Ann: Quarterly Activities and Cashflow Report , page-2

The good news is that 178,473 ounces of silver bullion was produced in the March quarter, however this "production was below budget."

Plus AYN's hedging has been significantly reduced:

"A total of 367,163 ounces of silver were delivered into the company’s hedging and prepaid facility during the quarter through physical delivery and financial close out.

The Company’s current forward silver sales and pre-paid commitment is 429,964 ounces at an average price of $33.83 per ounce."

AYN is still undertaking "optimisation work on heap flow rates and reagent addition to maximise silver leaching kinetics from the heaps."

However, unless I missed it the report did not the grade of the silver mined and the recovery rate.

AYN reaffirmed that their forecast production rate is "1.2-1.5Moz per annum." So it appears 1.5-2Moz per annum is no longer the case.

AYN told us that they are "confident of achieving commercial production rates during Q3 of 2012." I take this to mean 4,000 ounces of silver in a day. However it is worth noting that AYN expect "steady state operations by Q4." So obtaining "commercial production rates" is not the same as "steady state" production.

I suspected cash was very tight and AYN would need to raise more cash. This was confirmed:

"During the Quarter the company entered into a $1.25 million facility with Seaspin Pty Ltd, a company controlled by a Director Mr Charles Morgan.

The working capital facility was obtained on normal commercial terms is unsecured and is repayable on or before 1 July 2013 or from receipt of equity funds greater than $2m whichever is earlier. At the end of the Quarter an amount of $500,000 remained undrawn."

From the cashflow statement:

Production costs were $3,828,000.
Exploration & evaluation was $289,000.
Development $602,000.
Administration $586,000.

Receipts from product sales was $4,261,000.

This means AYN had a Net Operating Cash Flow loss of just over $1 million.

AYN's cash at end of quarter of $1,341,000 was bolstered by the loan from Seaspin Pty Ltd.

It will be interesting to see how the market responds to this report.

Good luck to all holders.