Hello all,
At first blush, the numbers seem pretty good, but not hugely exciting. The year over year comparison seems less than useful given the "bulge" in revenue from the overburden processing in Q3 98.
A quick, sequential comparison with Q2 numbers leads to Cash Flow improving from 35 to 50 cents (+43%) and EPS from 7 to 12 (+63%), both achieved with lower production dropping from 110,000 to 100,000 carats due to lower grade and throughput. This with amortization of costs of Marsfontein very high, and likely to be restated at year end as the mine life of Marsfontein gets extended.
I liked the postive implications of doubling the processing at Klipspringer to 40,000 tpm as capacity is available. For the analysts, this should double the long term revenues, cash flows and earnings from present projections, as some meaningful effort to replace the M1 revenue is implied (though a more explicit plan would be welcome). The expectations of higher diamond valuations is positive, and coupled with the expectations that the eventual mining grade will be above 50 cpht, this could lead to increased projections.
The extension of the Marsfontein potential reserves is positive, though 40% of a fissure is a lot less than 100% of the same stuff from the Leopard. More important to me would be the extension of mine life, allowing for a longer period of amortization of costs, which would materially boost EPS.
I was disappointed with the poor recoveries at Camafuca, and would continue to question why more progress has not been made. While the stone size seems positve, the lack of detail can only lead to doubts.
The details on Messina seem to be pointing to a very quick decision/announcement, with the higher planned monthly throughput indicating a positive decision on feasibility and financing. Some analysts had said this could add $4.00 to SUF shares.
All in all, I have to say the report was slightly better than I thought, though with only 100 shares traded today, it would seem others are yawning.
If this is good news, then who at SUF bears responsibility for translating this into the share price? It is conceivable that SUF could have cash flow of $1.75 per share for all of 1999, putting the multiple at slightly over one, ridiculous for an operating company and completely silly considering the exploration blue sky and the Messina platinum project. Why?
Best Luck,
Confluence |
