A hamster's thoughts, it is worth the read for all SUFferers.
The price drop is frustrating,...but it is in line with the earnings SUF is predicting for the next two years. SUF has guided analysts down because none of the new projects in prefeasibility (Camafuca) or feasibility (Messina PGM) will be ready to go before then. The broker/analysts in their infinite unwisdom are refusing to recognize these projects in the share price, and for the moment they are right.
The question you must ask yourself,..."is management reputable?" and "is management working to insure the long-term viability of this company" and "does management know how to mine these deposits to produce good profits". The rest is luck,...are the diamonds and PGM's there and economic?,...answer to that question is we don't know for sure, but it certainly looks like it.
Has management ever lied to shareholders about future earnings or profits? I don't think so, but I have only been following them for 8 months. Certainly the guidance is very conservative now, even in the face of evidence that they are being too conservative,...drill indicated results for M1 showed declining grade and value, but the diamonds coming out are not falling off in grade and value as fast as predicted. That suggests that positive earnings surprises could occur in the next 2 years.
The drill indicated grade for the Leopard fissure in .73 carats per tonne, but management is guiding analysts to use .5 carats per tonne to allow for dilution (stripping ratio). Conservative guidance. Leopard is now in production and being ramped up each quarter to replace M1.
Management used the second quarter to write off exploration costs incurred in the winter and the Camafuca property acquisition costs of $9.9 million plus capital expenditures. That's why net income disappointed. The second half will not have those charges. Exploration costs will be much lower because the exploration charges in the NWT will be minimal. Management has directed that cashflow will be the same or higher in the second half ($18.8 million), with a lot less charges.
Next year will be lower in cashflow and net income if no other finds are made in SAf. They spent $1.8 million on SAf exploration last half, and the fruits of that preliminary work is now occurring. They started to drill the anomalies they discovered in July, so look forward to news on this before Xmas.
We also have the Messina bankable feasibility study to look forward to in the beginning of the new year. Keep in mind the known resource on the property to a depth of 1000 meters is 51 million tonnes at a grade of 6.4 g/t platinum metals and gold with nickel and copper too. It contains 10.5 million ounces of PGM and gold, and is open along strike and at depth. Another vein (reef) is known to exist beside this resource and has not been properly drill tested yet. If this thing is a go, SUF can purchase the whole thing (100% ownership) for $21 million. Negotiations with banks indicate that if the study is positive, the financing will be there to start production in two years (Suf has met or exceeded all their production targets thus far). Capex currently is estimated at $41 million which is peanuts in this business. They have estimated they will make $US277 per oz after total costs are deducted at an initial mining rate of 120,000 per annum. The acquisition cost is only $US 1 per oz. That works out to $US 33 million added to cashflow per year or $CDN49,860,000 per year. Tell me I'm wrong.
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Now a simple comparison. SUF with Messina and Klipspringer, assuming nothing else is found in SAF or anywhere, will have cashflow for as long as we are alive of $49.5(Messina) plus$55.0 million (Leopard fissure)(see #reply-10898672 = $104.5 Cashflow SUF per year by (predicted) 2003 (3 years).
Dia Met (Ekati) had a cashflow of about $15,000,000 at near full production last quarter. 15 x 4 is $60 million cashflow per year for Dia Met
Dia Met shareprice is $23.50 and has 33 million shares to SUF's 29 million. Hamster calculation says we are worth $23.50 x 33/29 x 104/60 = $46.35 per share by 2003 based on cashflow comparison with Dia Met. Tell me I'm wrong. Don't forget, capex for SUF is a lot lower, so interest and principle payments will be lower too.
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The thesis that SUF doesn't care about share price is in error, I think. Take a look at the above thoughts, and tell me they are not looking out for us.
As far as a buyout, keep in mind the above figures when someone is asking you to tender your shares. No one can stop the uninformed from selling their shares to the bid. Perhaps someone could say something to the analyst/brokers for not doing their jobs fully.
russet can now be found in a "trailer" cage down by the river. (ggggg). |
