Author: teevee -- Date:2000-07-30 07:44:41
Subject: deja vu ....for DeBeers
A little poorly known history may help folks appreciate just what Snap Lake is worth to DeBeers:
When the Mir pipe came on in the 1950's, and the diamonds started showing up in the market, DeBeers had to change their grading system because they could not match the blue white color of the Russian diamonds. Furthermore, DeBeers black balled companies who bought Russian goods in order to maintain buyer discipline. Not knowing how long life or reliable the supply of Russian diamonds was at the time, most site holders complied.
In the 1980's and 1990's when Russia opened up to the west, DeBeers arranged a marketing agreement for Russian goods. DEBEERS HAS PAID RUSSIA WELL OVER $US 1 BILLION PER YEAR SINCE THEN in order to maintain their market control and margins.
The chemistry of the Snap Lake indicator minerals indicates that the source for diamond at Snap Lake is as deep seated as diamond from Mir. The inference is that the diamond will also be as blue white. This has subsequently been demonstrated by the cut stones displayed by Winspear.
On the one hand, some shareholders are thinking why would any one else bid if DeBeers intends to prevail at any cost? On the other hand, should another company, BHP for example, get control of Snap Lake, they will be on an equal footing with DeBeers and be able to obtain a larger piece of the diamond pie and more margin. Other shareholders have, perhaps through ignorance or self interest, indicated that they would sell at anywhere from $6.50 to $9.00 or $10.00 per share. Arbitraguers short sited and detached logic dictates that they will tender at $4.25 without another offer. ALL OF THE ABOVE IS EXACTLY THE KIND OF THINKING THAT DEBEERS IS COUNTING ON. Going forward, not owning Snap Lake will cost DeBeers billions of dollars. As some sort of straw poll, the various threads indicate to me that most shareholders have no idea of just how valuable Snap lake really is. IMO, WSP's suggestion that DeBeers is offering "a nickel for a quarter" isn't far off the mark.
regards, teevee |
