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Gold/Mining/Energy : American International Petroleum Corp

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To: Sergio H who wrote (83)	6/21/1997 8:05:00 PM
From: richard hawkins	of 11888

Well I finally had a chance to look at the Annual Report, and I must say I am underwhelmed. The report discloses a lot of information that has been curiously lacking from recent press releases, such as the fact that the asphalt production is now perceived by management as a TWO PHASE implementation and that as of now only PHASE ONE has been implemented. Buried on page 9, paragraph 2 under subheading Marketing, the company nonchalantly discloses that: "Since the Company was unable to secure a sufficient amount of funding to complete the timely construction of the asphalt terminal facilities within the deadline dates specified in its agreements with Coastal Refining and Marketing Inc. ("Coastal") the agreements have lapsed. However, the Company continues to have discussions with Coastal......" This is material information which should have been disclosed in a press release rather than buried obscurely in the company's 10K, and will only reinforce the markets' skepticism regarding our management's credibility. PHASE TWO of the asphalt production facility is expected to be completed in the fourth Quarter of this year (or early'98) at a cost $2 million and will greatly enhance productivity according to the report and production will ramp up by 15-20% per year going forward . Meanwhile, the PHASE ONE implementation will allow the company to process certain feed stocks for a fee and market within a 100 mile radius of the refinery, if I have read the report correctly. There is no timetable set out for the exploration and development of the Kazakhstan concession nor mention of the cost to the company of this asset (only the cost of the option ($100,000) to purchase a 40% working interest. I presume the option was exercised and that somehow we ended up with a 70% working interest. But details of this transaction seem to be glaringly omitted. Because the company derived 60% and 24% of its' 1996 revenues respectively from the leasing of the refinery and Columbian operations, 84% of our revenue source is no longer extant. Whether the company can recoup through either running independantly or re-leasing the crude oil operation at the refinery and starting up the VDU operation remains to be seen. They plan to margin the Mercantile Intl Pete stock for working capital going forward which is kind of scary. To be continued..........

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