Hi Vaughn,
SUF's balance sheet is deteriorating. The burn rate for exploration, development and acquisitions is greatly exceeding the cashflow of the company for this year. More and more exploration plays are being brought into the fold, and more and more personnel are needed, and that's increasing head office overhead costs. They are gambling on exploration plays with current cashflow.
Revenue is dwindling as M1 is mined out. The cost to transport the lower and lower grade M1 ore over 10 kilometers to the Klipspringer plant is eating into the profitability of that operation. If they don't do some very tough financial planning right now, private placements will be needed to bridge the funding gaps over the next 2-3 years. That equals dilution which can be avoided if they emphasize the production projects now, and ease back on the exploration. If not,...welcome to the under a $1.00 SUF in a few quarters, because there will not be any earnings, in a quarter or two.
Canabrava, the Yamba area JV's, and now Caldera won't be helped in their share price departments if SUF is forced later on to abandon them because they failed to get the current cash cows up and running efficiently, or if they stick all their money into a project that literally blows up in their face (Angola).
There is a time to explore, and a time to consolidate cashflow projects. The next two years are crucial to the eventual emergence of SUF as a longterm producer of diamonds and platinum. It is also a time they are vulnerable both to financial bungling, and/or a takeover by a firm that is South African centered, and drops the JV's in the rest of the world. How will that help Yamba, Brazil and Australia?
Many other shareholders and me, would prefer to see a healthy income statement with increasing revenues, cashflow and earnings, as well as a much improved use of cash which is the financial statement that the explorer faction is not addressing, before we run off and explore the world.
Of course, healthy debates by both these factions is necessary to creat a world class company. |
