Lorne,
Author: teevee -- Date:2000-07-28 15:46:12
Subject: peering through the misty veils
DW,
I'm back:-))
I see nothing much has changed in the last month or so. Here is how I see it, for what its worth:-))
On the surface, DeBeer's wants us to believe:
1. If we don't tender, there is a risk of being left in a minority position with poor liquidity at a lower share price, or
2. If the tender fails, WSP will finance at a lower price, either suggesting that selling or tendering is a better option.
Also, I note that in spite of some analyst's (and their brokerage firms) opinion that the DeBeer's offer is so low as to be opportunistic or predatory, non of them have stepped up and offered to finance the company on terms better than DeBeers offer. It would appear that everyone wants WSP for as cheap as they can buy it eh:-))
Now for what I really think is going on (and what DeBeers doesn't want us to know):
The market for off colored diamonds such as South African capes has deteriorated and the market for a limited supply of "white" Canadian goods is reflected in the high prices BHP and DMM are obtaining for Ekati diamonds. Fortunately for DeBeers, they have a 3-year contract for 35% of Ekati's production. I suspect the white Ekati stones are sparingly sprinkled in the sites so DeBeers can foist their capes on site holders. Unfortunately for DeBeers, their contract for a percentage of Ekati goods will expire. With Snap Lake coming on stream, to produce large white goods aplenty, Snap Lake production threatens to capture a significant percentage of the high end of the market where the large margins are. IMO, DeBeers MUST have this large, long life deposit and therefore will eventually prevail. The longer DeBeers waits, the more expensive WSP will become, or worse, through an arrangement between WSP and a third party such as DMM or BHP, become unavailable at any price. WSP is worth far more than $4.25/share, and worth even more to DeBeers in terms of protecting their market share and control. Another offer from a third party such as Diamet or BHP would help shareholders achieve the highest possible price, but at this time, it appears that DeBeers will only have to nominally increase and extend their offer accordingly until sufficient shares are tendered. Ultimately, we the shareholders will decide. Unfortunately, the mechanism allows DeBeers to divide and conquer. I hold all my shares and am standing firm, as I doubt the $4.25 offer will succeed and I do not believe that DeBeers will drop their takeover. It will be interesting to see at what price the required number of shareholders tender or sell at.
Regards,
teevee |
