Advanced Explorations Inc. ADEXF

Preliminary Economic Assessment REALITY

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The recent Preliminary Economic Assessment released by Advanced Exploration Inc. is completely inappropropriate.  I will focus on one aspect of the news release, the price of the commodity used.$0$0$0$0Given that scrap steel fob Rotterdam is currently priced at US$265 per tonne and pig iron slabs are sold at ~US$250 - US$275 fob Ponta de Madiera, this analysis is incredibly inappropriate and misleading.  I will focus on pig iron slabs as DRI/HBI products are priced based upon slab prices.  HBI (Hot Briquetted Iron and Directly Reduced Iron) and Special Metallics (iron nuggests, etc).$0$0$0$0$0The pig iron reference price has generally been priced between US$ 250 to $400 over the past five years with one period between February to August 2008 where average prices spiked to US$950 per tonne.  However, this was the only time that prices exceeded US$400 per tonne.$0$0$0$0$0Comparing different charge mix for the EAF, with 70% scrap and 30% alternative iron source (Special Metallics (SPM), HBI/DRI or pig iron), and taking pig iron as a reference, detailed calculation show that the relative VIU of HBI is about 83%, while that of SPM is 87%.  This means that, taking the price of pig iron as US$250/t, the SPM price should be $217/t and that of HBI $207.$0$0$0$0$0Using US$500 and US$750 per tonne as base prices for any economic analysis is not appropriate.  It also ignores the fact that DRI/HBI and Special Metallics (SPM similar to the referenced iron nuggets) are priced based upon the individual value-in-use model that a steel customer uses.  This means that inputs into the EAF are not exactly interchangeable and are priced accordingly.  this means that DRI/HBI and SPMs are prices ~83-87% of the pig iron slab reference price, not at 100% of the price as implied in the news release.$0$0$0$0$0Since August 2008, pig iron slabs have been priced ~US$200-US$275 per tonne, so using two reference prices at two and three times the current price is misleading without actually stating the current price is just not on.$0