management team continue with the same level of commitment to producing, generating income, and structuring finance without diluting shareholder interests, we will easily work through the resistance levels in the SP as our index consolidates within a large range.

I am sure others are less optimistic than me and I stand to be corrected with the passage of time?

 

[rub92me]

Signs of bot buying the last couple of days, after the conversion near the lows. Cynics could argue that the price was 'engineered' down for a conversion at a low price . Someone is accumulating at these levels so could signal an improvement over the next couple of weeks, depending on how much this buyer is after and what price/timeframe they want to have it. Quietly optimistic that there is not much downside at this level of the shareprice.

 

[mick2006]

I took the recent sell off as a chance to buy into ADY, with iron ore production ramping up in Chile and the upcoming company demerger likely to create shareholder value there is plenty to like about ADY going forward.

 

[nikki]

Signs of bot buying the last couple of days, after the conversion near the lows. Cynics could argue that the price was 'engineered' down for a conversion at a low price . Someone is accumulating at these levels so could signal an improvement over the next couple of weeks, depending on how much this buyer is after and what price/timeframe they want to have it. Quietly optimistic that there is not much downside at this level of the shareprice.

I hope so Rub92me. You have been pretty good with your observations in the past so I hope the move up comes sooner rather than later to help get rid of some of my anxiety. The charts do not look particularly inviting. The bot buying is very obvious but i do not understand where the selling pressure is comming from. Not that many shares have traded below 0.24 for people to be selling them at those prices.

I do not fully understand what a convertible note is. The good thing is that ADY used the money to pay off debt rather than needing it for everyday expenses. I assume their recent ore shipment must be bringing in money.

looking forward to the next month and a bit - hoping for lots of news to come our way.

 

[nikki]

Ouch! I am so surprised by the annual report! Can anyone put perspective on issues like: over $13 million in losses re iron ore; how is that a week ago they report that they are only in debt by $30 million and this report says that they are bankrupt and relying on overdrawn debt facilities . . . .blahblahblahblahblah......

What a shame! I have to admit, if i was not sitting on huge losses i would not hesitate selling after reading this financial report. . . . so i think i have to hang around another century to get my capital back - assuming that the company will be around!!

 

[MS+Tradesim]

Nikki,

I think that the "Provision for loss on iron ore contract" of $13.6m is a paper writedown for accounting purposes.

Also separately announced today, ADY have sold a shipload of iron ore at a spot price of $189/t which will inject revenue of around $9m.

 

[gfresh]

Nikki: As an audited report, obviously they have to report on the current "now" position of the company, not taking into account any future activity. As of the last half-year, very little ($2.5M) of sales revenue came in, which of course meant a subtantial booked loss, and the "going concern" of the company is in question as of the information presented at that time from a pure accounting perspective.

Already this half we look to have $9M payment for a shipment (already 3.5x more sales revenue than last half-year), and they are looking to ramp up to at least 2 shipments per month, I assume at somewhere close to $US9M a pop. Even if it's less than this, cash flow should be good, as long as the shipments continue regularly.

They also note on page 12, $US40-60M for pre-payment for 10% of Lithium production. Now if this can be secured (they say "mid 2008"), this will in almost one swoop zero nearly all prior $51M losses incurred in setting up operations. Again, until it happens, it can't be counted.

So obviously ADY is in a very important make or break period in the next 12 months, as per many producers during the initital stages. But if it can continue to sell iron ore shipments, I think they will have no problems in paying off any debt, and/or make close to a tidy net profit in FY2009. Of course, the split will separate the two sides of the business, but the iron ore to me looks like it's viable.

As an early stage producer, there is quite a bit of risk attached, so it's not for everybody.

 

[rub92me]

Ouch! I am so surprised by the annual report! Can anyone put perspective on issues like: over $13 million in losses re iron ore; how is that a week ago they report that they are only in debt by $30 million and this report says that they are bankrupt and relying on overdrawn debt facilities . . . .blahblahblahblahblah......

What a shame! I have to admit, if i was not sitting on huge losses i would not hesitate selling after reading this financial report. . . . so i think i have to hang around another century to get my capital back - assuming that the company will be around!!

I don't really understand your surprise. Did you expect a profit??
No real surprises for me other than the accounting treatment for iron ore sales contract in 2006. For ADY at this stage the only thing that matters is cashflow. We already knew about production of iron ore being lower than originally planned. And we know about all the activities they are working on to secure sufficient cash.

 

[nikki]

I don't really understand your surprise. Did you expect a profit??
No real surprises for me other than the accounting treatment for iron ore sales contract in 2006. For ADY at this stage the only thing that matters is cashflow. We already knew about production of iron ore being lower than originally planned. And we know about all the activities they are working on to secure sufficient cash.

I Did not expect a profit? But i did not expect 13 million in write-down for iron ore side of the businness? Did not expect auditors warning us about the solvency of the company b/c of 50million plus in debt rather than the 30 that had been reduced to 20 a few days ago. I did not expect the suggestion that management might hold off producing other by-products from lithium process if solvency becomes an issue. I cannot figure out how ADY or RLL can be solvent going into a demerger! Phil must have something up his sleeve in terms of financing RLL.

 

[roland]

Well, I am in for a few more today - Nikki's posts had me thinking twice - but hey, another good news announcement today ... grab a few and help bring the average down a little.

 

[rub92me]

I Did not expect a profit? But i did not expect 13 million in write-down for iron ore side of the businness? Did not expect auditors warning us about the solvency of the company b/c of 50million plus in debt rather than the 30 that had been reduced to 20 a few days ago. I did not expect the suggestion that management might hold off producing other by-products from lithium process if solvency becomes an issue. I cannot figure out how ADY or RLL can be solvent going into a demerger! Phil must have something up his sleeve in terms of financing RLL.

1) As explained before: the $13 million write down is an accounting treatment only. It is money they could have earned if the 2006 contract had been a FOB contract (as all subsequent contracts have been) and if they had produced all the iron ore in the period they expected.
2) Auditors only look at current financial position which shows a big loss and little revenue. So they express concern. That's their job.
3) The company is not $50 million in debt. That figure is accumulated losses, which doesn't affect the current cashflow or debt. The debt (borrowing) is shown around $28 million and has since been reduced.
4) Management has to watch the cashflow, so of course if there are delays in production or production is lower than forecast they have to contain costs. Shows to me that they're well aware of what needs to be done to keep them going.
Once the prepayment for Lithium has been secured solvency for RLL is a no-brainer. Iron ore production will need to improve and will take another 12-18 months before it is cashflow positive. Looks like they have plenty of interest from buyers to tide them over until that has been achieved.

 

[roland]

Doesn't stop - does it:

Director’s Shareholding securing Margin Loan
The Company has become aware today that stockbroker Opes Prime Group Limited has been placed into receivership by the ANZ Bank today.

Director Phillip Thomas has advised the Company that entities associated with him have a margin lending arrangement with Opes Prime with a facility balance of $2.85 million , with a current gearing ratio of 55%.

It is now expected that this margin loan will need to be repaid or refinanced as a result of Opes Prime Group Limited being placed into receivership.

... I grabbed some more at $0.20, seemed like a good chance

 

[STRAT]

Doesn't stop - does it:

Director’s Shareholding securing Margin Loan
The Company has become aware today that stockbroker Opes Prime Group Limited has been placed into receivership by the ANZ Bank today.

Director Phillip Thomas has advised the Company that entities associated with him have a margin lending arrangement with Opes Prime with a facility balance of $2.85 million , with a current gearing ratio of 55%.

It is now expected that this margin loan will need to be repaid or refinanced as a result of Opes Prime Group Limited being placed into receivership.

... I grabbed some more at $0.20, seemed like a good chance

Hi Roland,
Does this mean there is a possibility that PT will loose all his shares to ANZ?

http://www.businessspectator.com.au/bs.nsf/Article/Billion-dollar-bust-D64HQ?OpenDocument

 

[nikki]

Hey Roland, we should call you the 20cent buyer. I have to admit you got guts. I was watching the potential break at 20c and kept thinking should i or not!!!

Could not do it. I might get another chance next week maybe! I suspect if 20 cents gets tested and holds that it will be the last time we will have the chance to buy some at that price?

 

[Trojax]

Hi Roland,
Does this mean there is a possibility that PT will loose all his shares to ANZ?

He only had a portion with Opes, $4.1 million or so with the 55% gearing, seperately holds around 7 million dollars worth that wasn't with them apparently, and unencumbered.

So on one hand he'll have to cough up the margin (2.3 million roughly) or potentially yeah they could sell down some to cover the margin, return the difference, but overall not effecting the majority of his holdings.

 

[rub92me]

I'm more interested in the holdings of Anthony Blumberg, former ADY director and major shareholder, and major equity holder and CIO of Opes Prime. If Anthony knew about these problems, it doesn't look like he told his former colleague Phil Thomas...

 

[juw177]

Can we say that the last 2 days drop in price was due to selling of Opes holdings? Or was it combined with panic? Will there be more substantial selling from the Opes debacle?

From a VSA point of view, a big shakeout happened yesterday and the rise today confirmed that the selling has eased.

 

[roland]

Hey Roland, we should call you the 20cent buyer. I have to admit you got guts. I was watching the potential break at 20c and kept thinking should i or not!!!

Could not do it. I might get another chance next week maybe! I suspect if 20 cents gets tested and holds that it will be the last time we will have the chance to buy some at that price?

Hi nikki, actually I got some more yesterday at $0.17 - holding a sell order now for that lot at $0.21

 

[TheAbyss]

Article in todays Australian reported that ANZ have only sold 1/4 of the Opes shares so the downside is not finished yet. What the percentages amongst the 7 most affected are is another question. Perhaps the ADY holding is done with.