Ann: ASX Letter to XPD, page-33

The fact that the respected Rob Gibson has been a director and seen the operations meant a lot more to me than the auditors signing off on the accounts.

My optimistic view of things hinges on

(1) the restrictions on Getting cash out of China.

(2) The fact that Chiao Qin blistered their large holding for a loan from Barclays.


When I learnt that Chang was selling truck loads of shares, undisclosed, for 3.3c when the company was supposed to have 12c a share in cash deposits my first thought was this is a scam of Made Off proportions and this scam was the motive for the IPO.

Having learn't about the Barclays loan another more wholesome motive for the IPO emerges.
Is it possible that the IPO was a means of transferring the value of the asset out of china into ASX listed company shares that could be mortgaged to realise foreign currency ?

If we accept that that was the motive and we are not dealing with a bunch of crooks.

Its possible that when the share price dropped, when the controlling family withheld a dividend, that they were taken by surprise. A margin call from Barclays would have been inevitable. Bankers who lend against shares and see the tide going out, follow the tides lead, and wait for no one.

Chou Qin wouldn't have taken out the Barclay loan if they were flush with cash.

Its possible that the restrictions on getting cash out of china prevented Shui-Chiao from raiding the XPD deposits to satisfy the margin calls. Maybe there wasn't enough time to smuggle diamonds out and being shot at dawn if caught was enough deterrent.

Its possible and even probable that Barclays exercised their rights under the loan agreement and sold all those shares.

If the fundaments of the operation are what they have been purported to be and Chou Qin weren't able to get their hands on the cash necessary to stop Barclays from selling them out then it was a hell of a mortgagee sale opportunity.

If all was lost one would think that the new chairman and his fellow director would know by now and be ringing the alarm bells.

A very interesting couple of months coming up.