Welcome back gg! Lets hope that was the end of the fire sale on SUF.
Here are some notes on the Conference call:
SUBJECT: Notes from conf call
Posted By: hegel
Post Time: 12/18/03 10:47
In no particular order :
- good possibility of 80,000 tons/month this month, more importantly, no geological, structural or metallurgical problems encountered in the ramp up
- still on track for 120,000 tpm in 2nd qtr 2004 - this represents full production for Phase 1 Messina
- Suf is testing alternative mining methods, eg., long hole stoping on Merensky reef, to reduce costs and raise efficiency - some promising results so far
- PE restated intention to be 1 million oz/year producer by 2010
- upbeat comments on Kumba gold exploration -- some drilling completed, break for the holidays, recommence in 1/04 -- they are drilling across, not along, strike to test widths etc.
- Klipspringer not viable at current Rand rate - will be temporarily suspended at end of month until exchange rate improves
- SUF retains 18 % carried interest in Camafuca, and is still waiting on Angolan govt approval - not much they can do but be patient
- PE is talking with the banks to try and reduce current high interest rate (14 3/4%) that SUF has on its debt. Prime in SA now is 11 1/2% and hopefully on the decline. Recent pp and rights offerings gives SUF options to pay down some or all of its debt. However it is Rand based debt and with current Rand strength there are obvious drawbacks
- at 7 Rand/US$ Messina has a $125/oz margin on 5PGE, at 7.50 Rand/US$, margin rises to $150/ oz. Rule of thumb (per PE) - for every 10% move in currency, there is a 20% move in margin. At current rates (about 6.50 R/US$) its about breakeven.
- about 20% of the 27% of the minority Messina interest is in a blind trust held by HSBC bank. The cost basis for the minority owner is 2 Rand /share. PE made the point that even though the trust already has an enormous gain they continue to pay up for continued participation, a valid point
- even if Rand remains strong, projects 2 and 3 are robust enough that they will move ahead, but perhaps with less than an optimum mining plan ie., one with less up front capital cost
Overall an upbeat call that gave me the sense that the company has solid footing, even if the road we're on is somewhat rocky.
From Hegel on SH stockhouse.com |
