China Armco Metals Inc. (CNAM)

[derek2000]

CNAM - Apollo Investment

Wristshot - The questions you are raising are very good.

I have a sense that the investment is much less risky than you worried. Although I am no expert in mining and exploration, I did live near iron ore mine and coal mines for many years and had observed the production of their operations first hand. I believe that iron ore is similar to coal, the risk is much smaller than gold mine, and the reserve is easier to prove, and the cost to ramp up production is relatively lower.

Following is my reading per Apollo news release -

1) CNAM has conducted an extensive due diligence, including a site visit to Mount Oscar project - which should mean that the project is in later stage.

2) The project is only 20 miles away from a proven reserve. It should share the similar geographic composition.

3) The transportation infrastructure is ready (one of the biggest cost for iron/coal/oil fields)

4) CNAM's investment is for 19.9% interest of Apollo. It gives CNAM rights (option) maintain its 19.9% interests if Apollo shares dilutes, but not the obligation.

5) CNAM's main interest is not in the 19.9% shares of Apollo, but rather, its rights to 15% ore should stand - This is critical to CNAM's interests.

6) It seems to be a very good deal: Comparing to China Metallurgical Group (CMGC) investment of A$400m for 1500Mt project Cape Lambert, CNAM's A$4.2m for 19.9% interests in 500Mt project Mount Oscar is more moderate and much better deal. (Cost per ton is 1/6 of CMGC's investment, subject to further dilution though).

7) Your Aquila A$5.8B comparison - I googled the news: "The DFS recommended the stage-one construction of a 30-million ton a year mine, 282 km of new rail and a new deep-water port facility at Anketell Point port."

Yes, 282km of new railway and a new deep water port alone will probably cost A$5.8B. But this seems not to be in the card for Apollo's project, a much smaller operation. Per Apollo's news release: "Apollo's Mount Oscar project is located close to existing infrastructure."

Hope this helps.