I have been doing due dilligence on chrome and have been reluctant to post about it. However, some things need to be said. The IMF Company is 29.1% owned by a Chinese steel company, Jiuquan Iron and Steel. IMF have ceased production from their two furnaces indefinately until markets improve. XSTRATA and its partner have cut production by 52% (500,000t) through the shutdown of 11 furnaces. Hernie Ferrochrome has cut production by 70% by shutting down three of their four furnaces. Samancor, the world's second largest producer after XSTRATA, has shut down all operations from mid Dec. to the end of FEb. Assemong is shutting down their two furnaces indefinately. This is not good.

Another thing, South Africa may be unstable and have serious deficiencies in power but their chrome is not all deep underground. Chromex just started production of it's 39MT of chromite reserves that is outcropping, which means at surface and mined open pit. They just announce financing for additional plant installation approx $5 million to increase the processed ore products. Go figure!! Obviously they are bullish on the future and have convinced bankers as well. All is not lost.

What does this mean? It means the timing of our discovery is brutal. It means we all should realize that majors are focusing on self preservation and not expansion at the moment. It means that if a major is interested, it will be nearly impossible to convince a BOD of that major to buy the whole shooting match. However, if we are approaching an economic bottom, a 9.9% stake in McFaulds would be a good cheap hedge for future negotiations. This is not a bad thing for us, we don't want to be picked off at this price. When you think of it, oil is a quarter of what it was a few months ago. Production and consumption of oil have spiralled down. No one has written off oil. Same scenario for chrome. I don't think there is anyone in the world that thinks oil will not rebound in price and the same goes for commodities like chrome. We just have to wait like every other sector.

It also means we have time to prove our worth. Before the recession, the US accounted for 14% of the 19.1 MT global demand for chrome which amounts to 2.66MT. Even if we got a third of that demand, we would be a fairly large producer. You can rest assured that US trade will be more restrictive after tomorrow and our friendly adjacent status may auger well in the supply of chrome which the US does not have much of.We just have to have the best data.

Mike