Ann: Company Presentation , page-4

It's just good to see a presentation and it looks reasonably positive, the market is pretty bleak today so it wasn't going to do anything mind blowing.

I agree with septic, commissioning means more than just the wheels turning, but if it wasn't close then, it must be close now and hopefully running well.

Now every new plant that is built around the world is performance guaranteed, this one would be no different. There are specialised lawyers that are employed to look at just this sort of contract, and knowing the level of detail that both Sentient and Macquarie Bank’s (minerals division) did prior to backing Andean Resources, I feel that this process would have been thorough.

Just some background information regarding this issue.

In 2007 the company paid $1.5m and installed a 10tph wet processing plant. This pilot plant was used to test and refine a wet processing flowsheet using the variability of grade across all the tenements. Thousands of tonnes would have been processed to get the 200t of concentrate. This concentrate was sent to Northern Iowa University for dry mill testing to develop the appropriate flowsheet as well as providing product for customers to trial. Now all this data combined with all the drill results and any other information was compiled and overseen by the designer and manufacturer of the plant. Now if there have been issues or changes to the plant, it will be at their expense, not the business, I’m sure of that.

Now there is a negative point to a commissioning delay that directly impacts the business and that’s with sales. If you are providing customers with something new and a remarkably better product, you need to prove it and also give guarantee of supply, this could well have been a problem with the production delays.

Now around the world foundry grade is in short supply (like most high quality commodities). Most use supply from South Africa and many would be hesitant to change suppliers unless they knew categorically supply would not be an issue. Amcol’s brand new plant in South Africa that produces Hevi-sand (foundry chromite) has commitments for the total 2012 production. So if you were a foundry, you’d be thinking twice whether to jump from that queue, so you can see what I’m saying about being able to provide supply - consistently.

Now just with some points from the presentation.

I agree with you WJR about the table on page 25. The 18,643 would be projected conversion of tonnage in the U.S. of Zircon over to Spherichrome from the 30 foundries they have sent samples too. At the moment, they have 3,587t contracted with a further 15,000t possible. You don’t think the price differential of $1,700 a ton might weigh on managements thoughts, especially when it has the same characteristics as Zircon and the same GFN?

It won't take long either for the other zircon foundries to work out what their opposition are using instead of Zircon.

I still expect a fair amount of the Spherichrome sales within the U.S. will be substituting or mixing with South African chromite. The benefits increase dramatically and it may be a better way for foundries to adopt this new product.

Now I know foundries have shut down periods twice a year for maintenance - June/July (summer holidays) and from Xmas to mid January. With the Spherichrome production running late, many foundries would not have received samples until after the July shutdown, thus why the “still sampling” number is at 14,442t. Many will start testing soon and I would think many will move over after seeing its capabilities, just like the initial 3 customers who have tested and are buying 3,587t (3 early bird customers are taking 4% of production).

Just of interest, there is 5,500 foundries across the U.S. and the 30 foundries that have received samples could well take 20% of total worldwide production. The U.S. is the second biggest foundry market in the world, behind China and this plant will be the first in the U.S. for nearly 50 years.

It's good to see within the report that the foundry chromite price holding up well, but there are no new mines coming online anywhere in the world, so it should be expected and the South African mines are having quality issues. Also all exports from Zimbabwe to China have been halted and there is serious talk about India pulling the plug on them too. (No wonder the Chinese are buying aussie assets).

Cashflow
It does look low, but both Macquarie and Sentient have converted options to the value of $1.5m, so that will extend a little further and it’s a positive sign for the company when 50% of the register don’t mind writing a cheque. I do agree the bank account would be better served if it was up near $5m in a climate like this, but there have been sales of Zircon and I would expect Spherichrome production and deliveries to really start moving forward in 2012.

All the best
Pep

DYOR