I'm encouraged with the conference call. It seems clear that the SUF Board of Directors has felt the pressure from shareholders (due only to the declining share price) and is directing management to concentrate on the basics of maximizing production, cashflow, and profitability. Non production exploration will be cut back to maintenance levels until Messina and Klipspringer cashflow kicks in in about 2 years. Except for a few exploration nuts, this is what most of us wanted, and because of that, this hamsters internet criticism of SUF management will stop for the moment.
There is a plan of action to repair the damage to the share price.
1. Find the new president before the end of the year,...and that president will have full authority.
2. Publish a grade on Klipspringer ore. They are finally mining and stockpiling kimberlite ore from the fissure, as opposed to the exploration ore they have been processing recently. It will take a few months to acquire the data from this ore and calculate an average grade. Current grades predicted from drill cores is .7 cpt with a processing grade of .5 cpt.
3. Publish a diamond value for the diamonds from underground mining on Klipspringer fissure,...CJ says they already have preliminary numbers, and those values are better than current M1 pipe values(>$112US/carat), because of the presence of bigger stones in the fissure than were found in the M1 pipe.
4. Outside consultant employed to review data on Camafuca and recommend course of action. There was a promise that no more precious money from SUF cashflow will be used to explore this resource. SUF is receptive to a JV. CJ under pressure from probing questions revealed this project, based on data to date, looks to be worth $1 to $3 billion dollars (SUF 50% currently). The Angolan government appears to have UNITA on the run. UNITA has been kicked out of all their major strongholds in the south east of Angola, and government troops have repulsed an UNITA offensive on the Cuango valley (big diamond producing area).
5. Publish a value for the diamonds mined at Camafuca. They are sending a large pile of concentrate to a DMS plant to recover all diamonds and will combine those results with the big diamonds they have recovered already. This process will be cutoff by the end of the year (a promise) and grade and value will be reported on whatever results they have by that time.
6. All exploration projects will be cut back to the lowest levels possible. Cashflow is being preserved for Messina and further exploration to delineate the resource on Klipspringer.
7. Bankable feasibility study for Messina(final) is on schedule and looking good. Negotiations with banks are occurring now. We will have this report on time, or maybe a bit before the mid November deadline. Revenue from Messina is expected to be $50-$60 million US per year (SUF 54%).
8. M1 will be mined out by third quarter of 2000, and Klipspringer ore (100% SUF) will start to be processed by the 100 tonne per hour plant at that time.
If the above come to pass over the next year, and current expectations are met or exceeded, a higher share price will be justified. It should be noted that Klipspringer fissures are really in a feasibility stage, and the results of the current sampling program must be good, or the project could be uneconomic and will be dropped. The same is true of the Camafuca pipe and the Messina platinum mine. All these programs are in various stages of feasibility studies, and the market is obviously nervous of the viability of each one.
The next few weeks are critical to the share price. The Messina announcement has become the single most important event in the next year, and will determine the direction in share price for the next two months of this year. Management says it's preliminary results look very good. It is obvious to all that the reputation of the company, it's management, and it's board is on the line with Messina. If the Messina document shows the project will be as positive as management says it is, and the banks agree and approve the equity financing, we should be looking at a project that gives (SUF at 54%)$Cdn42 million revenue per year to SUF and net earnings of $Cdn16.7 million per year according to the figures on the SUF website. If SUF moves to the 70% ownership level, net earnings would rise to $Cdn21.7 million or $0.80 earnings per share. Contributions from the Klipspringer and Marsfontein fissures(based on current figures of value and costs presented by SUF) could double that eps. So in two years SUF could be on its way to eps of double to triple current levels (currently looks like eps for 1999 will be around $0.50).
Nothing proved yet, but the first key (Messina) will be turned in a few weeks, and the second key (Klipspringer) will be turned in the first half of next year. Additional revenue could come from Angola, as the war in that country could be over shortly, if present news leaking out of the country is accurate.
It is clear, that we all need to stuff horse shoes up our arses, to give us the good luck we need to make sure these projects have all the goods needed to get the green lights.
I will be glad to see 1999 get turfed out.
In the meantime, this hamster has been placed on life support. |
