Monday, 29 June 2009 1:44 PM

Pheonix International (SI) Limited - Business Model Explained

Dear Sir,

I have been watching the debate being waged on the net and other medium about my business model and feel that I should respond. In particular, I wish to address the sharing of profit on a 50/50 basis, an issue that has been the focus of this debate. Here is what Pheonix International [SI] Ltd will do.

Upon my return to the Solomon Islands, all of the many valid questions and genuine concerns will be addressed. Please allow me to respond to what have become such hot topics and in particular, the 50/50 profit sharing business model employed by Pheonix International (SI) Limited.

By definition "profit-share" means after costs, as in net. The deal done between Pheonix International (SI) Limited and the Hokola Landowners Association is as follows:

. Pheonix International (SI) Limited Supplies all start-up capital, machinery and expertise while the Hokola Landowners provide ongoing access to their land and resources and settle any landowner disputes.

. Employment figures will favour the local landowners and not ex-pats, at rates greater than those provided for under other existing arrangements. For example, local labour will receive approximately $4,200.00 SBD for an 8 hour day, six day week.

. Prior to operations commencing, the Hokola Landowners Association will receive $1.5M SBD (in addition to what they have already received to date), to help run their administration and make payment to the various tribal groups within the area of operations. They will also receive a vehicle capable of taking their goods and people to the markets.

. All costs of set-up and initial operations are NOT recoverable by Pheonix International (SI) Limited - i.e. the Company cannot claim reimbursement from the operations revenue generation. The only gain Pheonix can make is out of the equal share of the profits from the actual mining operations. So in effect, all machinery, plants and equipment is supplied by Pheonix at no cost to the Landowners in anyway.

All investment made by the Company thus far is a natural business expense when venturing into new projects. The cost that cripples most companies is the debt servicing requirements associated with large borrowings. Pheonix International (SI) Limited has zero debt associated with borrowing from any outside funding institution and therefore does not require any of the revenue generated from the mining operations for that purpose.

If any debt was incurred and required to be repaid, it would come solely from the company's share of the profit and not as part of the operations cost. I am unsure how I can be any clearer on this point.

As for the possibility of ramping up costs so the landowners will not see real benefit, one must realise two important factors here.

First, The Hokola Landowners Association has an oversight committee that will have full, unrestricted access to the books relating to the operations within their area and would certainly raise the alarm if they thought they were being cheated in anyway.

Second, a full costing has been done that indicates what will be required to run the operations and the expected revenue projection from that. Any sudden "extra" expenses appearing in the books I am sure would once again raise an alarm.

The Company also has plans to assemble and fully fund a local team of geologists to explore and assess other provinces resource potential. In the first instance, Malaita, Makira Ulawa and the Western Province are earmarked for such an undertaking. Once identified, we will go through the appropriate legal channels to secure the opportunity to work with the landowners in those areas on the exact same basis as we have with the people of Guadalcanal.

I hope this has clarified a number of queries some of you have in regards to the operations that the Company will be undertaking. In a separate letter, I will address the other issues in regards to my past and the misinformation brought forward by those that in reality have never spoken to me, nor sought information outside of that which has been posted on the internet [and other media outlet].


Kelvyn Alp
Managing Director
CARATAPA Group of Companies Limited
New Zealand

Disclaimer: The views and opinions expressed in this letter/article are those of Kelvyn Alp and do not necessarily reflect the official policy or position of Solomon Times Online.

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