Hello Goalie
Thanks for the info.
Some opinion from Cannacord in their Morning Coffee post conference call I believe.
* SouthernEra Resources (SUF : TSE : $9.00 : Issued 30.4M)
One year ago, SouthernEra was trading at about $9.00, the Company had
22.6M in the treasury (an $18.1M financing was completed in Q1/97),
and the acquisition of a 51% interest in the Camafuca/Camazambo
kimberlite pipe in Angola was just being finalized. At Klipspringer,
some 6,500 tonnes of bulk sample from the Leopard (Main) fissure was
processed, with the recovery of over 5,200 carats of which 4,823
carats were valued at an average of US$107/carat (up nicely from
earlier valuations). Exploration was ongoing on the Sugarbird Fissure
and small scale bulk sampling had been done on the blow with
encouraging results. We were modelling Klipspringer at production
rates of 500, 1,000 and 1,500 tonnes per day which would (and could)
produce pretax profits in the US$6-20M range. We were looking at
Klipspringer as a good cash flow support project for the Angolan
ventures.
The revised joint-venture agreement for the Farm Marsfontein with
Randgold was announced on June 19/97, by which time reverse
circulation drilling on four of seven geochemical anomalies had
identified two pipes (M1 and M3) and at least two kimberlite dikes.
Subsequent bulk sampling and drilling on M1 outlined a resource of
512,400 tonnes grading 3.083 carats/tonne with an average carat value
of $142. The prospect of reaping a one year(() bonanza of $100M+ from
M1, prompted the ordering and construction of the new 2,000 tpd plant
which is located on the nearby Farm Rusfontein. M1 promised to
provide the cash required for the development of the fissure mine(s)
at Klipspringer, cover off Angolan requirements and then some. The
Company's focus was changed during the summer of 1997.
The litigation over the mineral rights on the part of the Farm
Marsfontein containing M1 was first announced on January 15, and
background is provided in our March 16 Daily Letter (copies on
request). At the time of that comment, the heirs of the original
owners of the mineral rights (circa 1920) were transferring their
claims into a corporate entity which we now know as NGS Minerals (Pty)
Limited ("NGS"). SouthernEra and Randgold were to seek expropriation
of the mineral rights at a hearing in Pretoria on April 14, however
immediately before the hearing, counsel for NGS informed SouthernEra's
lawyer that they had concluded a prospecting contract for Marsfontein
on April 9, 1998 with De Beers Consolidated Mines. The hearing was
postponed until April 16 (today) with a final hearing set for May 18.
We do not have details on the terms of the prospecting contract NGS
has signed with De Beers but suspect that, subject to the court's
decision, De Beers would be given a period of time to redrill and bulk
sample M1 (etc.); possibly a buyout agreement has already been
formulated. De Beers has become quite active in
joint-ventures/financings with junior exploration companies (Mountain
Province in the NWT, Troymin in Alberta's Buffalo Hills, TNK Resources
in Botswana), and it is unlikely that the prospecting contract
transaction should be viewed as having any ulterior motive beyond a
potentially sound business decision.
Once again we will not offer any opinion on the litigation as this
area is well beyond our scope. The M1 litigation is a critical
component in SouthernEra's future: to develop the Leopard and
Sugarbird Fissures to the point that they could fully support the
2,000 tpd processing plant might take 18 months, and capital of US$20M.
Cash on hand is believed to be in the C$5-10M range and C$7-14M might
be generated from the current mining of the Sugarbird Blow.
The stock dropped sharply yesterday, to an interday low of $8.50
previous close $12.90) on volume of 469,697 shares, and we could see
further downside short-term. (SouthernEra tends to be a very volatile
trader-look for buy points on down-spikes.) The Company is hosting a
conference call at 10 a.m. EDST today (Thursday) and this might
provide some support: any further thoughts will be in Friday's Daily
Letter.
David James (204) 988-9602
Regards |
