I'm currently looking for an updated production plan, but haven't found one yet to give you figures for next year. My post was based on a September presentation that did not include the plan details.
There are a combination of reasons why the stock may be so low and there has been no takeover. One is that there is concern in the South African mining industry related to planned laws changes relating future government mining royalties, which if I remember correctly may come into effect as early as 2007. For platinum, the plan is for it to be based on revenue and not profit. I don't think that these plans have been finalized, and it has created uncertainty. While the plans as they are would not drive a company like Southern Era out of profitability, I think that they have caused some investment firms to make a strategic decision to reduce exposure to South Africa or get out altogether, and this has likely overridden practicalities and common sense in terms of what price to exit at. Fidelity had a 12.55% stake and was apparently selling in large quantities, even though Southern Platinum has tended to trade thinly.
A second reason for the low stock price is that their Messina Phase 1 plans with expected production were published a long time back, and then have been delayed and underperforming plan, that is up until this last month with a news release just issued. There were two problems -- the company had a brand new workforce who they may have had difficulty training properly, and they did not perform with the productivity expected in the first year. The company thinks that they have now gained more experience and particularly with an incentive program will be much more productive in future years. The second issue was that they changed plans midstream and invested in automated stoping equipment that will reduce their reliance on the workforce, save costs, and allow them to extract the platinum more quickly. One can see why they would do this, with labour costs escalating and the government threatening to extract more royalties on the cash flow coming from 2007 onwards. Anyway, this increased costs in the short term and slowed down their plan. People comparing the results to the original plan probably lost patience and faith in management after seeing the plan underperform for several quarters due to the issues above. Anyway, the latest production results may finally prove that the company is on track now.
By the way, the company's new website is http:://www.southplats.com. I hope that you do not have troubles accessing some of their pdf files. For some reason I get errors on my computer. |
