is the allmine group the next market darling?, page-9

"Invert, invert invert" is what Charlie Munger says. George Soros says "I am always fallible". Basically means 'what if im wrong...'

In actuality AZG is not really that great of an investment (although I own it) at current prices. Its market position is not one with strength ie competitors such as NWH, FGE and the juggernaut MND (although one further argue that they focus on different tiered mines). Thus I would conclude AZG being a price taker. This can be seen by its days payables and receivables.

Days Receivables 359.6
Days Payables 290.0

(Figures from Aspect Huntley's FinAnalysis, although I have previously calculated it and it was pretty much right. NEVER trust a generic analyst ie MF Global)

AZG cashflow is pretty poor. That is why AZG keeps diluting its shares to pay for its working capital requirements. Every time it issues more shares for working capital or pay down debt it issues more shares to the financial Advisory service it received as payment(see notice of AGM).

However, why did I buy it?(I did kind of overpay for AZG at 14.5c - Hindsight bias anyone).

Because I was buying potential for management to grow this business. I am risking my money in the business in the speculation (not straight up investment- the only recurring revenue is its maintenance division and its returns arent very good) that as a larger entity they can achieve cost synergies, cross divisional sales ie "life of mine strategy" and command better terms therefore better working capital requirements and better cashflow.

xFireStorMx has talked extensively about future revenue (great work xFireStorMx) but its the margins that are more important. Interestingly AZG margin ie EBIT, EBITDA, net profit margins are better than even MND (AspectHuntley FinAnalysis) except ROE ROA and ROIC.

Everyone knows smaller businesses have better cost controls. So if AZG can grow the business and keep costs down like currently as being a small entity while continually securing contracts (NFC alliance will help alot
) the future is quite bright. I have also assumed future is bright because of good management and current rate of capital resource expenditure (http://adl.brs.gov.au/data/warehouse/pe_abares99010544/MEprojectsApril2011_REPORT.pdf)
reflects the continual LONG TERM growth of not just China but the other BRIC economies.

I have assumed management is good because of the metrics they are currently showing, what they have previously achieved and the length of time they have spent in the business but then Alan Greenspan was governor of the Fed Reserve for 19 years.

I did not realize I ranted so much. Please do not take my post seriously.