Hello Peter
My estimate of $500 valuation was based on:
A) Good production from Klipspringer + pipe(s) discoveries
B) Good production from Angola aluvials + feasibility on Camafuca
C) Other discoveries (Zambia, Urkrain, Angola, Canada, etc.)
While Ukrainian & Canadian announcements have been disapointing, the overall program remains essentially the same as I suggested several months ago.
SUF is a core holding in my RSP which if I trade at all, will be done only on a significant summer run up and certainly not at these prices. This is a buy and hold stock as I have always maintained, not one to be purchased by those who want a quick speculative flip.
SUF has serious management with a long term plan and they have not wavered off that plan to my knowledge other than to take advantage of developing opportunities at Klipspringer and in Angola and to JV with DeBeers and Rea Gold on their less prospective properties.
I do not recall management saying that they would have the Klipspringer plant operational in 1996 but rather in mid to late 1997. This schedule I believe is still being maintained. I expect that production of 750 tonnes/day should be achieved this year and I believe that will be expanded to 1,500 tonnes/day in 1998. Nothing I have read recently leads me to question progress.
Management has now confirmed multiple pipes on the Klipspringer property as I had hoped they would, however, sizes are modest. This is intriguing however. Geologically, it is not unusual in Africa to find small pipes and modest dykes as ore shoots off, and in close proximity to, a large pipe. If I do not miss my guess, I would imagine management is exploring on this geological model.
If a pipe of 500m x 800m +/- can be located, and presumming it is as diamondiferous as nearly every ore body on this property has proven to be so far, we are in for a tedious series of posts from new shareholders endlessly boosting SUF and cheerleading every price and volume bump.
Regardless, management may not choose to expand production of the plant to 3,000 t/d (or more) if it turns out that SUF has a higher volume open pit opportunity(ies) elsewhere on the property. The Leopard Sugarbird fissures could end up as small satelite operations if a large pipe(s) were discovered. That would take a $200 million plant running 50 to 100,000 tonnes/day and in close proximity to the pipe(s). Management may be proceeding cautiously until they are comfortable that they have exhausted the exploration potential of this property.
Regardless, I would be surprised to see DeBeers take a run at SUF as it is owned 17% by Kennecott (RTZ/CRA). While remote, that possibility would of course be to our advantage, as I doubt CRA would want to be a minority shareholder to DeBeers.
Typically, DeBeers is only interested in owning production from very large or valuable long life pipes. This is probably why they passed on the Klipspringer property originally when only dykes were evident. Camafuca on the other hand was one of theirs and I am sure they would love to have it back along with the potential of the other claims. However, whether Angola would like them to have it back is another matter, as there would appear to be some distrust of DeBeers by current authorities.
Rather, I suspect that DeBeers will be maneuvering to seek exclusive marketing arrangements possibly through advantageous JV's with SUF on other plays and possibly by generous financing arrangements in putting Klipspringer, Camafuca and other ore bodies into production. Management may use this strategically, as again CRA may not want DeBeers worming its way in through the back door.
Unless a dark horse like BHP comes out of left field, if there is a takeover in the wind, that is where I suspect the pressure will come from (CRA).
Takeover aside, only serious production and significant discoveries will support a market generated $500/share price (or equivalent price through splits). That would take at least a five year horrizon which is what I believe I suggested originally.
I know it is very hard to be patient in this atmosphere of doom and gloom but that is why so few are so wealthy and so many finance their life style.
Regards |
